What is a “Fixed Rate” IT Support Model?
A “Fixed Rate” IT support program provides an unlimited number of tickets per month for all the equipment listed under the scope of the contract. This plan is the most commonly used IT support plan among all Managed Service Providers (MSP). Primarily because it is easy to bill and it’s easy for the client to understand. However, it is not as cut and dry as one might think. As you can see below, there are many caveats to the program:
1. The “Fixed Rate” Monthly Cost IS Predictable
The number one reason why clients love the “Fixed Rate” IT Support Plan is a low risk. Subsequently, the client does not need to manage the number of end-user calls or worry about unforeseen labor costs with their network equipment. Hence, everything is covered.
2. The IT Support Provider Bears the Cost Risk
Unlike Adhoc, Blocks-of-Time, Use-it-Or-Lose-it, or the Budget IT Support models, the Fixed-Rate plan puts the full burden of cost on the provider. For example, the provider would be on the hook to clean up a virus that hit all the computers at once. In other words, it includes unlimited calls. Obviously, clients LOVE this!
3. The “Fixed Rate” Cost Only Covers What is Under Scope
Unfortunately, unlimited is not exactly “unlimited”. Hence, the provider will only cover the assets that are under contract. For example, let’s say the manager brings in and sets up a new computer. Unless that computer is added to the scope, all labor is billed separately at a high hourly rate. In fact, all new computers and server installs are considered “projects” and will be billed at high hourly rates. Only then is it added to your support agreement and the monthly cost goes up.
Further, unless told otherwise, the cost never drops off. For example, you will continue to pay the same cost if your company downsizes and you no longer need certain computers. This may seem obvious to you and me, but you would be surprised at the number of companies that forget to renegotiate their contract at the time of renewal. In other words, they just let it roll over into a new contract under the same terms.
4. The “Fixed Rate” Hourly Rates Are Substantially Higher Than Other IT Support Models
This is the part that seems to be a real eye-opener for most people, so pay close attention.
That “per seat” or “per device” cost is not how it appears. Most MSPs will charge $75 to $175 per seat per month. Maybe more for servers. To the unknown decision-maker, this seems fairly reasonable. However, these service providers are not going to lose money. In fact, they need to make sure there is a healthy cushion for unlimited calls and unforeseen events. Let’s take a look more closely.
MSPs determine their rates by the industry averages. For example, industry metrics show that the average computer takes 30 minutes per month to support. Therefore, they can take care of 2 computers per month in an hour. Not only does the mean that $75 per seat is actually equivalent to $150 per hour, but $175 per seat is equivalent to $350 per hour. Ouch!
It should also be noted that 80% of your IT support calls are entry-level calls. That means that you are paying $150 – $350 per hour for entry-level calls! (Insert shock emoji here!) Furthermore, project and add-on rates are charged even higher than that.
5. Not All “Fixed Rate” IT Support Companies Are the Same
As with all things, no two MSPs are identical. Watch out for the following:
- IT Maturity Level – The IT Maturity Level is more important than any other factor when considering an IT support provider. Most importantly, it measures the efficiencies of the people, processes, and technologies.
- Additional Fees – Many MSPs will charge a travel fee (trip charge), onsite fee, or after-hours fee.
- Terms – Terms range from month-to-month all the way up to 10-years. Many will automatically rollover if the client does not give notice in a specific period of time. Therefore, it is always important to understand the terms.
A Better Alternative
A better alternative to “Fixed Fee” IT services, is INSI’s Managed Services or Customized IT™. INSI has a tiered structure that can offer decreased rates on 80% of the IT support issues without sacrificing quality. This is because our tiered structure allows us to charge entry-level rates for entry-level tickets, which constitutes 80% of the IT support tickets. Further, we can manage the entire environment, fill in the gaps for an internal IT team, or we can break out the services to the client’s exact needs. Finally, we can do all this for a fixed fee.
Do You Want To Learn More About The Difference Between “Fixed Rate” and INSI’s Customized IT™?
Go here to see the various types of IT support, their pros and cons, and great questions to ask the provider on each one.
In addition, if you would like to know more about this topic and how it affects you, visit Amazon or Barnes & Noble for a copy of the book IT Outsourcing Secrets – A Small Business Guide to Comparing IT Support Companies.