Pricing Integrity In Managed IT – Part One

Pricing Integrity In Managed IT - Part One

Pricing Integrity In Managed IT – Part One

You take your car in to be repaired and the garage quotes you $2k for the work involved. When they’re done, the garage calls you back to say there was more involved than anticipated and it’s actually going to cost you $3k. It’s not enough money to challenge them legally, and they’ve got your car, so what do you do? You pay up of course. You might even use the garage again. Better the devil you know, as they say. It’s an analogy everyone can relate to and one I see time and again within managed IT services.

When Options transitions a new client to the platform from a competitor, the two most common reasons cited for changing IT providers are (i) service levels and (ii) monthly costs being unpredictable, but always much higher than expected. The former can have multiple causes; staff turnover, dated architecture and poor account management. The latter, in my experience, is almost always a consequence of a misleading pricing model.

Looking closer, poor service levels from an outsourced IT vendor are often attributed to inexperienced engineers, legacy or SME infrastructure, outsourced 1st line support and / or a support team not located in the same time zones. Another view is that poor service levels typically begin with a misalignment of vendor and client incentives and in particular, commercial models that compensate the vendor for customer problems.

Much to our bewilderment, it has become accepted policy within financial IT outsourcing to have hourly support charges on top of a fixed monthly fee. This gives the IT provider the best of both worlds, but a very conflicted commercial model.

It results in the client not wanting to report an issue until it’s so painful they are willing to pay to fix it. While the incentive for a vendor to resolve the issue in timely a manner is not as strong as it should be (as they make more money the longer an issue or outage lasts). On top of these hidden support charges, some of our competitors also charge to send engineers onsite, which again, slows down the resolution process. For some, a month riddled with IT issues is a profitable month indeed and customer pain equals significant incremental revenue.

At Options we take the opposite approach, delivering world class service with a personal touch for a fixed monthly fee. This commitment, combined with a transparent pricing model, makes Options a CFO’s dream. From his or her perspective, their monthly IT bill is consistent and as expected. From an Options’ perspective, it means our incentives are in line with those of our clients (and customer pain is our pain). When issues arise, the onus is on us to resolve them as fast as possible, and by whatever means necessary (informal onsite visits, for instance). It also ensures we resolve issues permanently so they never arise again and schedule regular customer visits, and follow-ups, to prevent fires in the first place.

While the competing models invariably lead to poor service and swollen monthly bills, the Options approach creates a virtuous circle where both client and vendor win. Over time, this makes our platform and network more automated, stable and scalable.


Callum Runcie – Head of Buy Side Sales Americas, Options

P.S. ​In part two, we’ll examine hidden monthly charges and why you need to do careful due diligence on your IT provider’s pricing structure. Stay tuned.

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