MSP Tools: Lower Price Doesn’t Always Equal Higher Value

We all love a bargain—who wouldn’t? But not all great deals are good for business. As tempting as it might be to take advantage of a special product promotion that is being marketed towards us, sometimes it is necessary to take a step back and spend time really thinking about what the ramifications of switching to the lower-priced MSP product could entail. Because as attractive as the price may be, it shouldn’t automatically be placed on a pedestal and assume the pole position when it comes to making a purchasing decision.

Factors to consider beyond price

Price isn’t everything. A lower price point could actually end up costing your MSP a whole lot more, in ways that you might not have even considered. It’s crucial to evaluate the overall value proposition and long-term benefits when choosing tools for your MSP. Instead of focusing solely on budget MSP products, let’s examine the important factors to consider beyond price.

1. Understanding the Potential Risks to Your Business

If something costs less, there are generally reasons WHY that product or service might cost less than what you are using today. As such, it doesn’t always provide a true apples-to-apples comparison for decision-making purposes. So it’s important to ask yourself a few key questions to assess what risks your MSP could be exposed to by switching:

• By switching, am I still able to deliver the same set of services, at the same level of service quality, moving forward?
• Or, will I have to amend my customer service levels and adjust expectations to accommodate the changes I’m planning on making?
• What gaps exist between the two products I am considering, and will these product disparities increase the security risk exposure for my business and my customers?
• What am I looking to achieve with this move?
• What issues am I trying to resolve, and will this move actually resolve them for my MSP?
• Does this move make sense for my business? 

Examine your goals and objectives and the vision and mission you have for your MSP, and then compare that to your customers’—what goals and objectives have your customers set for their business? Are your priorities in line with their priorities? Ideally, they should be. As your customers’ trusted security/technology advisor, you have a heightened sense of awareness around what is needed to keep their business safe, secure and protected, as they are likely lacking this knowledge themselves—it’s probably why they chose to partner with an MSP in the first place. So, by accepting this responsibility, it’s advisable to ensure that you are making the best decisions when it comes to the care and management of their network environment, and then base your product purchasing decisions on that obligation—not on how little you can pay for them. Be realistic and honest in your product assessments before making a decision that could cost your customer their livelihood and your MSP its reputation.  

2. Quality and Reliability

‘Best of breed’ is an important concept that many growth-oriented MSPs follow. Having the ability to work with top vendors to choose the right mix of technology and security toolsets that are considered top-tier in the industry, is what high-performing MSPs should consider prioritizing. They recognize that not all toolsets are built the same, nor do they deliver the same set of features and benefits. So they are discerning about what products they DO decide to incorporate into their MSP tech stack, as they do not want to compromise on their service delivery or offer a subpar customer experience. One that could impact their customer satisfaction scores and possibly compel them to churn to another MSP, which appears to place a greater emphasis on reliability, productivity and performance.

3. Flexibility and Customization

Growth-oriented MSPs and more mature MSPs also recognize that they require flexibility and customization in their tech stack when it comes to delivering their services, especially as their own customer-base matures and grows. Networks configurations and cyberthreats are becoming increasingly complex, so MSPs require an open ecoverse and flexibility in their platform to be able to curate their own set of security tools that are needed to address the increased complexity they are now facing. So, if you are considering another toolset, you should be asking yourself:

• How customizable is the product bundle I am considering?
• How interoperable is the product bundle I am considering?
• How easily will it integrate with other tools I am already using today?
• Am I locked into a prescribed set of tools that I have no say or ability to adjust, based on the uniqueness of my customers and their risk mitigation and compliancy requirements? 

As the MSP, don’t under-estimate your expertise that comes from being able to test, evaluate and select your own best-of-breed toolsets, and don’t discount the convenience factor that comes with being able to adjust these as you see the market evolving. It is your job to be proactive in how you address your customers’ cybersecurity protection and compliance requirements, and you may need to move quickly to make significant changes, if the threat landscape warrants it. So don’t give that power—or that authority—away by allowing a vendor to make software and technology stack decisions on your behalf; their motives could be different than yours.

4. Partnership

Is the new potential vendor you’re considering focused on building an actual relationship with you, your team and your MSP? Do they seem to be invested in your business and truly want to see your MSP thrive? Looking at their long-term strategy: are they making the right investments in their R&D and making the right acquisitions that will aid in your success—not only now, but into the future? What are their core design principles, and do they align with what you are trying to achieve for your MSP? What’s their vision, their reputation in the market, and their view of partnership? How capable and willing are they to work with you to coach you on ways that you can improve your MSP? Or, do they appear to be more interested in just making the sale? Bottom line: Is this a vendor that you would be proud to be in business with?

5. Understanding the Hidden Financial Costs

Although you might be able to secure a lower per-node cost, there are a number of other ‘hidden’ costs that shouldn’t be ignored and that need to be factored into the equation as well. For example: Physically switching RMM platforms is an expensive labor effort, and that doesn’t include the additional time needed for the NOC and helpdesk teams to get re-trained on the new platform, and to get everything redeployed and reconfigured so that the RMM is functioning at an acceptable level, like what you had previously. And even after being initially trained, there will still be that learning curve and the time investment needed for the team to acquire the same level of proficiency that they had with your previous toolsets. And during this learning process, your MSP and customers could be exposed to higher levels of risk because “they don’t know what they don’t know yet.”

And from a security perspective, it is important to invest in the right set of security and disaster recovery toolsets, that provide the right set of comprehensive protection and recovery coverage, because it is cheaper to prevent an attack from occurring, than to pay out after a breach has occurred. When it comes to security, it isn’t about IF your customers will fall victim to an attack, but more about WHEN. So your primary objective as their MSP is to do whatever you can to prolong their attack-avoidance streak, and then when it does happen, having confidence in your own curated and chosen security tech stack that not only will you be able to minimize the impact of the breach, but you will also be able to lessen the length of downtime the company is experiencing. This will help ensure that every employee can get back to work, making money again for the business.

So what may initially appear like a great deal and a bargain, could actually end up costing you more, once you factor in these other costs.

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Cost-saving alternatives

Are you concerned about your tools cost to the point that you are considering swapping out your technology stack for possibly less expensive, lower quality alternatives? If so, here are two strategies that you can implement that will help put money back in your pocket, but that don’t involve dismantling what is working well for your MSP today from a security and disaster recovery perspective.

1. Examine how you are running your MSP from an operational perspective

Employees are often the biggest expense for MSPs, while how they deliver their services is often the single largest variable cost that they must contend with. Tool costs tend to actually be the smallest component when you look at your overall cost structure. So, what are you doing from an automation standpoint to service and support your customers, that doesn’t involve human intervention? Because as soon as you require a human touch, your costs go up.

Tools that deliver high levels of automation are desired by growth-oriented MSPs, as automation is designed to allow IT teams to perform better, as it removes human error and delivers a more reliable and predictable customer experience. It’s the whole raison d’etre for having tools in the first place—to reduce the amount of human labor needed to deliver your managed services. It also affords the flexibility of allowing the team to focus on other strategic initiatives your MSP may have, essentially increasing your man-power, without doubling your labor costs in the process.

And if you end up switching toolsets, does that lessen your ability to run a more automated and scalable firm? Will the perceived cost-savings be negated because you now need to throw additional human-power at your service delivery model because your toolsets no longer integrate and play well together, or purchase additional toolsets to compensate for the loss of features and abilities that came included with the more ‘expensive’ set of tools you have been using? Will you end up being hampered by tool-sprawl and inefficient workflows and procedures to manage the same type of network environments and deliver the same standard of customer experience that you prided yourself on previously? If that ends up being the case, you are on the losing end of that deal and the impact for your MSP could be an accelerated decline in profit margins.

2. Examine how you are running your MSP from a revenue and growth perspective

Take a look at how you are running your MSP today:

• Are you targeting the right set of customers so that you are developing a quality book of business?
• Are you delivering the right set of bundled services, that are priced appropriately and generating the right level of gross margins for your MSP?
• Have you implemented a cadence for regular price increases so you can continue to make the proper investments in your staff, their capabilities and in your toolsets so you can make changes or add services as you feel the threat landscape warrants it?

When we look at what some of the best performing MSPs are doing, proper pricing and implementing regular price increases have been instrumental in helping to fuel their organizational maturity and strengthen their MSP’s overall business valuation. And they understand that sacrificing quality toolsets for the sake of saving a few dollars, is a short-sighted business strategy that can have a lasting impact. Top-performing MSPs recognize that their toolsets are just one component of the overall monthly price that they charge their customers. Instead of working towards a specific price-point and feeling that they need to sign on every customer that will agree to pay them ‘something’ for their services, they instead focus on what is needed to promote their brand, enhance their reputation and deliver true value, all while building a quality book business for themselves. They obsess over strategy, and what is truly best for their MSP long-term.

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A more practical approach to MSP tools

Of course, it makes good business sense to ensure that your costs are in order, but you don’t want to run your MSP based solely off a bargain deal you got on your security and disaster recovery toolsets. There are other ways to offset potentially higher quality tools cost—through automation, workflow and operational efficiency gains that help to minimize the amount of labor expended and to keep your labor costs in check. And to ensure you are pricing your monthly contracts appropriately, you should consider including a clause referencing annual price increases into your contracts. This can help mitigate your MSP against being forced to accept lower quality, lower priced toolsets as way to save money and maintain some level of perceived profitability. In addition to this, getting your labor costs and gross contract margins in order, can also help give you the flexibility to invest and maintain those higher quality toolsets that can help your MSP function and perform better.  

A bargain tool price could just be an illusion and might not be the deal you think it is. A top priority as an MSP is to protect and safeguard your customers’ most critical and sensitive business data—that’s what they expect from you. As such, this singular priority should prompt you to take due care and due diligence when it comes to selecting your best of breed security and disaster recovery toolsets. If you are struggling with cashflow and have profitability concerns, attempting to cut your tools cost by replacing them with potentially lower-quality, feature-deficient versions is not the answer.

Building a highly automated MSP, that maximizes their technicians’ efficiencies and coupling it by going to market with a comprehensive set of services that are properly priced and centered on meeting their customers’ security and compliance needs, can represent a better approach. Choosing a vendor that understands that partner success is what ultimately drives its own success will help you deliver this. At N‑able we have the people, the products and the training resources to not only to help your MSP grow, but to thrive.