Most MSPs Raising Prices in the Next 6 Months: An Interesting Breakdown
Managed Service Providers (MSPs) are seeing a trend of increasing prices, according to a recent global survey of 333 IT providers conducted this week. The industry is undergoing several transformative changes, and understanding the nuances of these trends can offer insightful cues for where the managed services market is heading.
Key Findings from the Survey
- Highly Likely to Increase Prices Across the Board: 34% of MSPs surveyed said they are highly likely to increase prices for all their services. This might be an indicator of increasing operational costs or a reflection of the increasing value and demand for their services.
- Selective Price Increase: 22% of respondents claimed they would selectively increase prices for certain services, possibly tailoring their approach based on market demand or specific clientele needs.
- New Clients to Bear the Brunt: 16% said that while existing contracts remain unaffected, new clients might see a price hike. This could be a strategy to retain existing customers while capitalizing on new business opportunities.
- Status Quo for Some: 12% of the MSPs said they had no plans to change their pricing structure soon.
- Expansion of Managed Services: A noteworthy 15% mentioned they don’t sell managed services, the lowest percentage. The rise in IT companies, now totaling 335k, having at least one contract in place supports this trend.
The Canalys projection, suggesting that the managed services market is on track to touch half a trillion dollars next year, paints a promising picture. With such projections, it’s no wonder many MSPs are capitalizing on this growth trajectory by reconsidering their pricing models.
The Real-World Impact and Perspectives
MSPs adjusting their prices isn’t merely a factor of demand and supply. Operational costs, quality of service, and market positioning play crucial roles too. Here’s what some MSPs have to say:
- One MSP commented, “Last year, we raised rates between 8-15%, depending on the service and client. We’re looking at another 5-8% increase this year.” They attribute this to the need for better margins due to the increased salaries they offer to attract quality talent.
- However, not every MSP feels the pressure to increase rates. One owner remarked, “I haven’t raised rates in 3 years. It’s just me. I live comfortably and see no need to.”
- Another seasoned MSP with 20 years in the business shared, “Throughout two decades, I rarely raised rates and instead honed in on internal efficiencies.” The focus on cost-cutting, vendor negotiations, and strategic investments has allowed them to increase profits without compromising service delivery.
A Balanced Approach is Key
While raising rates can be a viable strategy, MSPS must focus inward. Streamlining operations, automating processes, and ensuring efficiency can offer avenues for increased profit margins. And as one seasoned MSP rightly pointed out, it’s not just about starting with the right price but also ensuring you never undersell your value.
Lastly, MSPs should not just compete on price in a rapidly evolving industry. It’s the perceived value, the unique offerings, and the specialized services that will set them apart. As the market grows, those MSPs that can strike a balance between pricing and value will likely thrive.
Understanding Price Dynamics in the MSP Market
It’s clear from the recent survey and the voices within the industry that price restructuring is a focal point for many MSPs. But let’s delve deeper into the intricacies of these decisions and understand the driving factors behind them.
Inflation and Operational Costs
A key motivator for many businesses to raise prices, not just MSPs, is the inevitable rise in operational costs. With global inflation rates varying and the increasing prices of hardware, software, and services, maintaining a steady profit margin becomes challenging.
Moreover, as the technological landscape evolves, there’s a continuous demand for investing in the latest tools, technologies, and training. Keeping a team up-to-date with the newest certifications and training can be costly but essential for maintaining a competitive edge.
Talent Acquisition and Retention
With the surge in digital transformations, there’s an increased demand for IT professionals. Consequently, attracting and retaining top talent in the MSP industry has become more competitive, leading to rising salary expectations. As one MSP pointed out, paying well is sometimes the only way to ensure you have the best hands on deck.
Perceived Value vs. Real Value
The balance between perceived and actual value is delicate in the MSP industry. When clients perceive they’re getting more value than they’re paying for, they’re more likely to stay loyal, even amidst price hikes. However, businesses risk losing clients when the scales tip the other way.
Thus, MSPs must demonstrate the value they provide consistently through top-tier services, unmatched customer support, or additional offerings that set them apart.
The Balance of Supply and Demand
The growing number of IT companies stepping into the managed services domain suggests an increased demand for these services. When demand surges, it naturally gives businesses the leverage to adjust their pricing. However, MSPs must be cautious. Pricing oneself out of the market or alienating a core customer base can be detrimental.
Final Thoughts
The decision to adjust pricing isn’t one to be taken lightly. While market dynamics, increasing costs, and competitive pressures play a role, MSPs must always return to the value they offer their clients.
Successful MSPs will understand their clientele, anticipate market shifts, and continuously innovate to offer unparalleled services. They’ll adjust their prices and ensure their services evolve, ensuring they always offer more than what their clients expect. In the ever-evolving MSP landscape, adaptability, innovation, and value will always remain king.
