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Managed service providers (MSPs) vary by focus, scale, and the way they charge. This guide explains the common MSP types, the pricing structures you’ll encounter, and practical advice for choosing a model that protects margins while delivering value to customers.
An MSP is a company that handles routine IT operations for other organizations. Typical responsibilities include systems maintenance, backups, patch management, and vendor coordination. MSPs often provide fixed-fee contracts or retainers to create predictable revenue. They are ideal for businesses that lack internal IT staff or want to outsource day-to-day operations. MSPs can scale services across multiple clients using standardized tools and processes.
An MSSP focuses on security-first services like threat detection, incident response, and continuous monitoring. MSSPs usually operate a security operations center (SOC) and use specialized tools and frameworks to hunt threats. They charge for advanced security expertise that goes beyond general IT support. Many organizations choose an MSSP when they need proactive defense and compliance help. MSSPs can be offered by standalone security firms or as a specialized arm of an MSP.
Pure-play MSPs specialize in one technical area, such as cloud migration, endpoint protection, or penetration testing. Their depth in a niche makes them valuable for clients with focused needs who want expert-level service. Pure-play MSPs typically use subscription models tied to the specific capability they provide. They fit organizations that need a targeted skill set rather than broad IT coverage. Work is often delivered by small, highly skilled teams with tight SLAs.
Managed IT services concentrate on hands-on support: hardware, help desk, onboarding, and break/fix work. They are often structured around hourly rates, service bundles, or basic retainers. This model is practical for businesses needing frequent hands-on tech support. The provider’s value is in speed, reliability, and technician availability. For many, a managed IT provider is the front line while an MSP or MSSP provides broader strategy or security.
MSPs use several popular pricing approaches: tier-based, per-device, per-user, value-based, and pay-as-you-go. Tiered plans bundle discrete features and support levels into named packages for predictable billing. Per-device and per-user pricing scale linearly and are simple to explain to clients. Value-based pricing ties fees to outcomes or business impact, which can drive higher margins when you prove ROI. Pay-as-you-go charges based on actual consumption, common for cloud services.
Tier-based pricing is best when clients need clear, predictable packages and you offer standardized services. It simplifies sales conversations by letting customers compare Bronze/Silver/Gold bundles. This model helps you sell higher tiers by stacking features and response SLAs. It’s scalable and reduces billing complexity across many clients. However, it can limit flexibility for clients with unusual or rapidly changing needs.
Per-device and per-user structures are easy to implement and explain, and they scale with client growth. They work well for organizations with steady headcounts or device counts and for distributed workforces. The downside is margin erosion if device complexity increases (e.g., servers or specialized hardware) without proportional price adjustments. Both models can misalign incentives—encouraging providers to grow seats rather than deliver efficiency. Regularly review what counts as a billable device or user to avoid surprises.
Value-based pricing charges based on the business outcome you deliver rather than inputs. Use it when you can measure clear KPIs—fewer incidents, reduced downtime, or compliance cost avoidance. It can produce higher margins because clients pay for results, not time. This model needs strong monitoring, reporting, and a trust relationship to work. Start with pilot clients and measurable goals before rolling it out broadly.
Pay-as-you-go suits customers that want consumption-based billing, like startups or businesses with seasonal spikes. It is common for cloud compute, storage, and API-driven services. This model keeps costs aligned with actual usage but can be unpredictable month-to-month. It’s attractive when clients want to avoid long-term commitments while they test or scale new workloads. For MSPs, integrating pay-as-you-go requires good cost transparency and chargeback tooling.
Pick a model that aligns with your service mix, client base, and margin targets. Analyze your cost to deliver each service, then map pricing to outcomes you can reliably provide. Many MSPs mix models—tiered core services plus per-device add-ons and consumption-based cloud fees. Test price points with pilot clients and track churn and profitability. Prioritize transparency so clients understand how charges map to value.
Protect margins by calculating your true cost of delivery—tools, labor, overhead—and then add a target margin. Factor in onboarding costs, escalation time, and expected ticket volume per client. Use service tiers to capture different willingness-to-pay and create upsell pathways for higher-margin offerings. Monitor utilization and adjust prices when SLAs or scope change. Automate reporting and billing to reduce overhead and shrink the gap between list price and realized margin.
Lead with value: explain outcomes, SLAs, and what problems you remove for the client. Offer simple, comparable packages and a clear list of inclusions and exclusions. Use examples and case numbers to show typical monthly costs and expected savings from fewer incidents. Provide a transition plan showing onboarding steps, timelines, and responsibilities. Make contracts transparent with defined renewal windows and an easy change control process.
Yes. Many firms offer both general IT management and dedicated security operations as separate service lines. The key is clear scope separation, pricing for specialized security work, and the right tooling and staffing for a SOC. Offering both expands your revenue streams but increases operational complexity. Make sure SLAs and reporting differ when clients buy security vs. standard IT support.
Define device categories (workstation, server, network appliance) and price them accordingly. Use clear rules for what counts as a device and which are included in base tiers. Regular audits and an automated inventory system prevent billing disputes. Consider hybrid pricing with per-user for workstations and per-device for servers to maintain margins. Communicate device classifications to clients as part of onboarding.
Not always. Startups with variable workloads or short-term needs often prefer pay-as-you-go for flexibility. However, if a startup plans predictable growth or needs hands-on support, a tiered or per-user plan can be cheaper and more stable. Evaluate expected usage patterns and support needs before deciding. Offer short trial periods or convertible credits to help startups test services without long-term risk.
Review pricing at least annually and after major changes in tooling, labor costs, or service scope. Track utilization, ticket volumes, and margin trends monthly to catch erosion early. Reprice or restructure when onboarding costs rise or when frequent custom work becomes standard. Communicate changes with plenty of notice and offer grandfathered options when practical. Continuous monitoring helps keep prices aligned with delivery costs and market rates.
For practical resources and tools on MSP pricing and service design, visit Palisade. Our guides and calculators help you model margins and test pricing scenarios to find what works for your business.
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