The task of a managed service provider (MSP) is to quickly and efficiently deliver top-notch IT services to customers at the lowest possible prices, while still making a profit.
However, many MSPs struggle when it comes to determining exactly how to price their offerings to meet those two goals. The easy part is finding the right technology, the right tools, to get the job done. More difficult is determining how to adequately fulfill service requirements without over staffing.
The fact is that every managed services provider has to figure out how to price deals and put together quotes for prospective customers.
One of the most challenging tasks MSPs must face when they’re managing systems is forecasting the required staffing levels to meet contractual SLAs (service level agreements) while remaining competitive and profitable.
In other words, the MSP must determine what support staff levels are needed so that IT systems run effectively and users get the required support, but they must also operate profitably and minimize excess costs.
The MSP has to be able to estimate and customize its pricing based on its risk as well as on what ongoing support services it is assuming on behalf of each customer.
Furthermore, the MSP must often justify staffing expenditures so cost estimates must be accurate, transparent, reliable, and need to account for risk and uncertainty in the operational environment.
For example: Say two customers each have similar data centers and number of users supported, but customer A requires round the clock support and has more business critical applications being supported. As a result, customer A will need staff available around the clock and potentially more specialized application support. The ability to compute effort for different scenarios must take into account such differentiators.
If you are not an MSP but you procure managed services for your organization, having a method to estimate required resources is key to understanding what the costs of the services should be. Being able to independently evaluate and compare the bids of multiple managed services providers will yield better decisions.
Estimating software like SEER for IT (SEER-IT) from Galorath Incorporated provides resource and cost estimates for running managed IT services.
The SEER-IT estimate includes:
- Labor Hours: The work hours required to complete ongoing support tasks.
- Labor Cost: The cost associated with the labor hours.
- Material Cost: The cost of purchased hardware, software and other non‐labor items.
- Staffing: Required staffing or headcounts over time.
SEER-IT also provides MSPs with the resource and cost estimates for the ongoing support services required by IT systems. Ongoing support estimates include all the labor costs associated with running an IT system including service desk (tier 1 support), system administration, technology refresh and updates, system monitoring, troubleshooting, elevated problem management (tier 2 support) and backup and recovery activities.
SEER-IT can be used to project the total number of resources required for a managed services contract, significantly improving an MSP’s success rate based on the science of parametric modeling.
Parametric/predictive modeling can be used to accurately assess what is known about ongoing services and to model or simulate what is unknown, based on meaningful comparative data. A formula is developed for estimating the effort and/or resources needed to perform a managed services activity. Parametric modeling provides “fact-based” estimating techniques including mathematical equations as well as interpretation of historical data.
Based on this sophisticated modeling technology, SEER-IT helps MSPs objectively estimate the time and resources needed to perform each managed services activity.
SEER-IT consists of a collection of estimation elements, or process models that MSPs can use to build work or estimation breakdown structures. Each element has a set of inputs, calculations, rates and factors (used to compute costs) and a set of outputs. Elements/process models provide logical groupings for managed services activities and can be used to fully define those activities. Process models built into SEER-IT cover such key IT services associated with infrastructure hardware, end user hardware, enterprise applications, databases, middleware, software services, virtual machines, training, and user documentation. Metrics such as number of servers, network devices, applications, databases, users, and virtual machines are used as inputs into the process models.
There are numerous things that MSPs have to worry about including the number of employees available, the infrastructure, the server, network devices and systems, the levels of security, and whether they’re using virtual systems or not.
MSPs have to determine all the elements they need to consider, then based on those elements the SEER-IT model will build accurate cost estimates. By applying labor rates and wrap factors, SEER-IT can also be used for indicative pricing.
MSPs can quickly develop SEER-IT estimates using SEER’s intuitive interface. They can generate new estimates from existing “templates” or by adding and defining these individual estimation elements. The SEER-IT estimation engine replicates real-world outcomes by combining sophisticated modeling technology with a database of industry and user-defined metrics.
Initially, SEER-IT computes a normalized estimate based on labor standards and material costs. Cost estimating relationships are applied to the normalized estimate to address organization-specific factors such as experience levels, system complexity, reliability requirements, and service level agreement as well as specific factors such as quantities, labor rates, and number of users.
Galorath’s SEER-IT estimation model provides MSPs with realistic estimates, increasing the probability of the success of their managed services contracts and increasing their profits.
Galorath’s SEER-IT estimation tool provides MSPs with realistic estimates, increasing the probability of the success of their managed services contracts and increasing their profits.