Web Hosting Talk : Web Hosting Main Forums : Managed Hosting and Services : Designing a pricing model for server management

[tamasrepus]

I'm wanting to enter the server management space, and I'm debating whether a pricing model I have in my head would work. I'd appreciate any comments.

For server installation, all work that the client would want done would be spelled out in a contract. Any work that needed to be done outside of that contract would be done at my discretion. That first month would then have a (relatively large) fee for the entire month, during which I'd do all setup & installation, and verify everything was working. This isn't different than most server management companies, I do not think, though I'd be willing to go farther than most of them do.

Each month after the first, I'd charge some hourly fee for any other work that needed to be done, including security updates. If the client needs no work done, and there are no security updates needed/the client does it themselves, I get no income from them, which is fine by me.

This seems to be a little different than a lot of server management services offered today, as I'm offering myself more as a contractor than a service to which they are subscribing.

I'm figuring that since I don't gouge customers for mandatory monthly revenue, and that I do some relatively advanced stuff, I can charge more (in initial first-month cost, and hourly cost afterward) for my services. Comments on whether this kind of pricing model will work?

[Laws]

I actually think that sounds fair....though it would depend how much you were planning on charging for different tasks...

[Shock260]

Yes, It does sound fair.
And as laws was saying, it would depend on how much you were planning on charging for different tasks.

[HostTitan]

Sounds like a good idea and I hope it works out. One of things you have to keep in mind is that sometimes people are more willing to pay a predictable subscription fee than trusting an hourly fee. It also can sometimes break the mood if you have to say "be forewarned i'm going to have to bill you for that reboot etc., etc.,"

Depending upon the subscription fee charged, it may not necessairly be more or less in the customer's interest. In some months, they may require a TON of work whereas in others none. So that model could work well to sort of even out the fluctuations and create a more predictable expense for your client.

[pmabraham]

Greetings:

1. Overselling can occur in managed services as it is in hosting.

While hosting providers can argue that adding a new hard drive, server, or getting more bandwidth is easy so overselling is not as bad it can be bad, hiring new employees to help with managed service load can take weeks to months.

So your pricing model should be based on what you can deliver.


2. Your rate calculation should include overhead as well as consideration for hiring other employees.

Janet Ruhl has a book more geared towards consultants; but, it can apply to any professional or service company. So you may want to check out her book on the Computer Consulant Guide (or something like that -- its' been a while since I've read it).

Thank you.

[eth00]

As Peter said you need to look seriously at the business model and see if it is something you can sustain. Based on what you have said you are going to have a very unstable income, if there are no security updates that have come out then your income is going to be a lot lower for that month. In doing that it is going to be harder to hire on more employees and keep them as the next month you make tens of thousands less.

While it does sound like a really nice model if you are planning on running a business with multiple employees it can be hard to pull off. Since your income will be so hit and miss you will also probably need to charge more per hour to do the work then other companies to make up for the lack of residual income. The other option of course is to do an extremely low price and work yourself to death.

Now you may very well have a plan laid out that this can work out but I just think you may want to seriously lay out a business plan and see how managable it is. I am not sure if you want to provide 24/7 support or monitoring but if so it can be very hard to do that all as a single person, especially if you start to get international clients.

[RayWomack]

I have found that the people that use Server Management services are happy to pay monthly. They view it as "insurance", much like automobile insurance. It is just the cost of doing business.

I would belive in your product, and price it accordinly. You cook up a pricing scheme like that, and you will end up attracting customers you want anyway, and there will always be someobody weighing your price structure.....It almost invites people to be pissed over every line item.

Just charge a good honest monthly price for your services, and stick with it.

[dav]

From a prospective customers point of view (and yes, I am someone who requires management services), I prefer paying a monthly subscription fee as I know that that fee covers all work that needs to be done.

Although charging an hourly fee seems a fair compromise (especially for people who need little help as far as managing is concerned), it would put me off as say for example some work is to take an hour but ends up taking four hours. Would that mean, you only charge the client for one hours work? Obviously, before you were to commence work, the client would like an estimate of the fee and saying something like 1-4 hours with the price being say $60 per hour it would mean the client could be paying either $60 or $240 which isn't appealing at all.

Also, how do you intend to make a steady profit from this sort of work? Nowing that monthly subscriptions bring in a steady monthly sum of money, working an hour or so here and there wouldn't bring in a steady sum of money. Also, if you wish to recruit employees, this would be nigh on impossible if you charge hourly rather than monthly.

Please note this is my view as a customer. I do not know how much goes into managing but I would never consider signing up with a company who charges hourly unless it was a very small task (such as a one-off migration) which would be cheaper than signing up for a month if you just needed this one off task.

Cheers - Dav

[steven-v]

You should check management categories that wasn't taken by other company's - e.g VDS Monthly Management, this can be less for you monthly, but you can get customers in bulk - e.g. instead of charging $29-$75/month per server - you can charge someting like $19.95 per VDS and have volume discounts. Here a LOT of VDS customers this days, because customer cannot afford their own servers, and hosting company's cannot monitor VDS due to low costs either - so, this can be good field for you or any other company's in this sector.

BTW - If somebody offer VDS monitoring/management - send me PM with your offers.

[Steven]

Originally Posted by steven-v

You should check management categories that wasn't taken by other company's - e.g VDS Monthly Management, this can be less for you monthly, but you can get customers in bulk - e.g. instead of charging $29-$75/month per server - you can charge someting like $19.95 per VDS and have volume discounts. Here a LOT of VDS customers this days, because customer cannot afford their own servers, and hosting company's cannot monitor VDS due to low costs either - so, this can be good field for you or any other company's in this sector.

BTW - If somebody offer VDS monitoring/management - send me PM with your offers.

Ive tried that market for a few months (vpsmanage.com), wasent that good.

[sprintserve]

Originally Posted by steven-v

You should check management categories that wasn't taken by other company's - e.g VDS Monthly Management, this can be less for you monthly, but you can get customers in bulk - e.g. instead of charging $29-$75/month per server - you can charge someting like $19.95 per VDS and have volume discounts. Here a LOT of VDS customers this days, because customer cannot afford their own servers, and hosting company's cannot monitor VDS due to low costs either - so, this can be good field for you or any other company's in this sector.

BTW - If somebody offer VDS monitoring/management - send me PM with your offers.

From experience, the time needed for VPS management is just like a full dedicated. End of the day, if your cost are the same (salaries for admins as well as their time spent) and yet, you have to go for much lower margins, it just doesn't make very good business sense. That's why we have never ever attempted to sell to the VPS market.

[Shock Hosts]

It's a pretty good idea, haven't seen it anywhere. The only problems you'll have are trust issues, because you could charge for 400 hours of work if you want! So, I think if your first customers are very happy with your service and gain your trust, then this idea will be a very good one!