Why Fixed-Cost IT Outsourcing Programs Don't Work
When searching for a new IT services provider, it can be challenging to sift through the various options. Many factors influence a company's decision, including reputation, client testimonials, offered services, and on premises vs. remote solutions. For some, perhaps the most important factor to consider is the cost. With many competing bids and pricing structures, it can be difficult to decipher which provider is best for your business.
Fixed Cost Pricing Approach
A fixed cost pricing model is the "one size fits all" approach to pricing; IT providers offer a quote based on the number of servers or the number of users in the business. In theory, this seems like a reasonable pricing structure, but since IT costs vary widely by industry, one party will always lose when setting monthly IT services cost at a fixed rate. If a business has more IT issues in a month than the provider foresaw, the provider will lose money. This often results in poor customer service as well: since the provider is not billing the customer enough to cover these issues, they will di-prioritize a more frugal client for other clients who are paying a higher monthly fee. Conversely, if a business has no IT issues in a month, they will be losing money by paying for reactive services they do not need.
The simplicity of the fixed pricing model is attractive to both providers and clients. It seems to be inexpensive for businesses because they can avoid the dreaded cost creep associated with dynamic pricing. Some providers enjoy fixed pricing because they can estimate monthly costs to their benefit. However, this often leads to a lack of transparency in the business relationship, as it is very rare that the monthly fee accurately covers the IT costs precisely.
One must also consider the differences between the IT needs of different industries. How can a company price IT services for a manufacturing company and a financial services company with the same model? A manufacturer typically spends around 2% of their revenue on IT, whereas financial service companies often spend closer to 8% of their revenue. This difference comes from compliance and regulation concerns as well as differences in basic IT infrastructure.
While the most popular pricing structure is a fixed cost model, at iCorps, we believe in a more customizable model, tailored to fit individual business's needs. When it comes to your company's IT needs, one size does not fit all, and pricing should reflect that. Otherwise, one party will always lose.
iCorps’ Pricing Model
iCorps' pricing model is more customizable to each individual business. Instead of simply counting the number of servers and users, iCorps starts with a thorough IT assessment. This assessment analyzes an organization’s IT environment, governance and compliance standards, and desired business objectives: all necessary information to develop an IT program that best services the unique needs of each client. The deliverable includes an in-depth analysis of the resources needed to provide proactive IT support - whether a business’s IT infrastructure is on-premises, in the cloud or a hybrid of both. Doing this deep dive upfront sets both parties up for success.
Once the assessment is complete, the iCorps team finalizes the IT support program that best fits the client's needs. These programs are scalable, depending on the size of the company, the makeup of a clients’ IT infrastructure and potential seasonal changes. Many clients also require additional project work on top of their core support program or may experience the occasional IT emergency. These projects and/or incidents can combine to form a supplemental bill. Since iCorps’ support programs are proactive in nature, major issues are few and far between.
“Today, the only time I ever deal with IT issues is when iCorps comes in for its regular hardware review, because everything just runs the way it should. All of the constant failures, things getting hung up, that just doesn’t happen anymore.”
Ken Brooks, Project Controller, Delphi Construction, Inc.
Overall, the iCorps hybrid pricing model combines the predictable spend of a custom support program with the supplemental bill for any additional projects that arise. This allows for complete transparency in the buying process and business relationship. It also ensures that none of our clients get de-prioritized or experience poor customer service simply because of a poor pricing model.
iCorps works with many clients who have ditched the fix-pricing model for our predictable spend model, and are happier for it. We strongly believe that the challenges created by fixed-pricing models hinder a business from moving forward. Our goal is to help our clients become proactive, progressive and competitive when it comes to their technology, and our strategic model allows us do just that.
Want to learn more about iCorps' predictable spend, proactive IT programs?