IT and Business Insights for SMB Solution Providers

Optimizing Managed Services Bundles

There is art and science to putting together a package that both meets your customers’ needs and is profitable for your business. By Colleen Frye
Reader ROI: 
OPTIMIZING SERVICE BUNDLES requires balancing customer needs with price competitiveness.
TIER AND/OR SEGMENT your offerings to achieve more customer engagement opportunities and higher profit margins.
DO THE MATH to determine your service delivery costs and appropriate pricing.

JUST BUNDLE IT IN. That’s the pitch channel pros frequently hear from their vendor partners, says Vince Tinnirello, CEO of Anchor Network Solutions, a managed service provider in Lone Tree, Colo.  It’s not that simple, however, he notes. MSPs have to be conscientious about avoiding bloat and overwhelming customers with solutions that they may not need (or care about).

They also need to be careful about pricing. “If you have too many tools bundled in, your offering lines up being way more than the competitors’,” Tinnirello says.

Too few tools can be a problem as well though. “If your clients are asking for things that you don’t offer, that’s a clue that you don’t have enough,” says Erick Simpson, founder and chief strategist at advisory firm From Entry to Exit. Conversely, he says, if you’ve partnered with lots of vendors and achieved lot of certifications, but you’re not selling any of those solutions, you’ve “misfired in terms of the time, energy, and effort, and potential partnering costs.”

So just how do you assemble the exact right combo of services, and sell them for the exact right fee? The answer is part art, part science.

The Art

Start by determining the core set of services—such as anti-virus, firewall, and remote access—at a competitive price point, says Tinnirello, and then add solutions based on specific customer needs. For example, he added disc encryption, email backup, and file sync and share to a healthcare client’s core offering.

Deciding which service is right for each customer may take some trial and error. “I started to bundle in file sync and share with every client and I wound up backing it out,” Tinnirello says, “because not every client had the need for it. It just made our offering bigger and heavier and pricier than it needed to be. Now I just bundle it in as needed by doing a little bit more up-front work in the sales process.”

Erick Simpson, Founder/Chief Strategist,From Entry to Exit

Similarly, The New England Computer Group (NECG), an MSP in Danbury, Conn., offers a core bundle to every customer, then adds on “a la carte,” says CEO and President Frank Ballatore.

Backup is an example. “Datto is our go-to backup vendor, but not all clients need that level of recovery time and sophistication,” Ballatore says, “so we have other backup services that we use that are less expensive. The same thing with email. It’s not one size fits all.”

Another approach is tiered bundles, says Simpson, who endorses bundling services and solutions in ways that give your audience options to engage with you. That subtly changes the psychology of the buyer from “Should I or shouldn’t I engage with you?” to “How should I engage with you?”

A minimum of three tiers per bundled deliverable is best, Simpson counsels. The lowest tier meets the customer’s requirements and stated budget, the second tier adds on some qualitative benefits at a higher price, and the highest tier includes services like virtual CIO that may only be appropriate for a small percentage of customers. Ultimately, “the middle option is where we try to steer all of our clients, because that’s the bundle that gives us our highest profit margin,” he says.

About the Author

Colleen Frye's picture

Colleen Frye is ChannelPro's managing editor.

ChannelPro SMB Magazine

Get an edge on the competition

With each issue packed full of powerful news, reviews, analysis, and advice targeting IT channel professionals, ChannelPro-SMB will help you cultivate your SMB customers and run your business more profitably.