And every MSP needs to automate its operations as much as possible for the sake of efficiency and profitability. The problem with MSP pricing and quoting, however, is that it defies a simple automated solution. The MSP business marks a departure from the VAR model, which emphasized hardware and software margins. Tools that support an MSP's service-oriented pricing approach may prove hard to find.
As a consequence, MSPs often build their own tools for calculating prices. But they may leverage commercially available software at the next stage of the sales process: Some companies plug their pricing data into a professional services automation (PSA) product or a specialized quoting and proposals software offering.
This mix of manual and automated methods seems standard in the MSP space.
Building your own
"We have not found a good tool anywhere," said Vince Tinnirello, CEO for Anchor Network Solutions Inc., a managed services consulting firm based in the Denver suburb of Lone Tree, Colo. "Most of the pricing calculations I do are based on a spreadsheet we've built."
We have not found a good tool anywhere. Most of the pricing calculations I do are based on a spreadsheet we've built.
CEO, Anchor Network Solutions
Indeed, Anchor Network Solutions has created its own pricing calculator through Microsoft Excel. The calculator takes all of the company's costs into consideration. The company taps its Autotask Corp. PSA tool for some of the cost data and obtains the rest from the vendors it works with on a particular customer project.
With the cost data entered into the spreadsheet, the company then plugs in its desired profit margin to obtain a price to quote to the client, Tinnirello said. The quote itself is created via the Autotask tool, which includes quoting and opportunity management functions.
Tinnirello said he suspects most MSPs handle pricing on a relatively homegrown basis. He noted that he has shared his MSP pricing calculator with his managed services peers.
The tooling story is similar at I.T. Responsive LLC, an MSP and IT consulting firm based in Orange, Calif. I.T. Responsive employs Autotask's PSA as well. Cost data is gleaned from vendor partners.
"We use Autotask for quoting and pull in data manually from our vendor sources," said Chance Weaver, president of I.T. Responsive.
In-house-developed automation, meanwhile, is the rule at All Covered, the IT services division of Konica Minolta. The company has built its own tools to generate customer quotes and contracts.
"Off-the-shelf systems can handle basic pricing, but given All Covered's broad portfolio ... it was necessary to build something custom," said Nick Pegley, the company's vice president of marketing.
The company's service lines include managed IT, 24/7 help desk, cloud services, security systems and application development.
"Also, All Covered has developed custom algorithms that look at many aspects of the client's environment to price the best solutions for them, rather than just counting devices," Pegley added.
Commercial options for managed services pricing
A number of software products aim to assist with the managed services pricing and quoting process, but the emphasis appears to be mainly on the quoting aspect. The ASCII Group Inc., a membership-based community of MSPs, VARs and solution providers, offers an MSP quoting tool to members, for example. The tool "quickly calculates the numbers you will need to build quotes," according The ASCII Group's website.
PSA vendors represent another source of quoting help. Vendors such as ConnectWise, NetSuite Inc. and the aforementioned Autotask provide built-in quoting and proposal-generation features as part of their products.
NetSuite, for instance, offers pricing and quoting through a combination of its OpenAir PSA tool and NetSuite enterprise resource planning (ERP) and customer relationship management (CRM) software. The company markets that suite under the banner of Services Resource Planning (SRP).
The SRP bundle includes an estimating capability through the CRM component. But many services organizations continue to use spreadsheets for pricing, noted Ed Marshall, senior vice president and general manager of the services vertical at NetSuite.
"Most of the customers we talk to are using spreadsheets today," Marshall said, who estimated that about two-thirds of MSPs use homegrown tools for quoting.
He said MSPs who use NetSuite's estimator are those who are looking for more discipline and standardization around the pricing and proposal generation process.
An MSP can use NetSuite's estimator or a custom spreadsheet tool and then build a quote via SRP. The quote kicks off a sales order, which, in turn, triggers NetSuite's ERP process: invoicing, revenue recognition, fulfillment and project management, among others.
At ConnectWise, Jeannine Edwards, the company's director of community, said the company's PSA product lets MSPs automate the beginning of their relationship with customers: quoting and proposals. She cited the importance of automating as many MSP functions as possible.
"Any place you can automate means a higher degree of efficiency, and that translates into a higher degree of profitability and revenue," she said.
More guidance for MSP business management
Cloud computing driving more MSP buyouts
Survey: Cloud computing stats for MSPs
Managed print services: Would you sign your own contract?
ConnectWise includes a built-in tool that generates a quote that can be sent as a PDF document to an MSP's customer. Edwards said the tool lets MSPs include the basic information required to deliver a quote. She called ConnectWise's quoting utility a fairly standard capability that doesn't provide "bells and whistles."
For example, the quoting feature lacks a product sourcing function, so an MSP must seek out and enter vendor pricing information.
But for MSPs looking for a bit more, ConnectWise offers integration to quoting and proposals software from vendors such as Quosal LLC. Quosal departs from ConnectWise's out-of-box quoting feature in that it provides a higher level of automation, including product sourcing, and lets MSPs juggle more sales opportunities, according to Amy Hodge, senior project manager at ConnectWise. In addition, Quosal has business intelligence capabilities that give MSPs insight into such metrics as average sales cycle.
Edwards said MSPs that opt for Quosal tend to be larger -- with more than 20 employees -- and employ more than one sales person.
NetSuite also lets MSPs integrate with enterprise quoting software. NetSuite's software links to products from vendors such as Quosal for customers who seek higher-end functionality. Marshall said an MSP running a particularly complex business may select a third-party quoting software product over NetSuite's native capability.
And that's fine with NetSuite.
"We don't want to replace all of that functionality," Marshall said of the enterprise quoting tools. "We want to work with it and have it kick off processes in our system."