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Why Cost Isn’t the Most Important Factor in Choosing an Outsourced Managed Services Provider Blog Feature

Managed IT services

By: Hannah Allpress on June 23rd, 2022

Why Cost Isn’t the Most Important Factor in Choosing an Outsourced Managed Services Provider

When considering an external vendor – for any business, in any industry – the most important factor is likely to be cost. A decision maker will almost always evaluate a vendor relationship against the financial bottom line. But is cost really the most important determining factor – the factor you should base the entire decision on?  

I work with MSPs every day who have different priorities and “deal-breakers,” and it’s given me some perspective on why cost isn’t the only thing to consider when choosing an outsourced provider. Read on for three points to consider, other than cost. 

  1. Perceived Value

According to HubSpot, a customer’s perceived value revolves around the customer’s belief that a product or service has the ability to meet their needs or expectations – and this belief can, in turn, impact a product’s demand and pricing. If a customer inherently believes a product is valuable, they may be more willing to pay a premium.  

Perceived value will vary for each MSP. You must examine what is most valuable not only to you, but to your stakeholders. Different vendors may place a heavier focus on different values – say, customer service, culture, or engagement with your team. If, on the other hand, your SMB customers are most concerned with sourcing the highest level of cybersecurity and strict compliance, cost may not even be a top five factor. Different yet are the hundreds of MSPs who value cost above all else, simply because delivering the lowest priced services is their niche. There’s not a universal definition of perceived value.  

By the way, the theory of perceived value applies to your MSP’s end customers, too. 

  1. Transparency

I’ve talked to a number of MSP owners who are frustrated by being locked into a long-term vendor contract with terms that weren’t properly communicated – or properly understood – at the start. Cost may be low, but that may be because, for instance, you’re only getting a tool and no management. When you look at only the price of an agreement, you could be missing factors which will have a greater impact on your customers than cost alone. A clear understanding of what you’re purchasing, and a strong relationship with a communicative, supportive account team who will guide you through the onboarding process, is worth paying a premium. 

  1. Alignment 

It’s imperative to consider how your offering aligns with that of your vendor. For example, a potential outsourced managed services provider could be charging $5 per seat for a fully managed solution – but what if their “fully managed solution” is half of what your original offering to the customer was? You’d need to fill in the gaps and take a smaller margin. If a vendor’s pricing and offering can’t cohesively align with yours – or worse, if pricing isn’t easy to understand – cost won’t be your only headache.  

Cost isn’t everything when deciding on an outsourced provider. Determining your own measure of value, in addition to clearly understanding agreement terms and alignment with your own business, will help you ensure that your vendor relationships start strong and support your MSP as it grows. To learn more about how Collabrance manages its customer relationships, click here