pricing on websites
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@scottalanmiller said in pricing on websites:
@mike-davis said in pricing on websites:
@dashrender said in pricing on websites:
But really, should an O365 migration be a project price and not hourly? You'd have to make the project price significantly more than the anticipated hourly to cover your bases in case there are issues.
As @dafyre said, customers demand it - and for good reason. They have to make a business case for the project. They would rather have a set fee than roll the dice that everything works the way it should and it might cost them a little less.
How is it rolling the dice, though? You have to roll the dice in the other case, and therefore must charge them enough to cover for that. Plus you have to charge them for figuring that stuff all out (scoping.)
It doesn't protect them, it pretty much just guarantees the worst case scenario.
The reality is that many MSPs don't charge enough to really cover their potential losses (and then end up eating it when it happens) and aren't charging enough to show that it's really just like that hourly will be more cost effective.
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@scottalanmiller said in pricing on websites:
How is it rolling the dice, though? You have to roll the dice in the other case, and therefore must charge them enough to cover for that. Plus you have to charge them for figuring that stuff all out (scoping.)
It doesn't protect them, it pretty much just guarantees the worst case scenario.I guess it changes who is rolling the dice.
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@scottalanmiller said in pricing on websites:
It doesn't protect them, it pretty much just guarantees the worst case scenario.
I wouldn't say that. I'm sure some of you have done enough of one thing that you get better than others at it. You quote the customer a better price than others can, but you still make out well because you have become really efficient at it.
Consider a wifi proposal from someone that is not using Ubiquiti vs one of us that has a controller already built.
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
How is it rolling the dice, though? You have to roll the dice in the other case, and therefore must charge them enough to cover for that. Plus you have to charge them for figuring that stuff all out (scoping.)
It doesn't protect them, it pretty much just guarantees the worst case scenario.I guess it changes who is rolling the dice.
Right, so it doesn't eliminate the risk, it only shifts it. And so your pricing has to be based on covering both your AND their risks - which forces you to pass more risk cost on to them. In the end, they have to lose.
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
It doesn't protect them, it pretty much just guarantees the worst case scenario.
I wouldn't say that. I'm sure some of you have done enough of one thing that you get better than others at it. You quote the customer a better price than others can, but you still make out well because you have become really efficient at it.
Consider a wifi proposal from someone that is not using Ubiquiti vs one of us that has a controller already built.
No matter how good I get at doing this, it doesn't change that the worst case is what gets passed on to the customer. As I improve my ability to scope, the customer wins regardless of which one of us is left "holding the dice." If the customer holds the dice, they only have to pay what it actually costs. If I'm left holding the dice, the customer has to pay for the worst outcome of the dice PLUS the cost of determining that worst outcome.
No matter how you look at it, scoping and project pricing either results in the vendor losing money by absorbing costs that are not their fault, or the customer losing because they have to pay a premium for not taking on their own risk.
Think of it like insurance. Who wins from warranties and insurance? The insurance companies. Who loses? The customers.
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@scottalanmiller said in pricing on websites:
No matter how good I get at doing this, it doesn't change that the worst case is what gets passed on to the customer. As I improve my ability to scope, the customer wins regardless of which one of us is left "holding the dice." If the customer holds the dice, they only have to pay what it actually costs. If I'm left holding the dice, the customer has to pay for the worst outcome of the dice PLUS the cost of determining that worst outcome.
No matter how you look at it, scoping and project pricing either results in the vendor losing money by absorbing costs that are not their fault, or the customer losing because they have to pay a premium for not taking on their own risk.
Think of it like insurance. Who wins from warranties and insurance? The insurance companies. Who loses? The customers.Isn't selling bocks of hours up front pretty much bad for the customer as well?
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
No matter how good I get at doing this, it doesn't change that the worst case is what gets passed on to the customer. As I improve my ability to scope, the customer wins regardless of which one of us is left "holding the dice." If the customer holds the dice, they only have to pay what it actually costs. If I'm left holding the dice, the customer has to pay for the worst outcome of the dice PLUS the cost of determining that worst outcome.
No matter how you look at it, scoping and project pricing either results in the vendor losing money by absorbing costs that are not their fault, or the customer losing because they have to pay a premium for not taking on their own risk.
Think of it like insurance. Who wins from warranties and insurance? The insurance companies. Who loses? The customers.Isn't selling bocks of hours up front pretty much bad for the customer as well?
Why would that be, unless the hours they buy expire.
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
No matter how good I get at doing this, it doesn't change that the worst case is what gets passed on to the customer. As I improve my ability to scope, the customer wins regardless of which one of us is left "holding the dice." If the customer holds the dice, they only have to pay what it actually costs. If I'm left holding the dice, the customer has to pay for the worst outcome of the dice PLUS the cost of determining that worst outcome.
No matter how you look at it, scoping and project pricing either results in the vendor losing money by absorbing costs that are not their fault, or the customer losing because they have to pay a premium for not taking on their own risk.
Think of it like insurance. Who wins from warranties and insurance? The insurance companies. Who loses? The customers.Isn't selling bocks of hours up front pretty much bad for the customer as well?
He also never said anything about buy blocks of hours up front unless I missed it.
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If it’s a canned cloud service, software, licenses, or anything that is close to a commodity, it just makes sense to post your options, pricing and features.
I wouldn’t post hourly or MSP pricing.
The value of MSP is that you take on a well defined set of IT responsibilities and deliver a guaranteed result. Per anything pricing is the wrong approach. Has to be a meeting, every customer is different.
Hourly consulting is the same, price is irrelevant in almost every situation.
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
No matter how good I get at doing this, it doesn't change that the worst case is what gets passed on to the customer. As I improve my ability to scope, the customer wins regardless of which one of us is left "holding the dice." If the customer holds the dice, they only have to pay what it actually costs. If I'm left holding the dice, the customer has to pay for the worst outcome of the dice PLUS the cost of determining that worst outcome.
No matter how you look at it, scoping and project pricing either results in the vendor losing money by absorbing costs that are not their fault, or the customer losing because they have to pay a premium for not taking on their own risk.
Think of it like insurance. Who wins from warranties and insurance? The insurance companies. Who loses? The customers.Isn't selling bocks of hours up front pretty much bad for the customer as well?
Nope, it's the best possible thing for them. Let's them determine their needs, get the best pricing, and not get burned by bad estimates or scope changes. From a customer side, it's literally the best thing I could imagine. Without it, they'd be stuck either paying as they go (which would force everyone into higher prices) or into the scoping disaster. It's the best form of customer protection we could think of.
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@scottalanmiller said in pricing on websites:
Nope, it's the best possible thing for them. Let's them determine their needs, get the best pricing, and not get burned by bad estimates or scope changes. From a customer side, it's literally the best thing I could imagine. Without it, they'd be stuck either paying as they go (which would force everyone into higher prices) or into the scoping disaster. It's the best form of customer protection we could think of.
Don't you have to estimate the hours to figure out how many hours they need to buy?
Why does paying as you go force higher prices?
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
Nope, it's the best possible thing for them. Let's them determine their needs, get the best pricing, and not get burned by bad estimates or scope changes. From a customer side, it's literally the best thing I could imagine. Without it, they'd be stuck either paying as they go (which would force everyone into higher prices) or into the scoping disaster. It's the best form of customer protection we could think of.
Don't you have to estimate the hours to figure out how many hours they need to buy?
Not at all. We CAN do that if they want, but they don't have to buy as many as estimated. They can buy what they want and buy more later. It doesn't limit them in any way, just gives them more choices.
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@mike-davis said in pricing on websites:
Why does paying as you go force higher prices?
Because you have to assume that they are going to just work for an hour, and deal with continuous billing as you go, it creates a lot of overhead and friction and you have to bill with the assumption that you are context switching on and off. It costs more to provide, it costs more to consume.
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
Nope, it's the best possible thing for them. Let's them determine their needs, get the best pricing, and not get burned by bad estimates or scope changes. From a customer side, it's literally the best thing I could imagine. Without it, they'd be stuck either paying as they go (which would force everyone into higher prices) or into the scoping disaster. It's the best form of customer protection we could think of.
Don't you have to estimate the hours to figure out how many hours they need to buy?
Why does paying as you go force higher prices?
Think of it like a retainer.
Also by purchasing time upfront, that they don't know when they will use it, is like you giving the bank your money.. the money can then re-invest your money to make money themselves..
so in this case, the business can afford to give you that time for a discount, and they'll make up for it by having your money longer to do what they need to do.
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@dashrender said in pricing on websites:
@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
Nope, it's the best possible thing for them. Let's them determine their needs, get the best pricing, and not get burned by bad estimates or scope changes. From a customer side, it's literally the best thing I could imagine. Without it, they'd be stuck either paying as they go (which would force everyone into higher prices) or into the scoping disaster. It's the best form of customer protection we could think of.
Don't you have to estimate the hours to figure out how many hours they need to buy?
Why does paying as you go force higher prices?
Think of it like a retainer.
Also by purchasing time upfront, that they don't know when they will use it, is like you giving the bank your money.. the money can then re-invest your money to make money themselves..
so in this case, the business can afford to give you that time for a discount, and they'll make up for it by having your money longer to do what they need to do.
Plus the company knows that you've paid and they don't have to overcharge to cover the cost of chasing down payments.
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So I'm looking at having a pole barn built. I call a couple of contractors and the first one tells me exactly what I have to pay him and when.
The second one says he really doesn't know how long it's going to take, but to trust him that he won't overbill me and he's going to do the best job he can. He tells me that if I pay for hours up front I'll get a better rate, but he can't really tell me how many hours he anticipates using.
I'm going with the first guy.
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@mike-davis said in pricing on websites:
So I'm looking at having a pole barn built. I call a couple of contractors and the first one tells me exactly what I have to pay him and when.
The second one says he really doesn't know how long it's going to take, but to trust him that he won't overbill me and he's going to do the best job he can. He tells me that if I pay for hours up front I'll get a better rate, but he can't really tell me how many hours he anticipates using.
I'm going with the first guy.
And you think that building a barn is like IT work?
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A barn is predictable. You look at the ground, you know the dimensions, you know what materials are needed, you know the cost of materials. There are no surprises. This is like civil engineering, and building a building requires BDUF, because it's a building.
IT is the opposite. Nothing is known, there is no way to scope it out and be certain what it will take, there are surprises along the way almost always.
Anyone that tells you IT is predictable is just out to make a quick buck, IT doesn't work that way. But building a barn is. Sure a barn COULD have a surprise, like you find that you are on an Indian burial ground, but they just stop and walk away when that happens. In IT, you have to work around countless unknowns AND deal with changes on the fly, like systems being down, the customer not having the access or licenses needed, the customer changing their mind half way, etc.
These are polar opposite things. And why we commonly use things like building projects to demonstrate why this thinking is not applicable to IT and software. In building a buiding all the "work" is labor, the design is trivial. In IT, all the "work" is design, there is no labor. With the barn, you are paying for parts and labor. With IT, you are paying for the design.
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If you think about it, nothing we do in IT is predictable. The moment our work can be predicted we aren't doing IT any more, we are doing bench. Projects like "placing desktops onto desks and plugging them in", that's predictable. That's because it is mechanical labour, like building a barn. It's just people lifting pieces into place.
Real IT isn't a manual labour job. So it can't be scoped like manual labour.
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@mike-davis said in pricing on websites:
So I'm looking at having a pole barn built. I call a couple of contractors and the first one tells me exactly what I have to pay him and when.
The second one says he really doesn't know how long it's going to take, but to trust him that he won't overbill me and he's going to do the best job he can. He tells me that if I pay for hours up front I'll get a better rate, but he can't really tell me how many hours he anticipates using.
I'm going with the first guy.
Even in this case with the barn, you are applying something here that isn't really healthy... you are saying you'd go with the first guy, why? He's not trying to do a good job, he's overcharging. The second guy is going to do the job possible.
The issue is you distrust the second guy. You aren't stating it, but that's the issue. If you trusted him, it would be insane to go with the first guy. Why would you pay the higher price and not go for the person doing the best job he can?
Your reaction here, even in the barn scenario, only makes sense if the underlying problem is that you assume that people working by the hour are cheating you. If you assumed that the second person wasn't trying to cheat you, then he's obviously the better choice.
I'm not sure how to read into this. Do you feel that all companies that charge by the work that they actually do are dishonest? Does that extend to employees and other people paid by the hour? If so, well okay. But if not, why do you apply that to a barn building trying to give you the best possible deal?
To me, the first barn builder is going to build in plenty of buffer and you'll pay the higher premium for the flat rate. I wouldn't want to pay more. I prefer the unpredictable lowest cost rather than the predictable higher cost.
