Is the per-device model still relevant?

Karl Palachuk

Many of us – most of us – started offering managed services with a per-device model. After all, it was easy to define a device and easy to tell whether that device is being monitored and managed. But the industry has evolved considerably in the last five years. Your old per-device model may not be the best choice any more.

1. “Device” is not as easy to define as it used to be.

It used to be that “device” was shorthand for a server, a desktop computer, a laptop computer, or a phone. Now devices are tablets, e-readers, medical imaging devices, printers, security systems, and all kinds of other things.

As Cloud Services evolve, some devices will simply be instances of some device or service in the cloud. And we’ll need to manage these just as we manage hosted email or spam filtering. It’s already almost impossible to walk around the office and count the devices. This problem will simply multiply when everyone is walking around with Google Glasses and wearable computers.

2. Many users have more than one device.

In fact, most users have more than one device, even if you don’t manage them all. Our experience has been that the owners and managers want us to take care of all of their stuff. But they don’t want to pay for us to take care of the average employee’s cell phone, laptop, or Kindle.

So the boss might have a desktop, a laptop, a cell phone, an iPad, and even an xbox that they want us to take care of. What’s the fare cost of managing all those devices? If you charge $75 per month for a desktop computer, can you charge $75 per month for each of these other devices? No way.

3. Some devices are far less complicated than others.

For computers – desktops and laptops – we manage all kinds of things. We take care of the operating system, the office software, peripherals, drivers, disc space, etc. But for many devices we do almost nothing. On the average cell phone, we make sure the anti-virus is working and we make sure we can nuke the device in case it’s stolen. For the average IP phone, we do nothing after it’s set up.

Similarly, on iPads and medical imaging systems, we make sure they are online. After that, there’s not much to do. I suppose you could create two big categories: Computers and everything else. Some devices need anti-virus, some don’t.

4. Users are more sophisticated than they used to be.

Finally, we get to the user. Users may not be technically inclined, but they know that their cell phone takes a lot less work to maintain then their desktop computer. They also have a sense of how “business critical” each of their devices can be.

In some environments, iPads are central to the operation. They are order-taking devices or the front end to a medical records database. In other businesses, they’re just a place for the boss to watch movies while traveling. Obviously, an x-ray machine is a mission critical device. But there’s not much you can fix except the connection to the disc drive.

So, in the big picture, you’ve got this growing collection of devices with various levels of complexity and various levels of importance to the organization. Creating a matrix of all of these devices and determining a fair price for maintaining all of them is nearly impossible.

Consider the Per-User Experience

Time-to-AdaptLet’s pretend for a minute that none of the existing managed services models existed. You want to provide excellent service to your clients, maintain as much of their network as possible, charge a fee that’s as flat as possible, and still make a bunch of money. Does that sound good?

When we started moving toward managed services, we estimated the amount of time it takes to support the average server, the average desktop machine, and the average laptop. Since I had employees, I could estimate hard costs associated with supporting those devices. The same was true (though less accurate) regarding support of the routers, switches, printers, and other network-attached equipment.

We know that some months are almost pure profit and some months are very labor intensive. But the goal was to set a flat fee so that we would be profitable over the course of a year and the client would get all the maintenance they need.

Now consider how you would do that with the mix of iPads, cell phones, and tablet PCs that your clients are using. What does it cost to maintain all that stuff? If you have a PSA (professional services automation) tool, you should be able to run a report that tells you exactly how many hours you spent supporting a client over the last twelve months.

As we’ve experimented with per-user pricing we’ve discovered that it’s pretty easy to sell. Instead of having tiers related to servers and desktops, we have tiers based on the type of user in the environment. The greatest part of this is that the decision-maker is a power user. So he’s got five or six devices and understands the value.

As you can imagine, the boss is most likely to have the most devices. As a result, they are totally fine with the charge for “power users” because that’s them. They get to decide how many power users they have and how many standard users.

Price-TagThe next question is: How do you start pricing a service like this? Well, it’s easier than you think. You might be tempted to calculate the cost of supporting all those devices and figuring out how many users have which devices. It’s must easier to simply count power users and standard users. There will always be a certain overhead for the network as a whole. But the network component is generally very low maintenance. You set up firewalls, switches, and printers once. After that they normally take little or no maintenance.

Your experience with the “old” pricing model should serve you well. Consider a small premium (around 10%) for power users to cover the maintenance of all those devices. If you use a PSA and keep good track of your time, you will know which users cost you more to support.

You’ll probably discover that you don’t need to change the price at all. You can probably just shift from devices to users and still make money.

We don’t need to go deep into the pricing details. The point is: We should put our focus back on the users and not the devices. It’s the users who get value from your service. It’s the users who love you. It’s the users who become more productive as a result of the work you perform.

Isn’t it an odd consequence? The proliferation of devices results in a greater focus on the users rather than their many devices.

Your thoughts and feedback are welcome.