Putting a price on Disaster Recovery
It’s probably one of the toughest sells you’ll face – trying to get a customer to give you money just in case something goes wrong… AND have them see this as a valuable addition to your services! It’s just like car insurance; no one says to themselves “I sure am glad I give hundreds of dollars a month to my insurance company!” That is… until they get into an accident. Likewise even your customers know it’s possible that data, applications, and systems can corrupt or fail, leaving their business partially or completely inoperative. So, they realize the need for disaster recovery, and possibly do see some value.
But then comes the question of just how much to protect. You want everything protected – 1) because it makes everyone’s life easier if something should fail and 2) because it does bring in more revenue. It’s probably safe to say the customer is thinking in somewhat the opposite direction – minimizing spend and only protecting the most critical parts of their business.
So, how do you put the right price on disaster recovery services so that both of you are happy?
There are a few schools of thought on pricing models, each more mature than the previous:
- Per GB – This is more a “pay as you go” model – charging the customer for each GB of backup storage used. The upside to this model is the costs only go up as the customer’s needs grow. But it’s also easy for the customer to focus solely on the backup space, and not the value of what’s in that space.
- Per User – With this model, you’d need to assess the systems in place and necessary storage enterprise-wide, and then calculate an average cost per user, spreading out the cost across everyone in the company. The downside here is when you have a significant jump in storage from a single application, the customer sees that the per user costs go up across the board and the value there is less tangible.
- Per Device – In this model, you provide a fixed cost per laptop, workstation, and server. As more devices are included, the cost goes up by a fixed amount. It’s a flat fee regardless of the storage used (which does mean you need to plan your pricing out carefully, as you don’t want to take a loss as a system grows).
The challenge with the first two is neither of them focus on what’s being protected. You’re not in the business of protecting GBs of data or every user are you? No. You’re in the business of protecting your customer’s operations – which is made up of (in essence) servers and client machines.
So it’s this last model that I want to focus on. There are some significant benefits to using this model. Let’s start with the pitching of DR itself. You’ll start the conversation with your customer talking about how you need to backup their email or CRM server. So the thinking is about systems as a whole. Which of the three pricing models aligns best with that thinking? Right – per device. It’s far more fluid to simply say “I’ll back that server up for a flat fee $50 per month” which will help move the conversation along to a sale.
Additionally, as customer systems come under protection, there’s no perceived penalty by the customer for needing more space. This encourages the inclusion of more servers, workstations, etc. And it’s far easier to have a conversation about protecting that new database application by simply including the entire server it runs on than discussing a rise in costs for every user or haggling the cost of the GBs needed.
And, lastly, when it comes time to discuss your current charges, you can show them “We’re backing up your Exchange server, your two domain controllers, your CEO’s laptop, and your file server.” And if they feel the need to reduce costs, you can easily respond “No problem – which of those items would you not like to protect?” See? Using this pricing model puts your efforts – and the value they bring to the customer – in focus.
It should be noted that as you mature your DR services offering, the conversation will eventually turn to services like Virtual Disaster Recovery and Business Continuity, where entire systems can be recovered virtually. Per device pricing won’t make fiscal sense for those levels of offerings, so you’ll need to price those out separately.
As you increase your services, you want those new services to make sense to your customer. Pricing alone can make or break a deal; if the customer sees the value, they buy. If they don’t, they pass. And if that connection of price to value exists, it’s easier to expand the scope of services within that same customer.
At the end of the day, you want every part of your customer’s environment protected. But no one’s going to sign up for the “everything plan” day one, so you’re going to need to start with Tier 1 critical systems and work your way down. Using the right pricing plan for your DR efforts is going to make it easy to get the initial sale and grow the business – providing you with more revenue, and the highest level of protection for your customer.