Service Desk Support: Pricing to Win

People sitting in conference room

In proposing a multitude of service desk solutions over the years, well established IT organizations tend to develop various strategic pricing models designed to achieve mutually beneficial results for them and their clients. Typically, this involves offering services that are complementary to the client’s internal IT department, delivering either what they are unable to support in their infrastructure or skill sets that are outside their current personnel’s core competencies. Whatever the case, potential clients do not see the value of outsourcing unless it fills gaps in their IT operations via a pricing model that makes sense. For example, incident-based pricing at Level 1 or Remote Level 2 streamlines pricing as well as how those services are delivered. The service desk is the Single Point of Contact for all initial contacts (voice, voicemail, email, chat, web forms) that logs, triages, and troubleshoots as many incidents as possible through resolution, only escalating incidents or problems that can only be resolved with an onsite presence or by someone with the appropriate access and permissions typically at Level 3 (i.e. network infrastructure related problems). So formulating pricing to reflect accurate estimates of Level 1 and Remote Level 2 incident volumes, using a monthly minimum baseline, ensures that none of the client’s IT expenses go to waste. Setting fair and consistent rates that targets a client’s true service needs is pricing to win that business. Luckily, there are many other pricing do’s and don’ts that contribute to a service desk support organization’s growth initiatives and deliver what clients want. Here are a few:

Usage-Based Pricing

Many organizations want 24 x 7 coverage for their global end users, but if the call volume drops to a trickle after hours it doesn’t make sense to staff full-time people during those shifts. Consequently, they adopt an internal, on-call approach to respond to incidents as they arise. Although this method may be effective from a cost-control and resolution standpoint, the adverse impacts often take the form of a rotation of helpdesk supervisors or managers being woken up at 3:00 am to get someone in Mumbai VPN access. This is where a per incident shared staffing model comes to the rescue. Service desk organizations are already fully staffed after hours with the volume consolidated with other accounts and therefore can afford to offer a usage-based fee structure. Charging on an hourly or per agent basis is a losing proposition to clients especially during low volume periods when the phones are barely ringing. Even those who choose a dedicated, per agent pricing model during core business hours for US time zones opt to flip the switch to the shared model after hours when those contacts take a significant dip. Known as a hybrid solution, clients pay a fixed per dedicated agent rate during the day. So when call volume is at its highest they’re being supported by agents assigned solely to their account who build in-depth expertise in their IT environment. And for after hours when call volume is lower, calls are handled by the shared team on a per incident basis. In this instance, pricing to win means clients are paying only for what they use versus full-time personnel with idle time on their hands.

Negotiate Instead of Haggle

Of course, everyone likes a bargain and, considering no proposal is necessarily set in stone until signed, vendors that don’t anticipate a request to “sharpen their pencils” may unduly entrench their sales team in an unwinnable position. Ideally, fair and consistent pricing whether following internal or industry standards should be aligned with the proposed services including call volume, ITSM system used, contract term, and technology supported so a case can be easily made for the no haggle approach; however, if there is any disconnect between client expectations and what is being offered, both parties should expect to concede either on price or extraneous service options.

The Delta or the Deal

Two schools of thought on the significant delta between original and revised pricing may be either “I got an awesome deal” or “Why did you quote so much the first time?” Hopefully, if the initially proposed price was calculated in careful consideration of all the aforementioned contributing factors, these questions will not apply to slightly adjusted revisions. On the other hand, if the initial price for a flat rate line item such as a service desk implementation fee is artificially set exorbitantly high ostensibly to leave ample wiggle room in the negotiation process, prospective clients will understandably view this as a dishonest not to mention short-sighted pricing strategy; that is assuming they stick around long enough to give such feedback. In either case, the winning price is better achieved by using an algorithm rather than a dart board.

Too Many Strings

If the fine print underneath the fair price comes with all sorts of contractual strings, price becomes irrelevant. Attaching long-term commitments to short-term or fluctuating client needs can be built in deal breakers. Unless significant price breaks are offered as a reward for a longer contract term or the service itself holds intrinsic, unwavering value, clients sometimes perceive little benefit to multiyear agreements not realizing that year one flies by and then they are back to square one deciding what to do next year. The vendor, too, is kept on a string concerned about the ongoing stability of the relationship and the business and jobs it sustains. Some clients will admit reticence to sign on for extensive agreements and often request early termination clauses. Fortunately for the service desk vendor, such clients remain engaged in the relationship with the goal of achieving mutually beneficial interests, but other potential clients may simply walk away from the deal without saying why leaving mere speculation in the wake of their silence. Relationships aside, what renders long-term contractual strings immaterial is whether or not the service desk truly adds value to the client’s IT strategy by lowering overhead and improving both efficiency and customer service. At the same time, transitional costs such as implementation fees or loss of continuity make switching to an alternate vendor disruptive and expensive (assuming the service currently provided meets all expectations). The same drawbacks hold true for redirecting internal resources to bring the solution in-house. In both instances, the renewals will continue regardless of the length of the agreement, but ultimately delivering consistent, quality service keeps clients coming back for more.

Long-Term Costs of Short-Term Savings

Calculating a fair price also involves paying a fair and consistent salary to the support staff (agents, team leads, managers, etc.). Although vendors are compelled to propose competitive pricing to clients, skimping on financial compensation appropriate to each position or failing to reward the most reliable, top performers can lead to higher turnover that benefits neither party. As a consequence, vendors that staff a revolving door of support agents in order to perpetuate entry-level salaries often create greater long-term costs by siphoning current resources to frequently recruit and train replacements. Additional impacts include potential lapses or interruptions in service continuity, abbreviated training sessions, and erosion of client confidence with the loss of a valued colleague, all of which undermine the benefits of outsourcing and lead to client dissatisfaction. Organizations that are priced to win strike that balance between merit-based employee compensation structures and continuing to offer attractive pricing to the accounts they support. Failure to manage that balance often leads to replacing departing client revenue with new business or seeking new opportunities to replace those that have been lost. From the perspective of a service desk support organization, this means sales efforts are shifted primarily to replacing current revenue streams with a constant influx of new accounts rather than adding to current client rosters and building those relationships. Contrarily, from a client’s perspective, pricing to win means the service desk is consistently justifying the value of outsourcing model, delivering a high return on that investment while not sacrificing quality of support for the lowest conceivable price. That means clients receive continual service improvements, consultative guidance in reporting analysis, and the maximum uptime for their end users. The fact is only happy customers keep coming back for more.