Simply put, an IT service and pricing model is the contractual agreement between your organization and the IT service vendor, governing the manner in which the vendor will bill to the service seeker. Not long before, the two basic pricing models for almost all kinds of services were the Time and Material model and the Fixed Price model.
However, with focus shifting from mere delivery of the services to formation of long term bonds with customers by delivering collaborative solutions, pricing models have also undergone a shift. Today, managed IT service delivery model is adopted by major IT consumers of the business world, whereas some also like to consider the per incident model. Let’s understand the intricacies of both models in detail, and see which one’s better.
What’s the Per Incident IT Support Model All About?
The per incident IT service delivery model is adopted in organization with very basic IT service requirements. Services such as IT help desks often prove to be decent candidates for the per incident model.
The delivery managers from the vendor’s side work in collaboration with your organization to understand your unique requirements, the estimated call volumes that the service desk support personnel would need to attend per month, the volumes of tickets (incidents) that will be logged per month, the expected support hours and work timings, estimated call handling times, kinds of applications covered, and of course, the Service Level Agreements or SLA.
Based on the quality and quantity parameters a per incident price is agreed upon. This per incident price is multiplied by the agreed estimate of monthly incidents, and the monthly base billing price is established. Any incidents worked upon by the IT vendor can be charged in accordance with the per incident price. The IT vendor does its staffing based on the estimated monthly average inflow of tickets.
The Low Risk, Forward Looking Managed IT Model
In a managed IT service model, the service provider has end to end responsibility of delivering the expected IT services, governed by well-defined service level agreements. All decisions regarding the delivery of the project are taken by the IT vendor, and customers are billed at a pre-determined fixed price plus additional price based on additional units of service delivered to customer.
Missing the SLAs means the vendor is held liable for penalties, and achievement of all SLA norms also implies financial rewards for the vendor. Many enterprises adopt the managed IT service model as extension of existing staff augmentation.
Let’s understand the key benefits that the managed IT service model brings forth for the service seeker.
- The managed IT models brings together the best attributes of the T&M and FP models, to deliver the best benefits to the organization availing IT services.
- With end to end responsibility of seamless IT service resting with the service provider, the organization’s role is limited to budget tracking and quality evaluation.
- By tying each missed SLA with a monetary penalty, the organization ensures that the IT vendor is self-driven to achieve the highest possible SLA levels.
- The customers are able to establish a middle ground of hourly payments and single time payments.
- Customers can optimize budget without the need of any compromises in terms of deliverables’ quality.
- The managed IT model mitigates risks for both the organization as well as the service provider.
- For the service provider, the managed IT model leaves scope for ramping up delivery in order to achieve established SLA norms, although that inflates the cost of the project delivery.
Because of the mutual benefits shared by the client and the IT vendor, along with the inherent low-risk approach of the model, the managed IT service model has become the most preferred, particularly in IT engagements where the scope of work can be clearly defined and tied to well-defined SLAs.