According to Tim Conkle, CEO of The 20 MSP, when you are out hiring an IT provider you’ll run into three types of managed service providers (MSP). Essentially, there’s the break-fix, the hybrid, and the flat-rate MSP.
“There’s only three types of companies out there that do computer work, period,” says Conkle. “One’s called a break-fix: I’ve got something that broke, I’m going to pick up the phone, call an IT company, get them to fix it, and pay them by the hour. They’re going to bill me, I’ll pay it, and the relationship is over.
“The second type of company you’re going to find is one that moves to the next level. You’re going to be able to buy blocked time and things like that. They may have some management piece to it, like monitoring, where you pay a specific price. They start a little bit of a relationship, but the reality is that if you look deep into that model break-fix is wound throughout it.”
“The third type of company is a relationship balanced company where you align goals between the client side and the MSP. In doing that, it becomes a really good business decision on both sides of the coin.”
Conkle explains that hiring an MSP by the hour for break-fix is a poor business decision because you aren’t able to know the cost up-front. It’s the equivalent of purchasing a car without asking for the price, instead driving off the lot and being billed for it once you already own it. The bill can even fluctuate, because the way you bought it – with no relationship, with no determined costs – allows for such fluctuations.
Instead, you want a relationship that is paper-based. Hammer out the details on the front-end, so you can understand the exact cost of upkeep, maintenance, services, etc. That way you’re creating a business plan, allowing for budgeting, and not being blind-sided with costs you hadn’t anticipated down the road.
“Think about this for a minute, from a client-facing side of break-fix,” says Conkle. “You call a guy and say, hey, I want you to come fix a problem and I’ll pay you for every hour you’re here. You’re really saying, if you take your time, if you go slow, if you’re sloppy, I don’t even care if you know what you’re doing, but if it’s fixed in the end I’ll pay you. How crazy is that?”
The reality is that the IT provider industry is a business just like any other. An MSP that works on a break-fix model will want to generate revenue. If the MSP is paid by the hour, then they MSP has an incentive to build more hours into each client in order to receive more money. That doesn’t mean every MSP working on a break-fix is out to screw over its clients. It’s just the reality of this type of business model, and in that reality an MSP very well could build in extra hours.
Basically, in a break-fix model, there is more money to be made on the IT provider’s side when the client is broken or not working correctly. When that is the case, the IT provider gets more hours, resulting in more revenue.
“Break-fix is broken. We know that. We’ve known that for a long time,” says Conkle.
You can listen to Tim Conkle’s entire interview in Episode 6 of My TechDecisions Podcast. You’ll learn more about the dangers of break-fix and the need to dig into contracts that consider themselves flat fees. You’ll also learn about Tim’s company, The 20 MSP, and how is creating a network of MSPs with the same goals, abilities, and resources to help the MSPs and clients involved.