I recently received some feedback from a prospective customer that decided to go with another IT support company. They told me:

“We ended up choosing a company who would simply bill us hourly for the services that we used.  We found that to be more straightforward and an easier business model for us to work with and understand.”

I think this is a very common opinion. It can also be limiting and maybe even dangerous. Let’s ponder the hourly business model for computer support together, shall we?

Do understand that Smart Dolphins is a managed IT service provider and doesn’t charge an hourly rate (and we haven’t for about a decade). We describe the end result and charge a fair, predictable price. It is really quite straight forward.

What about the hourly model?

First, I want to address what many people think is the case: If you charge a fixed rate, you have to charge more than you would if you charged hourly. This very simplistic view makes fixed rate pricing seem less “fair” or more expensive than hourly. Certainly that can happen, but I don’t think disguising a high cost in a fixed fee is sustainable. If you’re doing the same thing as someone else, but charging more, you’ll lose. It’s a free market.

If a company is worried about billing abuse, the hourly model can actually be more dangerous. I have had countless conversations where companies who have paid bundles for an IT support company to try to fix a problem, but get no results. They supplied hours so they supplied the invoice. I also know of other companies that have billable quotas and incentives for their techs. Yikes.

At the heart of the difference between the two models is really about what gets done. Very rarely have we had a new client who switched to using Smart Dolphins from another Service Provider because of something the other company did. It is almost always a matter of what the other company did NOT do.

• They didn’t check the backup.
• They didn’t see that the server drives were filling quickly.
• They didn’t fix the virus infection before it spread to the whole network.
• They didn’t sit down with the business owner and make a plan to migrate away from old technology.

I could go on. The service they actually provided was fine, but they still failed.

The hourly model leaves the responsibility for what service is provided ultimately in the hands of the customer. Hourly implies, “we’ll let you know when we need you”. Not knowing what they don’t know, the customer did not request their Network Support vendor to do the various things above. The hourly structure handcuffs the service provider to what they can and can’t do, but the customer still expects everything to work well.

Of course, the computer support company can still sell proactive maintenance on an hourly basis, but when the clock is ticking, the expenses are climbing and the client doesn’t really see any noticeable difference, it often is an expense that is cut long term. Proactive service isn’t at the core of the relationship – it’s superfluous. I’ve had lots of companies say to me, “Our guys do stuff every month, but I’m not really sure what they do. They still bill us for every minute!”

Most hourly IT Service Providers are good guys who intend to do a good job and have the customer’s systems run great, but the economics of the model don’t support this very well. They are first and foremost paid to fix problems because those have the obvious and tangible value to the customer. Sure, a company will probably end up paying an hourly Computer Support vendor less than they would have paid Smart Dolphins, but they are going to DO less. Those things they are not doing might have prevented their customer’s next disaster. What is THAT going to cost?

IT infrastructure is extremely complex and volatile, I can’t overstate the importance of ongoing management and proactive leadership. How do you bill for this on an hourly basis?