The pricing conversation with your clients can be tricky at times — especially when you let them focus more on the cost of the parts rather than the value of your total solution. Regardless of market or size of the organization, some of your customers will undoubtedly believe they could get similar services for less than your company charges. Managed services and proactive selling have helped providers uncover and address those types of objections over the past few years, but the commoditization of cloud solutions and hardware is helping to fuel new pricing discussions.
The data backup and recovery market is a great example. With a host of companies offering a variety of online BDR applications, the financial pressures are definitely there, pushed down further by the “freemium” options. These no-cost schemes are often used to hook consumers into purchasing suites or other services that more than make up for the profit lost on the giveaways.
As most channel professionals know, competing head-to-head with those companies is a losing proposition. It tends to create a virtual race to the bottom where small IT firms could easily go broke trying to match prices with well-funded rivals. The revenue loss is just one concern. With minimal funding and few of the other resources required to support their growth, many solution providers also run the risk of ruining the quality of their service delivery, as well as their reputation.
Some channel organizations choose to avoid those scenarios altogether; they simply walk away from deals when their current or prospective clients stress the importance of using “free” software as part of their solutions. Others do what their customers ask and make every attempt possible to incorporate those systems into their final design. The latter is actually quite common among the solution provider community, especially when they support non-profit organizations that have access to highly discounted or no-cost vendor programs. The good news is that many of the applications and services manufacturers make available to charitable groups is normally the same quality used by channel partners.
The Security Concern
Freemium offerings in the nonprofit setting have genuine merit, but the lesser services offered to the general business community should be a greater concern to solution providers. Many are designed to entice consumers to upload applications onto their PCs, tablets or smartphones. But what happens when those systems are connected into a business network? Consider the implications of introducing an unproven freemium service in a BYOD environment. The risks and support cost could be significant, especially for the solution providers tasked with addressing these potential issues.
From an IT security perspective, many companies that employ these no-cost options on their systems actually end up spending considerably more than those that employ more capable enterprise versions. Some may argue that even the most basic antivirus and antispyware software is better than nothing at all, but according to a recent Aberdeen Research report, that argument may be faulty. The firm’s study demonstrates that organizations that implement enterprise versions of those applications actually reduce their total costs by approximately 60 percent to 70 percent. Aberdeen tabulated the financial impact of intrusions, support and other related-measures during their survey.
For example, the report shows that for every $10 million in revenue and 1,000 endpoints being managed, there was an 80 percent chance an organization would spend $9,300 annually if using an enterprise AV solution. The freeware versions’ costs were significantly higher — $22,000 per year.
Part of that cost can be attributed to the time spent fixing issues these systems simply aren’t capable of addressing. No-cost solutions often lack some of the features and functionality of paid solutions, such as the ability to scan software before downloading it into your systems. Others may allow malicious scripts to load before sending off an alert. Either can result in system vulnerabilities and lengthy support calls can negatively impact productivity and expenses — for businesses and their solution providers.
Since VARs and MSPs are often tasked with supporting freemiums, they need to understand the total financial costs of doing so. And IT security isn’t the only technology area solution providers need to be concerned with. Before taking on new clients they should be assessing all the existing no- and low-cost systems, including file sharing, email services, VoiP and conference applications, and many others.
Each freemium offerings can have a negative impact their own bottom line, as well as those of their clients. This is where savvy solution providers show their courage and earn their customers respect. They use clear and concise language to explain why they recommend their preferred systems and clarify the true costs of unsupported freeware. As news reports on data breaches and other information security risks continue to grow, business owners are getting more in tune to these issues.
It’s up to solution providers to show them the best ways to address their concerns. A good first step is to develop a firm policy for freemiums, and applications in general. For example, an MSP might want to stick closely to a prescribed list of applications and services from vendors they approve. Exceptions can be made, but solution providers should have a process in place for vetting each of those unique services or platforms. That gives VARs and MSPs a say in the things they are asked to support and the forum to explain the reasoning behind their decisions.
No solution providers should walk away from prospective opportunities or assume liabilities that could sink their business without sharing the pros and cons of freeware with their clients. Even if the risk seems low, when both sides understand there could be long-term implications from using these services, they can each deal better with any issues that come their way.
Brian Sherman is founder of Tech Success Communications, specializing in editorial content and consulting for the IT channel. His previous roles include chief editor at Business Solutions magazine and senior director of industry alliances with Autotask. Contact Brian at Bsherman@techsuccesscommunications.com.
