If you ask most MSP owners what keeps them awake at night, the answers are usually predictable. Finding skilled engineers, managing customer expectations, keeping up with cybersecurity, driving sales and retaining team members.
Yet beneath all of these challenges lies a problem that is often overlooked but has a greater impact on profitability than almost any other business decision.
Packaging and pricing.
Across Australia, New Zealand, and the United Kingdom, we regularly speak with MSPs and IT Service Providers that are delivering exceptional technical outcomes for their customers but are still struggling to achieve the profitability they deserve. In many cases, the issue is not the quality of their service, the capability of their team, or even the number of customers they have. The issue is that their packages and pricing have not evolved alongside their business.
Many MSPs are operating with pricing models that were designed years ago for a very different market. The services customers consume today are dramatically different from those they required five years ago. Security expectations have increased, compliance requirements have become more demanding, cloud adoption has accelerated and artificial intelligence is beginning to reshape the way services are delivered.
Despite all of this change, many providers continue to charge customers in much the same way they always have.
The result is a growing disconnect between the value being delivered and the revenue being generated.
Why Packaging and Pricing Matter More Than Ever
For years, MSPs enjoyed a relatively straightforward business model. Customers needed help managing servers, desktops, networks, backups, and basic cybersecurity. The service offering was relatively consistent across the customer base, and pricing models were often built around devices, users, or a simple all-you-can-eat support agreement.
Today, the landscape looks very different.
Customers expect strategic guidance, cybersecurity leadership, compliance support, cloud optimisation, automation, vendor management, procurement assistance, user adoption programmes, and business continuity planning. At the same time, they expect rapid response times, proactive communication, and seamless support experiences.
The scope of responsibility for an MSP has expanded significantly, yet many providers have not fundamentally reviewed how they package and price their services.
This creates a dangerous situation where costs continue to increase while margins slowly erode.
Many MSP owners recognise this challenge but are hesitant to address it. They worry that increasing prices may result in customer churn. They fear competitors offering lower-cost alternatives. They become trapped in a mindset where pricing is viewed as a risk rather than a strategic lever for growth.
In reality, the greater risk is often doing nothing.
The Biggest Mistake MSPs Make: Selling Services Instead of Outcomes
One of the most common packaging mistakes we see is that MSPs continue to describe their offerings through a technical lens.
Their proposals often contain long lists of inclusions. Monitoring, patch management. endpoint protection, Microsoft 365 administration, backup verification and vendor management. While these activities are important, they are not what customers are actually buying.
Business owners rarely care about patch management. They care about reducing downtime. They are not excited about endpoint protection. They care about reducing risk. They do not wake up thinking about Microsoft 365 administration. They care about enabling their team to work productively.
The most successful MSPs understand that customers purchase outcomes, not activities.
When a provider focuses purely on technical deliverables, they inadvertently commoditise their own services. Customers begin comparing one MSP against another based on a list of features rather than the business outcomes being achieved.
This often leads to price-based buying decisions.
Conversely, when an MSP positions itself around business outcomes, the conversation changes completely. The discussion shifts from cost to value. Instead of debating whether a service costs $150 or $180 per user, customers begin evaluating the impact the provider has on security, productivity, risk reduction, and business growth.
This creates stronger customer relationships and significantly improves pricing power.
Complexity Is the Enemy of Profitability
Another challenge that emerges as MSPs grow is package complexity.
Many providers start with a simple offering but gradually create more and more variations as customers request exceptions. Over time, the business accumulates custom pricing arrangements, unique support agreements, specialised inclusions, and bespoke service bundles.
Eventually, nobody fully understands what each customer is paying for.
Sales teams struggle to position the offering. Service delivery teams struggle to maintain consistency. Customers become confused about what is included and what is not. Most importantly, profitability becomes difficult to measure.
The highest-performing MSPs tend to move in the opposite direction. Rather than increasing complexity, they simplify.
Their packages are designed to be easily understood by both customers and employees. Each tier clearly aligns to a specific customer profile and maturity level. The customer understands exactly what they are buying and why they are buying it.
This simplicity creates operational efficiency while making it easier for customers to progress to higher-value services over time.
Understanding the True Cost of Service Delivery
Many MSPs set prices based on what competitors charge rather than understanding their own cost structure.
This approach creates significant risk.
The reality is that no two MSPs are the same. Different businesses have different operating models, team structures, tool stacks, support processes, customer profiles, and growth objectives. Copying a competitor’s pricing assumes that their cost structure is identical to yours, which is rarely the case.
Before an MSP can confidently price its services, it must understand what it actually costs to deliver them.
This requires visibility into service desk costs, project delivery costs, customer success functions, management overheads, sales and marketing investment, tooling expenses, security operations, and training requirements.
Many business owners are surprised when they complete this exercise. Services they believed were highly profitable often generate far lower margins than expected. Conversely, some services that receive little attention can become valuable contributors to overall profitability.
Without understanding the economics of delivery, pricing decisions become little more than educated guesses.
Why Underpricing Is More Dangerous Than Losing a Customer
One of the most damaging habits in the MSP industry is chronic underpricing.
Many providers are willing to negotiate heavily to secure a new customer. While this may generate short-term revenue, it often creates long-term profitability challenges.
A customer that is incorrectly priced becomes increasingly difficult to fix over time. The relationship starts with a margin problem that compounds year after year. The irony is that underpriced customers often require just as much effort to support as profitable customers. In some cases, they require even more.
The consequence is that valuable resources are consumed delivering services that generate insufficient returns. This reduces the business’s ability to invest in automation, leadership, training, customer experience, and innovation.
Profit is not simply about owner remuneration. Profit is the fuel that allows an MSP to build a better business. Without healthy margins, every future investment becomes harder to justify.
The Capability Question That Changes Everything
There is another dimension to packaging and pricing that many MSPs overlook.
Sometimes pricing is not actually the problem. Sometimes capability is.
Over the past decade, labour costs have continued to increase while customer expectations have risen. This has placed significant pressure on service gross margins.
Historically, MSPs responded by hiring more junior engineers or increasing utilisation targets. While these approaches may deliver short-term benefits, they often create customer experience challenges and increase pressure on existing teams.
Forward-thinking MSPs are taking a different approach. Rather than simply looking for cheaper labour, they are redesigning how capability is delivered.
Many are building blended delivery models that combine local customer-facing resources with highly skilled offshore engineers, project specialists, automation experts, cybersecurity professionals, and service desk teams.
The objective is not simply reducing costs. The objective is improving capability while creating healthier margins.
When an MSP can hire an experienced offshore Level 2 Engineer for less than the cost of an onshore Level 1 Engineer, the traditional economics of service delivery begin to change. Customers receive faster resolution times. Technical quality improves. Service capacity increases. Profitability strengthens.
This additional margin creates flexibility that can be reinvested into the business. Instead of competing on price, the MSP can compete on experience, expertise, and outcomes.
Packaging for the MSP of the Future
The MSPs that will thrive over the next decade are unlikely to be the ones with the cheapest prices.
They will be the providers that most effectively align customer outcomes, service delivery capability, and commercial sustainability.
Packaging and pricing should not be viewed as an annual exercise completed before the start of a new financial year. It should be a strategic initiative that evolves alongside the business.
As customer requirements change, service offerings must evolve. As technology changes, delivery models must adapt. As capabilities expand, pricing structures must be reviewed.
The businesses that embrace this mindset create a competitive advantage that becomes increasingly difficult for others to replicate.
Final Thoughts
Many MSPs spend enormous amounts of time chasing new customers while overlooking one of the most significant opportunities already within their business.
Improving packaging and pricing can often deliver a greater impact on profitability than acquiring additional clients.
The goal is not simply to charge more. The goal is to ensure that pricing accurately reflects the value being delivered, supports future investment, and enables the business to continue providing exceptional outcomes for customers.
The most successful MSPs understand that packaging and pricing are not about maximising revenue.
It is about creating a sustainable business model that allows them to invest in their people, strengthen their capability, improve customer experience, and unlock long-term growth.
If you have not reviewed your packaging and pricing strategy in the last 12 months, now is the time.
Because in today’s market, the difference between a good MSP and a great MSP is often not the quality of service they deliver.
It is how effectively they package, position, and price the value they create.
If you have not reviewed your packaging and pricing strategy in the last 12 months, now is the time to start the conversation.
A practical discussion can often reveal where your current model is creating unnecessary margin pressure, complexity, or missed opportunity.