The Sticker Price vs The Real Price
MSPs advertise $150/user/month. But that's just the beginning. Here's what they don't tell you.
The Hidden Costs
1. After-Hours Rates
What they say: "24/7 support included" What they mean: "24/7 support at 2x the rate"
Real cost: $150/hr × 2 = $300/hr after hours
How to avoid: - Define "after hours" in the contract - Cap after-hours charges - Require approval before after-hours work
2. Travel Charges
What they say: "On-site support available" What they mean: "On-site support at $150/hr + travel"
Real cost: $150/hr + $0.85/km + parking + tolls
How to avoid: - Define travel radius - Cap travel charges - Require approval for on-site visits
3. Minimum Call-Outs
What they say: "Flexible support" What they mean: "2-hour minimum for every call"
Real cost: $300 minimum for a 15-minute fix
How to avoid: - Negotiate shorter minimums - Cap call-out charges - Require approval for minimum call-outs
4. Project Work
What they say: "Project services included" What they mean: "Project services at $200/hr"
Real cost: $200/hr × 100 hours = $20,000
How to avoid: - Define project vs BAU clearly - Get project rates in writing - Require approval for project work
5. Software Licensing
What they say: "We handle licensing" What they mean: "We mark up licensing 20-40%"
Real cost: $100/user × 1.3 markup = $130/user
How to avoid: - Buy licensing directly - Get transparent pricing - Compare with direct licensing costs
6. Hardware Markup
What they say: "We procure hardware" What they mean: "We mark up hardware 15-30%"
Real cost: $1,000 server × 1.25 markup = $1,250
How to avoid: - Buy hardware directly - Get transparent pricing - Compare with market rates
7. Training Charges
What they say: "Training available" What they mean: "Training at $1,500/day"
Real cost: $1,500/day × 5 days = $7,500
How to avoid: - Negotiate training into contract - Use free online resources - Train internally
8. Documentation Fees
What they say: "We document everything" What they mean: "Documentation at $150/hr"
Real cost: $150/hr × 20 hours = $3,000
How to avoid: - Require documentation as part of service - Define documentation requirements - No extra charges for documentation
9. Escalation Fees
What they say: "Escalation support" What they mean: "Escalation at 1.5x the rate"
Real cost: $150/hr × 1.5 = $225/hr for escalations
How to avoid: - Define escalation procedures - Cap escalation charges - Require approval for escalations
10. Termination Fees
What they say: "Flexible contracts" What they mean: "6-month termination notice + fees"
Real cost: 6 months × $20,000 = $120,000 to leave
How to avoid: - Negotiate shorter termination periods - Cap termination fees - Define exit terms upfront
The Real Cost Calculator
Example: 200-person company
| Item | Advertised | Real Cost |
|---|---|---|
| Monthly retainer | $20,000 | $20,000 |
| After-hours support | Included | $5,000 |
| Travel charges | Included | $2,000 |
| Project work | $200/hr | $8,000 |
| Software licensing | Included | $3,000 |
| Hardware markup | Included | $1,500 |
| Training | $1,500/day | $3,000 |
| Documentation | Included | $1,000 |
| Total | $20,000 | $43,500 |
That's 117% more than advertised.
How to Protect Yourself
Before Signing
- Get all-inclusive pricing — No hidden fees
- Define everything in writing — Scope, rates, terms
- Cap additional charges — Set limits
- Require approval — For all extra work
- Get references — Talk to current clients
During the Contract
- Track all charges — Monitor every invoice
- Question everything — Don't accept vague charges
- Document approvals — Get written approval
- Review regularly — Monthly cost analysis
- Negotiate adjustments — Don't accept price increases
If You're Overpaying
- Audit the contract — Find the hidden costs
- Negotiate better terms — Use as leverage
- Consider alternatives — In-house, other MSPs
- Get legal advice — If they won't negotiate
- Plan your exit — Know your termination rights
The Bottom Line
MSPs make money from hidden costs. The sticker price is just the beginning.
Key hidden costs: 1. After-hours rates 2. Travel charges 3. Minimum call-outs 4. Project work 5. Software licensing 6. Hardware markup 7. Training fees 8. Documentation fees 9. Escalation fees 10. Termination fees
How to protect yourself: 1. Get all-inclusive pricing 2. Define everything in writing 3. Cap additional charges 4. Require approval for extra work 5. Monitor every invoice
Use our MSP Cost Calculator to see the real cost of your MSP, or check the Salary Arbitrage Calculator to see how much the MSP pockets from your labour.
Related Guides
- MSP Pricing Models — Understanding how MSPs structure fees
- MSP Contract Checklist — Review contracts before you sign
- How to Negotiate MSP Contracts — Step-by-step negotiation guide
- The All-You-Can-Eat Myth — Why flat-fee contracts drain your budget
- MSP Cost Calculator — Calculate your true IT spend
- Contract Clause Analyser — Paste any clause to check for red flags
This analysis is based on industry surveys and real-world examples. Your experience may vary.
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