VARs Tread Carefully on Raising Service Prices

By Jessica Davis  |  Print this article Print

After cutting IT budgets back to the bone over the last few years and negotiating prices way down during the recession, is it time for IT solution providers and resellers to look at raising services prices again? Here's what those in the trenches say.

With the long winter of the 2009 recession seemingly behind us, everyone has got an eye out for signs of spring—job creation, more hiring and more contracts. Is there also room for higher technology services prices?

The answer seems to be a qualified yes.

For five essential tips to follow before you raise your price, click here.

More competition for fewer services jobs over the past few years has driven prices down. Many a VAR saw customers close up shop, shut down spending or negotiate lower rates for services during 2009. As OnForce CEO Peter Cannone tells Channel Insider, "There's been a price resetting. It's going to be a slow recovery in terms of increased pricing."
Cannone says jobs that used to command $300 are now getting $175.

"For a lot of services jobs, pricing has become commoditized," he says. The good news is that the price decreases that have characterized the market over the last couple years seem to have stabilized. So that means the big question is, Will pricing stay where it is now, or will we start to see it climb again?

"I do see it coming back," Cannone says. "But it will take a few quarters. And it won't come back to the levels we saw in 2007 and early 2008."

Cannone says he expects it to increase by 7 to 9 percent over the course of 2010 for typical OnForce work events.

How are VARs handling the pricing issue as we tiptoe into recovery? Carefully.

"Based on the economic climate, we have not raised our prices to existing clients, but we are not offering some discounts we've offered in the past on services except in cases when a client pays us in advance for either six or 12 months of service in order to get that discount," says one VAR representative who asked to remain anonymous. "We are increasing our prices on certain service elements on new contracts, however." Those are service elements that the VAR believes now have been underpriced previously.

Another IT solution provider also expresses caution.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com