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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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In today's rapidly evolving threat landscape, managed security service providers (MSSPs) face a critical challenge: how to price their services competitively while ensuring profitability and delivering value to clients. With cybersecurity budgets under scrutiny and client expectations rising, developing an effective pricing strategy has become more complex than ever.
Whether you're launching a new MSSP business or reevaluating your existing pricing model, this guide will walk you through the essential considerations for creating a managed security service pricing structure that works for both your business and your clients.
Understanding the MSSP Pricing Landscape
The managed security services market is projected to reach $46.4 billion by 2025, according to Gartner, highlighting significant growth opportunities for providers who can effectively position their offerings. However, pricing these services requires balancing several competing factors:
- Service delivery costs (technology, personnel, infrastructure)
- Market expectations (competitive landscape, regional differences)
- Value perception (ROI demonstration, risk reduction metrics)
- Client size and complexity (scale of protection needed)
Before determining your specific pricing approach, it's essential to understand the predominant models in the industry.
Common MSSP Pricing Models
Tiered Subscription Model
The subscription model has become the backbone of MSSP recurring fees, typically structured in tiers (e.g., basic, standard, premium) that correspond to different service levels. This approach allows clients to select the package that best matches their security needs and budget constraints.
Example structure:
- Basic tier ($X per user/month): Includes endpoint protection, email security, and basic monitoring
- Standard tier ($Y per user/month): Adds vulnerability scanning, threat intelligence, and 8/5 support
- Premium tier ($Z per user/month): Includes all services plus 24/7 SOC monitoring, incident response, and dedicated security engineering
This model provides predictable revenue for MSSPs while giving clients clarity on costs and included services.
Per-Device or Per-User Pricing
Many MSSPs calculate fees based on the number of endpoints, users, or devices protected. This approach scales naturally with client size and creates a clear correlation between protection scope and cost.
According to a 2023 CompTIA survey, the average per-user cybersecurity retainer pricing ranges from $15-75 per month depending on service level, industry, and security requirements.
Custom Retainer Model
For complex enterprise environments, a customized cybersecurity retainer pricing approach may be more appropriate. This typically involves:
- Conducting a thorough assessment of the client's environment
- Developing a tailored security program
- Establishing a monthly or quarterly retainer fee based on estimated resource requirements
- Including provisions for additional services beyond the scope
This model works particularly well for organizations with unique security challenges or compliance requirements.
Key Factors That Should Influence Your Pricing
1. Service Delivery Costs
Begin by calculating your true costs for delivering services:
- Technology stack: Licensing costs for security tools and platforms
- Personnel: SOC analysts, security engineers, account managers
- Infrastructure: Data centers, connectivity, backup systems
- Overhead: Office space, administration, legal, insurance
Remember to account for both direct and indirect costs when establishing your baseline pricing.
2. Service Level Agreements (SLAs)
Higher service levels demand premium pricing. Consider how these elements impact your pricing structure:
- Response time commitments
- Availability guarantees (99.9% vs. 99.99%)
- Escalation procedures
- Remediation assistance
- Reporting frequency
Each improvement in service level typically corresponds to increased resource requirements, which should be reflected in your security subscription model pricing.
3. Market Positioning
Your market position significantly influences pricing strategy:
- Premium provider: Emphasizing advanced capabilities, specialized expertise, and white-glove service allows for higher pricing
- Value provider: Focusing on essential services at competitive rates requires operational efficiency
- Niche specialist: Targeting specific industries or security domains may command premium pricing due to specialized knowledge
Research by Forrester indicates that MSSPs with industry-specific expertise can command 15-30% higher fees than generalists.
4. Client Size and Complexity
Different client profiles require different pricing approaches:
- SMBs: Often prefer simple, predictable pricing with bundled services
- Mid-market: May require a hybrid approach with core services plus add-ons
- Enterprise: Typically needs custom security programs with complex SLAs
Scale your pricing methodology to match client complexity—simplicity for smaller clients, sophistication for larger ones.
Pricing Strategies That Drive Growth
Value-Based Pricing
Instead of focusing solely on costs, consider the value your services deliver:
- Risk reduction
- Compliance fulfillment
- Breach cost avoidance
- Resource savings (versus building in-house capabilities)
According to IBM's Cost of a Data Breach Report 2023, the average breach costs companies $4.45 million. Emphasizing how your services mitigate this potential loss can justify premium pricing.
Outcome-Based Pricing
Some innovative MSSPs are experimenting with outcome-based models where pricing is partially tied to security performance metrics:
- Reduction in mean time to detect/respond
- Vulnerability remediation rates
- Security posture improvement scores
While challenging to implement, this approach aligns provider interests directly with client security outcomes.
Bundling Strategy
Strategic bundling of services can increase perceived value while improving margins:
- Core monitoring and detection services
- Risk assessment and penetration testing
- Security awareness training
- Incident response
- Compliance reporting
Packaged offerings often sell at higher margins than their individual components would command separately.
Common Pricing Mistakes to Avoid
1. Underpricing Due to Cost Blindness
Many MSSPs fail to account for all costs when setting prices, particularly:
- Tool sprawl and technology debt
- Analyst burnout and turnover costs
- Client onboarding expenses
- Feature development and platform updates
Conduct regular profitability analysis on each service component to identify underpriced offerings.
2. One-Size-Fits-All Approach
The diversity of client needs requires flexibility in pricing models. Avoid rigid pricing structures that force clients into inappropriate service tiers.
3. Failing to Demonstrate Value
Without clear value metrics, security services can appear as a cost center rather than an investment. Incorporate ROI calculations and risk reduction metrics into your pricing discussions.
4. Ignoring Competitive Intelligence
Regular competitive analysis should inform your pricing strategy. While you shouldn't simply match competitors, understanding the market landscape is essential for positioning your offering effectively.
Implementing Your Pricing Strategy
1. Document Your Service Definitions
Create detailed service catalogs that clearly define:
- What's included in each service tier
- Service boundaries and limitations
- SLA commitments
- Additional services available
This transparency helps sales teams communicate value and prevents scope creep.
2. Develop Pricing Tools
Create internal pricing calculators that account for:
- Client environment complexity
- Industry-specific requirements
- Geographic factors
- Volume discounts
- Contract length incentives
These tools ensure consistency while allowing for necessary customization.
3. Train Your Sales Team
Equip your sales organization with:
- Value proposition talking points
- Competitive differentiation guidance
- Negotiation parameters
- Authority levels for discounting
4. Review and Adjust Regularly
Set a calendar for periodic pricing reviews that consider:
- Cost changes
- Competitive shifts
- Service delivery efficiency gains
- Client feedback
- Market demand
Most successful MSSPs conduct formal pricing reviews at least annually.
Conclusion
Developing an effective managed security service pricing strategy requires balancing multiple considerations—from your cost structure and market position to client needs and competitive landscape. The most successful MSSPs create flexible frameworks that scale with client size, adapt to industry requirements, and clearly communicate value.
By avoiding common pricing pitfalls and implementing a strategic approach to your MSSP recurring fees, you can build a sustainable security business that delivers both client value and healthy margins. Remember that pricing is not just about covering costs—it's a strategic tool for positioning your services and communicating their value to the market.
As the cybersecurity landscape continues to evolve, your pricing strategy should evolve with it, reflecting new threats, technologies, and client expectations. The providers who master this balance will be best positioned for long-term success in this growing market.