MSPs Come Up Winners In N-able, LPI Price Battle

At the same time, revelations about LPI's increase in up-front costs has some partners questioning the vendor's onetime status as the low-priced leader. Next week, N-able formally plans to announce a hosted network monitoring service, dubbed the Momentum System, which will cost MSPs just $70 per customer site license per month with no additional startup fees, time commitment or cancellation fee, said Bill Stewart, vice president of marketing at N-able, Ottawa.

Five or more Momentum licenses drop the monthly per-license cost to $60. At that price, N-able matches the standard monthly per-site subscription price of LPI's Managed Workplace product—a price that for years LPI has promoted as the least-expensive way to add remote monitoring.

About three weeks ago, Bob Carter, operations manager at DCS Netlink, an ISP in Rice Lake, Wis., needed to decide between LPI or N-able. Considering that DCS was only looking to add desktop monitoring on top of its existing security monitoring services, there was little difference between LPI and N-able, so it came down to cost, Carter said. Because N-able already had its Momentum System up and running and offered it to DCS, he went with N-able because LPI's up-front cost was much higher, he said.

"All N-able wanted was the assurance of a credit card, and we were able to bring Momentum in-house for testing for no money down," Carter said. "And after 30 days, we'll be paying the $70 a month licensing [fee]."

LPI wanted $5,000 up front, and a five-to-10 license commitment for its $60-per-site per-month SKU, Carter said. "[LPI] said we could get our money back in 30 days if we didn't like it, but they wanted the $5,000 up front," he said.

A revised pricing structure from LPI that was quietly implemented in January requires up-front payments of between $2,500 and $7,000, said Dan Wensley, vice president of partner development at LPI, Ottawa.

LPI did not publicly announce the new pricing structure. "We just kind of overlooked it, or the issue got buried," Wensley said. The changes require, for example, that a new partner pay at least $2,499 up front for the vendor's Server Center management console and three one-year customer site licenses.

"We were bringing on partners for just $60, but we found that wasn't in the best interest of the partners, and it wasn't in the best interest of LPI." Wensley said. "It was such a low commitment that people were just coming on and then going off, and those who did that were just burning up resources." The revised pricing is for new customers only, Wensley said. But sources have told CRN that legacy LPI customers who become idle or shed LPI services can be hit with the added costs as well.

Matt Briese, owner of Briese Computers, an MSP in Rochester, Minn., walked away from N-able about three-and-a-half years ago because the $40,000 the Briese needed at that time to purchase the vendor's platform was too much, he said. He went with LPI instead and paid $60 per month per customer site.

But problems plagued the LPI platform, which often had difficulty reading the status of network devices, so in late 2005, Briese began to take his MSP customers off LPI and move them to Microsoft Operations Manager, which also could perform remote monitoring, he said.

During this ramp down of customers off LPI, the vendor introduced version 5.1 of its MSP platform, a version billed as a fix to many of the problems that plagued earlier versions, Briese said. When he approached LPI to upgrade to version 5.1, he was told the pricing had changed and that he needed to pay $1,250 for LPI's Service Center management console and buy a minimum of 10 site licenses up front, he said.

"I never received an announcement about that [price increase]. They never sent me anything explaining that," Briese said.

Wensley said the changes to LPI's pricing structure aren't causing sticker shock for partners. Most start out wanting more than one customer site license anyway and understand that there should be an added cost associated with proper training for the LPI product, he said. Comprehensive training and a partner development program are included in all of LPI's pricing.

In contrast, the Momentum System does not give MSPs access to N-able's trademark ingredient: The BluePrint for Success, N-able's comprehensive MSP business transformation consulting engagement, N-able's Stewart said.

"The idea behind Momentum is to provide much faster results at a lower risk, with a lower degree of effort," Stewart said.

MSPs need to buy into N-able's more expensive Velocity System to get the consulting component, Stewart said. Velocity is an expanded MSP platform in both technology and approach, and MSPs that begin with Momentum eventually should migrate to Velocity, he said.

"With Momentum, for $70 a month, you're ready to do remote monitoring and provide reactive managed services," Stewart said. "Will [Momentum] make you into a full-fledged managed services provider? No. To get to where you are making 25 percent operating margins as a proactive MSP that's transformed its business, that's the Velocity system."

This long-term goal of high-margin, recurring revenue—not just a low cost of entry—should be the focus of solution providers when shopping for an MSP platform, said LPI CEO Peter Sandiford. He said LPI partners can charge their customers anywhere from $10,000 to $20,000 a year for MSP services and earn whopping 500 percent margins using LPI's platform.

LPI partners posting these kinds of numbers do so because LPI's partner development and marketing support encourages the addition of new types of revenue-generating MSP services and billable customer collaboration, he said. Sandiford added that LPI, like N-able, is a channel-only vendor, and he took the opportunity to criticize rival MSP platform vendors Kaseya and SilverBack Technologies for having "significant direct sales operations."

Pricing for Kaseya's Managed Services Provider Edition of its flagship IT Framework product also has an up-front cost less than that of LPI's, according to the San Francisco vendor's price list. For a down payment of $1,500, Kaseya sells outright to MSPs a 100-user seat license for 18 monthly payments totaling about $12,000, according to Kaseya. This adds up to a minimum up-front cost of $2,083.33 after a 30-day free trial, according to Kaseya. That's hundreds of dollars less than LPI's up-front cost for the same number of monitored devices.

True, about 20 percent of Kaseya's revenue arrives from direct sales. But potential customers with less than 100 employees that approach Kaseya directly are referred to partners, said Bill Falk, vice president of sales at Kaseya.

Dan Phillips, CEO and chairman of SilverBack, Billerica, Mass., said, "Our competitors could offer their products for free, and it would still cost more to deliver managed services with their products than it does with SilverBack."

SilverBack's price can range from about $10,000 to $76,500 for the vendor's Business Builder MSP program, according to Jim Hare, vice president of worldwide sales at SilverBack. And SilverBack has raised its price continually, even as LPI was inciting an all-out price war by adding $15- and $5-per-site-per-month SKUs earlier this year.

"Why would we lower our per-device price?" Phillips said. "Our partners get 50 percent margin on recurring revenue on millions of dollars of revenue. Last year, our top eight partners generated over $80 million in services revenue."

Had LPI raised its up-front costs sooner than it did, Richard Rogers, senior consulting engineer at Swat Systems, a solution provider and MSP in Seattle, may not have become an LPI customer. Swat came onboard as an LPI partner last year, just before the vendor added the increased startup costs to its pricing model, Rogers said.

"We could have afforded the higher price [of the new pricing model], but a higher price probably would have made us look more at other options," he said.

The effect of LPI's up-front price increase is widespread, Rogers said. Swat currently is working with several smaller IT consulting firms in the Seattle area that are looking to resell LPI's MSP service because the vendor's entry-level pricing has become prohibitively expensive for them, Rogers said.

One solution provider, who is now an MSP and LPI partner, said he first contacted LPI about its service early this year and was not told about the up-front costs. When he was ready to sign a contact about three months ago, he was told the vendor had changed its pricing model.

The MSP, who requested anonymity, purchased a 10-seat license, which LPI lists on its price sheet at $4,999 for one year. He was surprised to hear LPI had raised the cost of entry, but felt the value of the product still justified the higher up-front investment. "I guess they have a business to run, too," the MSP said.