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96 posts

Master Geek

# 32732 22-Apr-2009 18:01
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Just wanting to get an idea of what type of IT contracts any of you may have come up against here in NZ, with specific regards to the most popular billing mechanisms.
i.e. would the IT company charge a monthly retainer, and then bill by the hour at a reduced rate, or do they charge per node on the network, or even a fixed monthly cost - how would that be based?
I have heard of a few where there is a fixed monthly retainer, which allocates a certain amount of hours, - but what if they go over, any idea's on what would be a reasonable billing expectation?

Any help you can give would be appreciated.


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112 posts

Master Geek

  # 208655 22-Apr-2009 19:46
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Most of the contracts I have been involved are for application (usually bespoke development) and for these they have been a set fee per month or quarter.  The contracts contain a schedule of rates so if we want additional work or go over the contract there is an agreed value.  The hours are also on a "use it or loose it" so if they are not used then all the beter for the vendor.

924 posts

Ultimate Geek


  # 208661 22-Apr-2009 20:12
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Most of the IT services contracts I've dealt with include a monthly retainer and a discounted hourly rate. The monthly retainer usually includes some services such as monitoring, a monthly report and a scheduled meeting with the account manager and/or techo once a month. In my experience this is the most common scenario as the monthly costs appear lower, but the risk is that you could rack up some huge bills in a month if you have a couple of major issues with your server.

Some vendors provide fixed, monthly rates which includes all services - the idea with these contracts is that the vendor is confident that the systems they have implememented are stable and trouble-free so they can afford the risk. The downside is that the business may pay too much each month had they gone for ad-hoc services, though this is usually outweighed by the knowledge that their systems are running well. Also, the vendor will more than likely include some clauses that allow them to charge for more services in some situations. A vendor would be unlikely to offer this sort of contract unless they are managing your entire infrastructure as they couldn't be sure that the existing systems would cause them grief.

There are a couple of other variations of the above two options - including pre-paying for hours at a discounted rate, or paying a higher monthly retainer which includes moves/adds/changes, or something else along those lines.

Depending on the size of your company, you may be able to negotiate hourly rates from $75 up to $150 depending on the type of work - sometimes 'senior' techos cost more than juniors (although this can lead to confusion down the track) and certain types of work usually carry a premium such as configuring/fixing Cisco equipment, SANs, blades, etc...

Hope that helps.


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Uber Geek

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  # 208704 22-Apr-2009 23:33
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zimbonz: Any help you can give would be appreciated.

Are you offering services, or looking for a company to handle your IT?

Either way, the two posters above have covered just about everything, I would check what happens in the event of a major systems failure, and what happens for after hours support.

For an IT solution provider, the above is very important as you need to plan for having someone available after hours if your service level agreement makes such guarantees, and you need to know what timeframes you need to respond in before penalties (if any) kick in.

96 posts

Master Geek

  # 208794 23-Apr-2009 14:01
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Thanks alot all, that has helped.

I am looking at providing IT services, but with a win-win maintenance contract. I have some ideas on how to frame it best, so thanks.

924 posts

Ultimate Geek


  # 209734 27-Apr-2009 13:39
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zimbonz: Thanks alot all, that has helped.

I am looking at providing IT services, but with a win-win maintenance contract. I have some ideas on how to frame it best, so thanks.

A win-win scenario is rare as one of the parties (customer or vendor) has to expose themselves to some risk, so I'll be interested to hear about your maintenance contract ideas.

96 posts

Master Geek

  # 209737 27-Apr-2009 13:43
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Hi Stuart,
I was really referring to the remuneration part of the contract, my idea was for the client to be billed a basic monthly retainer (comprising of a hourly quota), which would cover their basic needs, and then a discounted hourly rate for any hours exceeding their quota. Perhaps I should have worded that, a "fair" contract, as opposed to a win-win...

924 posts

Ultimate Geek


  # 209743 27-Apr-2009 13:51
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Yeah, that's a fairly standard contract, and if you keep their systems running well it should end up as close to a 'win-win' as possible.

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