Why We Stopped Doing Unlimited Project Hours
On the economics of MSP pricing, and what actually aligns incentives between client and provider.
The Break-Fix Problem: Getting Paid to Fail
Break-fix is the oldest MSP model and also the most obviously misaligned. You pay an hourly rate, billed after the fact, for work done in response to something going wrong. On the surface it sounds fair, you pay for what you use. In practice it creates a perverse relationship with stability.
When a provider bills hourly for reactive work, a reliable, well-run environment produces less revenue. A server that never crashes is a slow month. A workstation fleet that never needs emergency rebuilds is a quiet quarter. There is no financial incentive to invest in preventive maintenance, automation, or proactive monitoring beyond the minimum needed to keep clients from leaving, because every hour of toil that gets eliminated is an hour of billable revenue that disappears.
Clients feel this even when they cannot name it. The environment seems to need constant attention. Problems recur without root-cause resolution. Recommendations for infrastructure investment arrive without a clear business case, just an implicit understanding that the work will generate more billable hours. Meanwhile, budgeting is impossible: your IT spend in any given month is a function of how many things broke, and you will not know the number until the invoice arrives.
Break-fix is not a dishonest model, the providers using it are not conspiring to break your servers. But it is a model where stability and automation work against the provider’s revenue, and that tension shapes every decision at the margin.
The Block-Hours Trap: Effort Rewarded, Outcomes Ignored
Many MSPs figured out that clients hate the unpredictability of pure break-fix, so they invented prepaid hour blocks, sometimes called retainers, sometimes bundled as “unlimited project hours” within a managed agreement. You pay a flat monthly fee and, in theory, get a defined pool of hours to draw from for projects and extra work.
This sounds like it solves the budgeting problem. It does not solve the incentive problem.
In a block-hour or “unlimited project” arrangement, the provider still bills by effort rather than by outcome. The incentive is still to spend time, not to finish cleanly. Two failure modes emerge, and both of them hurt the client:
- Padding in slow months. If your environment is healthy and the project queue is thin, work expands to fill the block. Documentation gets over-engineered. Meetings multiply. Tasks that could be automated manually get done by hand, because the hours need to be consumed to justify the retainer. You overpay for the quiet months.
- Rationing as the block runs low. When the pool is almost exhausted, work mysteriously decelerates. Projects that were chugging along start accumulating blockers. Urgent items suddenly need “scoping” before anyone will touch them. The work does not stop entirely, but the pace adjusts in ways that just happen to keep the meter from running dry before the next billing cycle. You get less done precisely when the stakes are highest.
The fundamental problem is that hours are a proxy for value, not value itself. Rewarding effort rather than outcomes creates providers who are very good at being busy and not necessarily good at getting things done.
The pricing alignment test
Ask yourself: does my IT bill go up when my environment gets worse? If yes, whether through emergency hour overages, break-fix invoices, or a block that drains faster whenever something breaks, the pricing model is the problem, not the provider’s work ethic.
Flat Per-User Managed Pricing: Where Incentives Finally Align
The shift to flat, per-user (or per-device) managed pricing changes the fundamental math. The provider receives the same monthly revenue regardless of how many tickets come in, how many incidents occur, or how much time the team spends on your account. The only way to improve margin is to keep your environment stable and to automate the repetitive work.
This is the model where a good provider’s incentives and a client’s interests genuinely point in the same direction:
- Fewer tickets is good for everyone. The provider does not lose revenue when your environment runs cleanly, they gain margin. So investing in patch management, proactive monitoring, and preventive maintenance has a clear financial return for the MSP, not just for you.
- Automation earns its keep. When a task can be scripted and handled in seconds instead of an hour of manual work, the provider benefits. Under break-fix or block hours, that same automation would reduce billable revenue. Under flat pricing, it frees up capacity that gets reinvested in higher-value work.
- Budgeting becomes real. Your IT cost for managed services is a known line item, not a variable that fluctuates with how bad last month was. Finance can plan around it. You can compare it to alternatives. You can hold the provider accountable to outcomes because the price no longer has a built-in excuse for variance.
The provider’s growth model also shifts: the fastest path to higher revenue is adding users, which means growing with clients and earning new ones, rather than generating more incidents on existing ones.
Where T&M Still Belongs: Fixed-Fee Projects
Flat per-user managed pricing handles run-rate operations cleanly. It does not handle everything. There are genuinely one-off, hard-to-scope efforts, migrating to a new phone system, standing up a new office, consolidating two acquired companies’ environments, where the scope is ambiguous enough that neither party can price it sensibly on a per-user basis.
For those, time-and-materials billing is not wrong. But there is a critical distinction: it should be a discrete, fixed-fee project with a defined deliverable and a defined end date, not an open-ended hour bucket folded invisibly into the managed agreement.
A fixed-fee project means both sides agree upfront on what “done” looks like. The provider is incentivized to scope carefully and execute efficiently, overruns come out of their margin, not yours. The client knows exactly what they are spending and what they are getting. If the scope changes materially, you renegotiate. That is a healthy dynamic. Folding ambiguous project work into an “unlimited” managed bucket does the opposite: it makes scope invisible and removes every incentive to be efficient about it.
How the Models Compare
| Model | How you pay | Who benefits when things go wrong | Budgeting | Incentive alignment |
|---|---|---|---|---|
| Break-fix / T&M | Hourly, billed after the fact | Provider, more incidents = more revenue | Unpredictable; you learn the cost after it is incurred | Poor, stability and automation reduce provider revenue |
| Block hours / “unlimited project hours” | Flat monthly fee for a pool of hours | Provider in high-incident months; client in quiet ones | Predictable cost, unpredictable value delivered | Weak, rewards effort and time spent, not outcomes |
| Flat per-user managed | Fixed monthly rate per user or device | Neither, incidents cost the provider time without extra revenue | Fully predictable; a real budget line item | Strong, provider profits by keeping the environment stable |
| Co-managed (internal IT + MSP) | Flat rate for MSP-managed scope; internal team handles the rest | MSP bears cost of incidents in its scope; client team handles theirs | Predictable for managed scope; internal costs vary separately | Strong for managed scope, same alignment as flat per-user |
A Note on Co-Managed IT
For organizations with an internal IT department, a co-managed model is often the right answer, and it still uses flat pricing for the MSP’s scope. The internal team retains ownership of certain functions (application support, internal projects, vendor relationships), while the MSP manages defined layers: endpoint security, patch management, backup, 24/7 monitoring, help desk overflow. The split is written into the service agreement so there is no ambiguity about who is responsible for what.
Co-managed arrangements work well for companies between 50 and 500 people whose internal IT team is strong on strategy and projects but stretched thin on day-to-day operations and security. The internal team gets to stop playing ticket triage all day. The MSP gets a defined, manageable scope. Clients get both depth and institutional knowledge. The key is that the MSP’s portion is still priced flat, per user, per device, or per defined scope, not by the hour.
How We Price
Our managed services are flat, per-user pricing under a single SLA. There is one number per user per month. It covers help desk, endpoint management and security, patch management, 24/7 monitoring, backup oversight, and quarterly strategic reviews. When your environment runs cleanly, we do not bill extra. When something needs more attention, we do not get a windfall, we fix it because a stable environment is how we build a sustainable business.
Projects, migrations, new office buildouts, tenant consolidations, firewall refreshes, are scoped and priced as fixed-fee engagements with a defined deliverable and a project completion date. We scope carefully because overruns come out of our margin. You know what you are spending before the work starts, and “done” means something specific that both parties agreed to in writing.
We do not fold ambiguous project work into the managed agreement and call it “unlimited.” We have seen what that does to the relationship over 18 months, and it is not good for anyone.
If your current arrangement has you wondering where the hours went or why the project is still not finished, let’s talk. A 30-minute conversation is usually enough to diagnose whether the pricing structure or the execution is the real problem, and the answer is not always what you expect.