The Problem
When "All-You-Can-Eat" Eats Your Margin
Fixed-fee agreements drift when scope expands, ticket mix shifts to harder work, and time goes uncaptured. Margins erode quietly—until credits, discounts, or churn arrive at renewal. Catch it early and reset both delivery and commercials.
Common symptoms:
- Tickets per endpoint/user ↑ 15–25% QoQ (mix shift to high-effort categories)
- Unbilled/administrative time ≥ 8% of agreement hours
- Patch/compliance backlog ↑ (reactive incidents growing)
- CRs raised below expected despite scope changes (silent creep)
Business Impact: Most margin loss isn't a single event—it's a slow leak. By the time it's visible in the P&L, recovery options are limited and customer conversations become adversarial.
The Framework
The Margin Erosion Prevention Framework
Pair operational guardrails with commercial hygiene to protect profitability without damaging the relationship.
See It Early
Agreement P&L weekly + category mix trends. Don't wait for monthly finance reports.
Fix the Engine
Shift-left repeatable work; clear proactive debt. Operational efficiency protects margin.
Charge for Change
CRs and tiers keep value and effort aligned. Don't absorb scope growth.
Step-by-Step Guide
Guardrails & Visibility
Create early warning systems for margin drift.
Actions:
- Weekly agreement P&L: time, margin, credits, category mix, CR status
- Trigger CRs automatically when category effort ↑ ≥ 20% for 2–4 weeks
- Publish top fixes runbooks and macros to standardize high-volume work
- Track unbilled/admin time separately to spot capture gaps
Rebalance & Shift-Left
Fix operational drivers before they require commercial intervention.
Actions:
- Move repeatable fixes to L1 (access, runbooks, tooling)
- Schedule proactive maintenance windows to cut incident inflow
- Patch/compliance blitz for noisy estates; close "preventable" tickets
- Audit work assignment to ensure right level for right work
Commercial Corrections
Align pricing with actual scope and complexity.
Actions:
- Raise CR for out-of-scope deltas (new systems, security level, after-hours)
- Re-tier the agreement (per-device/user bands; complexity uplift)
- Right-size SLAs to environmental reality; align on outcomes vs speed
- Document all scope drift for renewal negotiation
Prevent Recurrence
Build structural protections into agreements and operations.
Actions:
- Add pricing guardrails (auto-review when estate grows X%)
- Bake health checks & patch SLOs into scope with evidence reporting
- Standardize onboarding checklist to avoid future silent creep
- Update agreement templates based on lessons learned
KPIs to Track
| Metric | Target | Frequency |
|---|---|---|
| Agreement Gross Margin | ≥ 35–40% | Weekly |
| CR Velocity (raise → approve) | ≤ 7 days | Weekly |
| Reactive Incidents per Endpoint | ↓ 15% | Monthly |
| Unbilled/Admin Time | ≤ 5% | Weekly |
Warning Signals
Agreement gross margin < 30–35%
Margin below target indicates structural issues requiring intervention.
Write-offs/credits this month > threshold
Financial pain already materializing.
SLA misses linked to complexity
Environment complexity you didn't price is causing service issues.
CRs raised below expected
Team absorbing scope changes without commercial correction.
Real Scenarios
The Ticket Mix Shift
Situation
Simple password resets declined 40%. Complex security incidents up 60%. Same price.
Response
Category mix analysis. CR for complexity uplift. Re-tier agreement.
Outcome
Agreement re-priced to reflect actual work mix. Margin restored.
The Growing Estate
Situation
Customer added 150 devices over 12 months. No rate adjustment.
Response
Document growth. Prepare CR with usage data. Present impact analysis.
Outcome
Per-device rate adjustment approved. Future growth triggers automatic review.
Quick Wins
Start with these immediate actions:
- Run category mix analysis: Which top 3 categories now dominate time? Are they in scope?
- Check work hygiene: Is engineer time capture complete? Any "admin" buckets growing?
- Review proactive debt: Are patching/health checks slipping (causing reactive spikes)?
- Assess tier mismatch: Are gold-tier SLAs running on bronze-tier environments?
Related Playbooks
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