Unlimited Support: An MSP Recipe For Success?8:18 PM EST Wed. Jan. 16, 2013
The notion of all-you-can-eat has long been the underlying concept of the buffet table. But at least one managed service provider has developed a track record around extending such a promise to information technology.
Sinu, a New York city-based MSP has successfully leveraged such a strategy since the company opened its doors in 2004. Among its offerings, the company provides SMB customers with an infrastructure-as-a-service opportunity. This includes servers, wireless access points, storage appliances and a host of other technologies wrapped into a service delivered by contract. The pricing strategy sets no limits on the volume of service and support that customers can use. Founder Larry Velez acknowledges that such an offer carries some level of risk, but he also stresses that the decision represents a highly calculated risk.
Velez noted that infrastructure as a service enables his team to better ensure that the client is working with the proper gear, and that those products are not too old. "If the server is seven years old, we can be pretty sure that it's going to fail," he said. "But if we install a new server every three years, the support aspect becomes a lot more stable, and the support costs are lower. The customers tend to be very comfortable with this type of arrangement, especially if they don't have to have complex discussions around Capex every time a piece of equipment needs to be changed out."
When the idea of unlimited support was first discussed back in 2004, Velez acknowledges that the internal debate lasted for several hours. The concerns were not hard to predict. Would the resulting customer goodwill compensate for the potential lost revenue? Another fair question involved whether some customers might try to leverage the policy in an exploitive way.
In the end, they decided to give it a try and have found no reason to look back.
"We started with a worst-case scenario in which something would break and require three days for a team of two people to solve the problem," he said. "We estimate that anything beyond that is probably a scenario in which the customer would be so unhappy that we would probably be replaced anyway. So we decided to focus on customer goodwill and hope that the volume of transactions would make the gamble worthwhile. It really has worked out very well for us, and our customers have not over consumed our resources like a lot of people expected."
There were also some back office benefits that were unanticipated.
"Unlimited support liberates us from huge amount of extraneous record-keeping," he said. "People are less interested in how long something takes. They want to get their work done. They want their staff to be productive. And, they want people to be efficient. Healthy companies have more important things to do than look for ways to keep us busy."
NEXT: Support Vs. Projects
But, Sinu does draw a line between customer support and projects of larger scope. The company interprets customer support within the context of routine business activities, according to David Owen, the company's chief sales officer. But much depends on the urgency, the scope and the number of people affected by a forthcoming upgrade. "It's as much of an art as it is a science," he said. "We don't have hard and fast rules. We know our customers and make a decision on a case-by-case basis. But, we maintain high customer satisfaction by taking the risk out of the equation for the client."
For larger scale initiatives, Sinu establishes the price on a project basis and does not offer its services based on billable hours. To keep their own risk within an acceptable range, the company works whenever possible with technologies that are highly familiar.
"We find that 80 percent of any solution is pretty much the same across multiple customers," said Velez. "Even though there are many applications, most of them run on Windows, and we can virtualize and control those. The last 20 percent are likely to be some sort of vertical market application. In that situation, they need to have a relationship with a third party to maintain proper customization. But, if we focus on the remaining 80 percent and maintain the stability of the lower part of the stack, the customer has more money to spend on the customization because they don't have to spend as much money keeping their systems running."
Velez declined to say how the unlimited support provision impacts his overall fee structure. But, he did remark that his fee is calculated on a per-user basis, and that his recurring revenue number is quite healthy. In addition, he reports that his average customer retention is more than five years.
"We build our profitability around extending the productivity of our customers," he said. "The budgets tend to stay about the same, year-over-year. It's about how we utilize the budget that makes the difference."
PUBLISHED JAN. 16, 2013