Not too long ago, managed service providers were thought of as startups that invested heavily in people and building out data-center space without having any customers. Exorbitant startup costs made it difficult to attract customers as MSPs charged high monthly fees to try and cover their operating expenses.
Many of the new breed of MSPs are leveraging technology from vendors that provide tools they need to transition all or part of their businesses to a recurring-revenue model. But technology isn&'t the only component for success. What all successful providers know is that they have to walk a fine line between providing the personal touch of a services company and the efficiencies typically associated with a manufacturer.
The rule of thumb for any manufacturer is to keep the number of SKUs low and standardize on several key products to keep costs down and profits high. This same model is embodied by the successful MSP. The ability to standardize on a set number of service offerings and then productize them—the deliverables, the setup, the rollout process and ongoing maintenance—is the hallmark of a successful MSP. A standard set of services certainly minimizes the number of errors during setup. Keep sight of the fact that it is during the provisioning process that most errors occur.
Many emerging MSPs fall into the trap of trying to be all things to all customers and end up selling only special deals. As a result, price lists become outdated, and the sales force needs a technical person to accompany them on all sales calls—a waste of technical resources. The 80/20 rule should be in effect: 80 percent of deals should be productized, standard offerings; the 20 percent of deals that are specials should be reserved for elite customers. Even providers smart enough to blueprint their processes don&'t always extend this documentation to day-to-day operations.
Each customer should have a standard “Run Book” documenting the specific devices and applications (IP addresses) the provider is monitoring, the hours of coverage, the responsibility for alerts and alarms, as well as an incident resolution plan. Some prebuilt platforms provide a starting point for this. In this way, everyone&'s interests are protected, and everyone is clear on responsibilities—this process has decreased finger-pointing and associated accountability issues.
While implementation of all these best practices is certainly critical, no business is static. Many of our best practices have evolved over time, and we make a point of analyzing customer contracts often. At times, the customers we believed to be our highest revenue-producing customers were in reality the least profitable because of the one-off requirements built into their contracts. An ongoing review of these contracts helps us determine whether it&'s best to convert them to a more standard contract (assuming the customer is amenable), charge more to cover our costs, or simply walk away.
The call to walk away is difficult but necessary. One guiding principle behind Jim Collins&' book “Good to Great”—about why some companies achieve greatness while others are merely good—is the ability of a company to focus and walk away from ideas and businesses where it can&'t be the best. While there is tremendous opportunity in the MSP space, the customer will benefit even more from healthy, profitable providers that keep costs in check and can leverage their expertise across their customer base.
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