MSP Mythbusters: Answers To Some Common Misconceptions

As an increasing number of solution providers get into managed services, many myths are still floating through the channel. For examle, some believe that it requires a significant investment to get up and running, that profits will take a hit, or that you need to fire customers not interested in a recurring revenue relationship. Not even close. So let's bust a few myths, and verify that some that are actually true. We asked five MSPs for their opinions on 10 myths surrounding the MSP landscape. Here are there responses.

MYTH 1 - Buying Managed Services Software Costs Thousands of Dollars
"That's not true anymore. It might have been true years ago. But lots of providers offer pay as you go pricing and pricing per users now. You don't have to spend thousands of dollars to get in. You might spend thousands over course of several years, but it's really pay as you go. It's transparent.

MYTH 2 - Quarterly business reviews with customers are critical for a successful managed services relationship
"Absolutely. We do some of them monthly. If you do managed services properly, they don't notice you as much. Early in life, I worked for the phone company. One day I was talking to the vice president of marketing. I asked him, why do you have a job? We have a monopoly what do we need to market for? He said pick up that phone right there. Did you get dial tone? I said yes. Did it excite you get dial tone? I said no. He said how would you have felt if you didn't get a dial tone. I said I'd have been upset. He said the only time people think about us is when something is wrong. My job is to think of us when something is not wrong. Even though you haven't seen us because nothing is broken, we are doing things in the background and planning for what you're doing next to stay up and running."

- Damon Richards, president of Port-to-Port Communications, Indianapolis, Ind.

MYTH 3 - PSA software is made just for MSPs
"PSA (Professional Services Automation) software is, in fact, a true value to organizations looking to impart service and process through the employee base, and provide for great customer service internal to an organization. Delivering service internally to an organization should not be considered so different from an MSP. There should be and#91;service level agreementsand#93;, expected deliverables and projects with milestones and cost justifications. Treating internal clients as customers, and proving it, shows a true professionalism that few companies take to heart . It also allows for complete business impact analysis, cost justification, course correction, and implementation feedback if done correctly with a management tool such as PSA software."

MYTH 4 - VARs need to "fire" all their customers who don't want to move to a managed service contract.
"Every customer has value and can continue to be of value to any organization. Simply 'firing' your customers during your transition is foolhardy. Customers of all shapes and sizes can bring revenue streams, either directly through continued product sales and break/fix services or through referrals and word of mouth. Never doubt the value of a current customer, managed or not, in getting your services out to further reaches. Your next big client may be from a referral, and having a client who simply wants to purchase hard goods from you, and not partake in a managed service should not be an issue. Terminating the relationship may have consequences far beyond what you expected, and that would be a black mark that would be hard to get rid of.

MYTH 5 - Remote monitoring and management (RMM) is the same as "managed services."
"RMM is definitely not synonymous with managed services. RMM can be used as a great introduction to managed services, especially for clients whom may be hesitating or unsure of what managed services may be and how to assimilate them into the operational organization. As a MSP with many legacy clients, we used RMM, even if offered free for a month or two, to show the value of how managed services can benefit an organization. Once proven, we then showed them further managed services that could have more dramatic, positive impact upon their organization. RMM is but one small subset of managed services that an MSP should offer. It is simply a foot in the door, and an eye-opener for both the client and the MSP, who will garnish invaluable details of the clients environment while performing RMM."

- Jerry Adamowicz, CTO of Gekkotek, Vancouver, Wash.

MYTH 6 - VARs must fire current sales staff and radically transform their business to deliver managed services.
"It is true that in most cases, companies must focus on transforming their business to deliver managed services. A common misconception I see is in companies that think that offering managed services is the same as offering a new pricing plan. This process may involve replacing some sales staff, although any good sales staff member should be able to adapt to a well planned transformation in service offerings."

MYTH 7 - Even with the proliferation of turn-key tools and services, VARs and MSPs can avoid commoditization.
"Absolutely true. When working with small- and medium-sized businesses, any service (technical or otherwise) is based on maintaining and excellent relationship with the client. Although large companies can try to commoditize the service, it is a seller's market for the foreseeable future."

- Simon Binder, managing partner at Greenhouse IT, New York

MYTH 8 - Managed Services converts IT costs from a capital expense to an operating expense.
True And False
"I first want to say that I am not an accountant. From what I understand though, this is a fact and fiction. When you say 'IT costs,' it may or may not include hardware. If hardware is procured for the client, depending on how it is procured and how it is billed, it can still be a capital expense. "

MYTH 9 - Posting pricing online drives down your value and commoditizes your service.
"I do not see how this would drive down your value. You either have value for what you provide, or you do not. I know that PTS can provide greater value than our competitors because of our knowledge of advanced technologies and our certifications. We provide superior leadership. We also offer better value because managed services is not only about providing service if an issue occurs. It is also about preventing issues and decreasing downtime."

- Neil Medwed, owner of Preferred Technology Solutions, Richardson, Texas

MYTH 10 - On average, managed services delivers 2x Technology Utilization, 3x Revenues, and 5x Profits
"Our experience is that managed services revenue is replacement revenue and profit. We do gain tech utilization. We are able to remotely diagnose issues and a high percentage of the time we do not have to travel to the customer site to solve a technology issue, however we find that we are spending more time watching, tweaking, modifying our thresholds, alerts, alarms and dashboards for our customers networks."

- Glenn Stenger, president of Ex-Cel Solutions, Omaha, Neb.