7 Key Decisions When Building Successful Managed Services Practices

Taking The Plunge

Migrating toward managed services is not something to be taken lightly. In addition to myriad technological decisions, companies need to closely consider a host of customer-related issues that could mean the difference between success and failure. Based on anecdotes from channel partners and experts who are familiar with the process, here is a short list of key care-abouts that merit attention.

Buy Or Build A Management Platform

The concept of whether to build or buy a management platform is something about which partners often disagree. Some claim building their own platform is far too expensive and time-consuming. But others claim customizing an existing platform from one of the major platform vendors is an equally arduous process. "We've done little bit of both," said Russ Young, executive vice president at LTech, a N.J.-based MSP. We've taken some pieces from similar products. But when you use someone else's management platform, it can often be very difficult to unlock yourself, if you decide later to go in a different direction. Some tools are easy to use, but you don't want to be locked in."


White-Labeling Or Not?

If you actively promote the brand of another company that is providing managed services for resale, MSPs may realize the benefits associated with using a strong brand. But on the other hand, a customer who knows what's "under the hood" may also pit multiple partners against one another, as a means of reducing price. "Time will tell whether acknowledging other brands will generate more traffic, or force us to defend ourselves," said David Browning, president of ThinkASG, Inc., an Irvine, Calif.-based MSP. "We will probably make our decisions based on the specific circumstances of the deal."

The Hands-On Approach

When evaluating a prospective managed services customer, it is often a good idea to consider the technical expertise of the people within that company. While managed services can help reduce costs in ways the financial people will embrace, such offerings can also threaten jobs, or at least eliminate the ability for the technologists within the organization to put their hands on the actual gear. Some partners report that without a "hands-on" approach, technical experts are often leery of giving their approval. "It's a paradigm of today's IT market," said David Browning of ThinkASG. "If the customer is an IT administrator, they have a proclivity toward the hands-on mentality. If the individual is a financial person, they're not so concerned about hands-on. It depends on who you're selling to."

Geographical Issues

Political borders often can mean the difference between victory and defeat in the sale of managed services to multinational companies. MSPs must become highly knowledgeable about the legal aspects, as well as the technical aspects of these deals. Oftentimes, countries will prohibit data within their own boundaries from being hosted beyond their own borders. "Pretty much all of our business is based in the U.S., but has subsidiaries and offices in other countries," said Russ Young of LTech. "In most cases, the clients, themselves, will alert you to the requirements. But, you want to keep this issue on the front burner, because sometimes the requirements can change the cost structure."

How And Where To Partner

Very few companies can deliver the entire technology value proposition all by themselves. Therefore, MSPs need to be highly selective in choosing potential partners that complement their offerings, rather than compete with them. Sometimes agreements include clauses designed to regulate one partner's ability to sell to the customers of another partner. These are often difficult to enforce, but they can sometimes be useful as a framework for agreement in situations where the risk is mutual. Phil Mogavero, vice president of PCM in Calabasas, Calif., underscores the need to tread carefully. "The partnership we form [with the customer] is really the most important long-term value we have," he said. "Giving that information to people who can become our potential competitors becomes a potential threat to our organization."

Developing Contracts

The long-term aspects of managed services make clear the need for effective contracts that protect both sides of the engagement. Some MSPs begin by using the contracts established by other companies, and sometimes telecom providers have contracts that can serve as a useful start. Much of the contract development depends on customer values. "Some customers want things like shorter-term contracts because they don't want to be locked in for very long, but others prefer longer-term," said Russ Young of LTech. "Some want to pay by the instance, while others want a fixed price. So contracts are moving target today."

Interfacing With The Customer

Working with the customer is where the proverbial rubber meets the road. Although managed services continue to gain momentum, particularly in the small to medium-size business space, customers still have a lot of questions that need knowledgeable answers before they will be willing to move forward. MSPs need to go to great lengths to ensure that they understand not only the services that they offer but also how those services will impact the particular vertical market in which the prospect competes. Doing one's homework can go a long way toward solidifying the deal, as well as establishing trusted adviser status that can help secure future renewals.