Here’s a question that’s certain to stir up some controversy in the managed services community: What type of managed services model is the BEST managed service model overall?
Let me explain…
After spending a lot of time talking with managed services providers, both large and small, one thing is for sure: managed services contracts are like snowflakes…no two are alike. Some MSPs only offer monitoring for $10-$20 per workstation and then bill their clients an hourly, discounted rate for all on site, phone and remote support.
Some MSPs are providing an “all-you-can-eat” managed service model where clients pay $x per month per device supported, but pay extra for hardware and software. Some are providing a true cloud computing solution, and some are offering a hybrid of the all-you-can-eat managed services PLUS hardware and some software thrown in. And some are providing all of the above and recommending a particular solution based on what they think they can sell that particular client. (As I said, it’s all over the map!)
But here’s the REALLY important question: does any one managed services model give you a competitive edge — and why? Is there any one managed services business plan that serves the clients better AND provides you greater levels of profit? THAT’S what I want to know – and I’m sure there’s going to be a bit of controversy over this one, as well as some awesome discussion from those of you reading this post.
So, what’s your opinion? Post a comment below describing your managed services model and why you think that’s the BEST managed services business plan to deliver, and why some of the OTHER managed service business models are NOT so hot…and why:
*Important:
We have a basic “per device” model for managed services. We’ve tried from the beginning to be as flat fee as possible while making sure that adds, moves, and changes are billable. We really avoid the term “all you can eat” because there are clients that can eat our company if we let them!
So we charge enough per server and per workstation to make money with the amount of labor it takes to serve a client. Then we create additional profit by creating efficiencies within our company.
Meanwhile . . . We’ve moved to a Cloud Services offering that is “per 5 devices.” The service is so cheap that there’s no point having single-user pricing. So we created a bundle of services sold in five-packs. We describe it as Up To Five Users for $249/month.
Then we offer a 5-pack of desktop management on top of that for $249/month for up to five users. In other words, all the clients with 1-4 desktops are actually paying the same price as the 5-user client. It has been selling well.
I’ve posted up some powerpoints with all the details at http://www.cloudservicesroundtable.com
The managed service model works great in the cloud!
I like Karl’s model and I don’t think there is one pat answer that works for everyone. There are some key considerations when deciding the right product mix for your managed services business.
– What is the competitive climate? What do I need do to differentiate from my competitors? Don’t do something just because everyone else is.
– How do I want to run my business? More predictably, less reactive? 24/7 coverage?
– How is my business currently staffed? Do my staff need task by task oversight or do they just get things done? This will impact your managed product margin based on time billed against managed services agreements.
I have seen businesses of ALL types flourish delivering across the range managed services product mixes. It is a business decision that should be looked at carefully with a certain level of minimum committment needed to play. I have seen 2.5 guys pull in over $500K per year in managed services, so I don’t think its a question of scale. It becomes a question of how do you want your business to run. Which may be different from how you run your business.
Just a few thoughts off the top of my head. I would be more than happy to talk more to anyone about this topic. My wife has heard it all before, and my kids are too young to incorporate.
Once you figure out your business model, product mix etc, choose your tools/platforms. I used Kaseya for years as a MSP, and now I work for them. http://www.kaseya.com
Brendan Cosgrove
Kaseya
twitter: @cozthegrov
brendan.cosgrove@kaseya.com
Your managed services need to hang around a core vertical or application specialization. Robin, Karl, and Brendan have all reviewed some fundamentals of pricing and packaging.
The issue I am concerned with is driving new demand for customers. To do so effectively, your managed security offerings should tap into deep market expertise; what are you known for? SonicWALL partners are successful with managed security services, using cloud-connected firewall appliances and our Global Management System for centralized management. But “managed security” is often NOT their core offering. Instead, they often attach managed security to a another core offering.
For instance, one of SonicWALL’s largest MSPs sells a vertical market point-of-sale application for the retail hardware market; they wrap security around it to better secure the application, to keep the cash register ringing, and to make incremental managed revenue off of every install.
In another case, a successful business ISP that focuses only on Kansas adds a managed security offering on top of the core business ISP service.
They don’t lead with managed security, but instead focus on a deeper competency or market and then attach monthly recurring services on top.
Ted Hulsy
Director, Channel Marketing, SonicWALL, Inc.
@TedatSonicWALL
ehulsy@sonicwall.com
510 394 4257
This is a hot topic within our customer base right now and a difficult question to answer. Basically there is a thousand ways to carve a turkey.
I just finished a 10 city North American road tour where we met with over 400 Level Platforms partners. A good portion of this was a “power user session”. In essence, we had successful MSP’s share how they approached their particular customer base. We had over 20 “power-users”, most of which are on the MSP 100 list. Let me tell you, all 20 we’re approaching their market differently. Some low-balled, some high-balled. Some had a fixed cost, some did per device. Some had a single price; some did a gold, silver, bronze approach. There were however a few similarities on how they approached their customers beyond being very successful doing so.
Regardless of how you chose to carve your turkey the need for long term contracts and recurring revenue was big on all of their lists. Locking their customers in and moving away from the traditional time & material, break fix type work has never been more important than now.
Sales and marketing efforts are also a key differentiator within the best in class MSP’s. Whether you lead with remote monitoring (RMM), Professional Services Automation (PSA), security or whatever MSP tool, creating that differentiator (service or price) and being consistent are the keys to success.
I have a lot more information, backed up and supported by organizations like IPED and MSP Partners/Comptia. If you’re interested, please don’t hesitate to contact me directly.
Rob T. Rae
Director of Partner Development
This is a hot topic within our customer base right now and a difficult question to answer. Basically there is a thousand ways to carve a turkey.
I just finished a 10 city North American road tour where we met with over 400 Level Platforms partners. A good portion of this was a “power user session”. In essence, we had successful MSP’s share how they approached their particular customer base. We had over 20 “power-users”, most of which are on the MSP 100 list. Let me tell you, all 20 we’re approaching their market differently. Some low-balled, some high-balled. Some had a fixed cost, some did per device. Some had a single price; some did a gold, silver, bronze approach. There were however a few similarities on how they approached their customers beyond being very successful doing so.
Regardless of how you chose to carve your turkey the need for long term contracts and recurring revenue was big on all of their lists. Locking their customers in and moving away from the traditional time & material, break fix type work has never been more important than now.
Sales and marketing efforts are also a key differentiator within the best in class MSP’s. Whether you lead with remote monitoring (RMM), Professional Services Automation (PSA), security or whatever MSP tool, creating that differentiator (service or price) and being consistent are the keys to success.
I have a lot more information, backed up and supported by organizations like IPED and MSP Partners/Comptia. If you’re interested, please don’t hesitate to contact me directly.
Rob T. Rae
Director of Partner Development
Level Platforms
rrae@levelplatforms.com
1-800-418-0881 ext. 360
@levelplatforms
rrae@levelplatforms.com
1-800-418-0881 ext. 360
We are finding that offering a fixed monthly fee that covers everything and provides for regular workstation replacements for clients who will commit to 4 year contracts is making it much easier to close sales. That said, we also are willing to be flexible.
For example, we recently worked with a client who had all old computers. They decided to purchase new systems from us at the beginning of the contract and we will replace them at the end of the contract at no charge. This particular client has more MACs than PC’s and we are only replacing the PC’s, so there will not be a huge expense at the end of the contract and we will be setting money aside for this purpose. We got this contract, in part, because we were willing to tailor our services to this particular client. Our competition wasn’t willing to do that.
I am going to echo Rob’s comments and say, “It depends….” To answer a question with a question, I’ll ask, Best for who? An “all you can eat” plan at a ridiculously low price might benefit the client, initially. A per device model might benefit the MSP if it helps drive hardware, software and services revenue.
I prefer the model that I first saw presented my Michael Drake at the Autotask Live presentation a couple of years ago. They offer hardware, software and service all bundled into one price. The difference is THEY own the hardware and software. WE have adopted a very similar model and we are just beginning to gain some traction with it. Our QualityCare Total plan, makes us VERY Sticky. If the client want to leave, they not only have to replace us, they have to replace all of their hardware and software as well. They LIKE the plan because there is absolutely NO finger pointing. Any problem is MY problem. If I own it, I am totally responsible for it. They LIKE that and are willing to pay a fair price for that level of peace of mind.
Quality Systems Solutions, Inc. likes it because we can manage lifecycle costs much better than we ever have. We can also standardize on hardware platforms that WE like and are easy for us to maintain. SPLA license agreements give us precise control over our software costs and once again, provide a level of standardization what we have not had in the past.
Derik (Rick) Bahl
Quality Systems Solutions, Inc.
(847)426-9548
rick@qualitysystemssolutions.com
http://www.qualitysystemssolutions.com
Robin, yours of course…. not brown nosing, stating a fact… seen many models, but it has really helped me to bless my employer and through my networking, I keep up on your stuff. Thanks for all the hard work and for sharing with the rest of us…
Robin,
Great Topic!
I am sure there will be many successful solutions presented here. But what our experience has taught us is that to be successful, we must have a solution offering that is much more unique than our competitors. To truly standout from the competition, we need to think outside of our needs. Everyone is looking for the next best “thing” to sell. But, what we should all be doing—and as you have mentioned in many of your teleseminars– is figure out what makes our clients buy. From our experience, we have found that end clients like one number. They do not like being oversold or “nickel and dimed.” What that means is an all-inclusive offering should truly be all-inclusive! Parts, labor, onsite, Anti Virus, SPAM , Vendor Management, web services, etc., should all be part of that final offering. Now not only does this give our clients a truly budgeted number, but it also alleviates that age-old question MSP’s get after billing clients for out-of-contract-services, “Umm, I thought that was included in my managed service.” If you choose not to provide an all-inclusive offering, the client will spend as much or more for everything and be less efficient in the process. Not to mention they will piece out the remaining budget to other solution providers and less will go to you. In addition, that total solution actually become less expensive than the client hiring their own full time IT person. Now, add Hardware as a Service in the mix of all this and look how unique your offer is! So, let’s kill a couple of birds with just one stone. Let’s give the client everything they need to run their business and make them sticky as can be to our firm.
Please register for our weekly Live webinar on this exact topic!
http://www.chartec.net/webinar-registration.aspx
Alex Rogers
CEO
Alex@CharTec.net
1-866-544-2772
I think, as Alex (and Robin) mentioned, you have to give the customer what they want. What we have found in the last couple of years is that clients want our services and yet some simply cannot afford to play in an all-you-can eat model. So, we’ve re-introduced a basic maintenance and monitoring plan and have actually sold this type of plan on the first phone call. No appointment until AFTER the sale! Truth is, smaller businesses do need a reliable company they can depend on too. And, they are willing to pay for the guarantee that someone will be there to solve their problem whenever they have one. There IS value in being a TOTAL solution for your client…for sure…this is the BEST way. And yet…I think you have to have an onboarding process and give the smaller companies a chance to grow into our all-inclusive plan.
We have a few different offerings but we only offer 1 to the client based on their needs.
We used to offer more but found that if you gave them too many choices the customer either couldnt make a choice or made it for the wrong reasons (I know we should educate them more!). So we cut it down to 3 plans. However we had a gap in our offerings that needed covering and (to use Robin’s phrase) we “honestly stole” Karl’s cloud ideas which filled in the gap perfectly!
Our marketing is all Robinized and then we use Gary Pica’s appointment process to find the pain before we tell them our “one” solution for their needs.
Although we are all here to make lots of money, I believe our duty (and probably our USP) is to give the client the “plan” to fit their needs and not necessarily the one that gives us the greatest margin.
As long as you base your model on any per X pricing you are selling a commodity. Per hour, per day, per machine, per incident. In our industry we seem to love buzz words, we are MSP(s), we are “trusted advisors” etc., but we seem to focus on the K-Mart commodity sales model. K-Mart will always have blue lights, Wal-Mart will always have roll back pricing. It is the market place and focus they have set up.
When you become a C level partner, a “trusted approver” for the company (ok, new buzz words) you price based on business value, not commodity based pricing. If you lift your model to a true business valued and core partnership the value of your service is not commodity based by value based. Example if your business process re-engineering can save your clients expense and/or increase their business your mere presence is worth more then any per unit pricing model.
I have to be flexible in what I offer but if comes down to the basics. Mine is an “everything included” so the client does not need to worry and couple that with excellent response. I am on the way before the client knows a problem has occured- really freaks them out!
I price hardware as a service and my cost is a “deposit” on services and charge per month based on their network configurations- for me providing labor up front and recovering it over the long haul gives me predictable income and a pleased client.
Everything is on monitor with Zenith Infotech and I am about to offer private cloud computing with their upcoming SmartStyle. (have one client with Ncomputing L300′s)
Thomas Wolff
President, Wolff Pro, LLC
888-896-DATA (3282)
I am finding that the more I bundle for the client the more saleable my offering becomes. In other words there is clarity in the sales process and at some point the perceived value jumps significantly. The client suddenly sees there is more in it for them than it will cost them….that is the time the sale is made I think.
Another point is that as you provide more for the client on a fixed fee basis the greater your focus on the client. As Keith points out in his comment your involvement with the client’s business becomes the value. They start to see you as integral to their success.
Taking this to an extreme I now have a couple of clients where I sit in on their planning days and occassionally attend their management meetings. Increasing pricing, extending contracts, adding products becomes painless at this level of engagement and maintains high profitability. I dont think you can get to these levels unless you are bundling a significant amount of technology support.
Our philosophy is to bundle all the services the client may need to run and improve there business using technology in one monthly flat fee. As Alex said, it’s not the next best thing that will get the client to buy. In fact they will probably not understand the next best thing and will most likely be skeptical about it, thinking. What will be coming out next that is better that I’ll have to spend more money on? Providing a solution that is customized to the client for one flat fee is appealing to them, and include the hardware. This approach is not for every client and that’s okay because I don’t want every client I want the best clients! Some of the most profitable IT providers don’t have the most clients they have the best clients. Or as Robin would say “A clients”.
It’s unique to be able to tell the client that with this model of doing business our goals and your goals are in complete alignment. Meaning we no longer look forward to the call that there is a problem to fix so we can “bill” our time, because that means I have to send someone to fix it on my dime! We are now motivated to do our best to make sure things run smoothly for you and in turn you become more profitable not having to deal with all those technology problems!
Once we get a client on this model most of our headaches go away because we have control of the technology. Meaning less time to be dealing with hardware that should have been replaced but the cleint didn’t have the budget for. This gives us predictable month to month income and more predictable service for the client. More profit!