Managed Services - The Secret Sauce For A Successful Managed Services Business
Written by: Lynn V. Hayes
Just for the moment, consider yourself a moderately successful IT service provider who sees the growing opportunity in managed services, is quickly developing the technology to support this burgeoning market and knows the secret – has in fact the secret “sauce” – to managing a successful managed services business.
Now liken yourself and your IT business to the owner of a fine dining establishment. The restaurant owner knows that his professional livelihood is built on the “meat and potatoes” of his operation, namely his fine selection of highly quality meats cooked to perfection. And he is convinced that his culinary success is due to the secret “sauce” he has created to adorn each entree. He even has a signature garnish that he places on top of each entree that makes it highly unique to him and a cut above his competition.
This same analogy applies to your IT business. Your company is probably beginning to shift away from the technology and the tools that deliver services to a realization that the managed services business is the “meat and potatoes” upon which your future livelihood will rest. Your “culinary” success will be due, in large part, to the special “sauce” you create to adorn each managed service you offer. That special “sauce” is your marketing strategy. The garnish you place on each managed service is the one unique fact or feature about your business -and how you market it – that sets you apart from your competitors.
So, what are the “meat and potatoes” of your business – the managed services you plan to offer your clients as you transition to a successful managed service business? How are you going to marketing those services – what “sauce” or “sauces” are you going to create to sell them? What “garnish” will you put on top – what fact or feature about your business is unique enough to separate and differentiate you from your competition?
First, let’s talk about managed services. This is the “meat and potatoes” of your operation.
To optimize your overall performance as a successful managed services business, here are five key elements of the business to master. Mastery of these “secrets of success” will determine how well you do in the marketplace and positively impact your success and survivability as a managed services provider (MSP).
- Core Technologies. The definition of managed services is expanding from infrastructure management and remote maintenance to the inclusion of software as a service. Selecting the right technology is one key piece of an effective MSP strategy. Successful MSPs typically use one of two types of software solutions – Professional Services Automation Software (PSA) and Remote Monitoring and Management Software (RMM). PSA blends such functions as customer relationship management (CRM), sales force automation, customer billing and troubleshooting into one single comprehensive platform. RMM allows the MSP to proactively maintain and troubleshoot customer systems and networks off-site.
- Emerging Technologies. Up until now, MSPs were able to master basic PC and server administration. Today’s MSPs face new challenges as the landscape of managed services continues to evolve. Now these MSPs have to master cloud and SaaS managements and learn how to tap into systems like Amazon Web Services (AWS), Google Apps, Microsoft Windows Azure and Microsoft Business Productivity Online Suite (BPOS). Keeping pace with these options requires constant networking. Successful MSPs make this one of their biggest priorities.
- Business Leadership. As you move from being a technology driven business to being a managed services provider, commitment from the CEO and top management is critical. Managed services will stall or fail completely without this commitment. CEOs don’t have to master the MSP technologies but what they do need to do is this:
- Promote recurring revenue streams as much as possible instead of quick break fix project work.
- Track and improve customer service levels rather than billable hours.
- Schedule frequent meetings to advise customers on those service levels and to discuss technologies that can further improve overall business performance.
- Hiring & Firing, Sales Training & Compensation. The jury is still out on whether MSPs need to fire or replace staff as they push into managed services or work with existing staff to generate more and more recurring revenue. Sometimes MSPs find it works better if they augment their staff with outside talent, though many times this talent can be found within their existing rank-and-file. In more traditional IT companies, sales teams are generally paid a one-time commission for special projects revenue. In the managed services market, however, recurring revenue models create new opportunities and new challenges. The biggest challenge is keeping salespeople focused on longer-term, ongoing contracts rather than quick-hit project work. Without the proper compensation plans in place, salespeople may make half-hearted managed services calls and end up pitching a new technology product instead of the managed services you hope to sell. The best MSP in the most successful managed services business has clearly communicated compensation plans with well-defined goals and priorities that motivate the sales professional to look for more business and more opportunities for managed services from either existing clients or new ones.
- Service Level Agreements. Successful MSPs know that without a well-designed and understood service level agreement in place, the clients will be expecting one thing and the MSP another. Using a solid service level agreement shows the client that you know what you are doing and that you will put both your reputation and wallet behind your word.
Now, let’s talk about how you are going to marketing these managed services. What “sauce” or “sauces” are you going to create to sell this business model and bring value to the customer. The signature “sauce” you create and the ingredients you use to make it is the key to your success. Here are the three ingredients you need:
Marketing & Client Education. Managed services generates a significant amount of information about end users’ activities and needs. Successful MSPs use that information to anticipate those needs and recommend applications and value-added services to help clients run their businesses more effectively. Using that information as part of a marketing strategy to better educate the customer is paramount. Many MSPs believe the client’s lack of knowledge and understanding about the managed services business model is their greatest inhibitor to success. When the time comes to describe your managed services portfolio to clients, remember these three words – less is better. Skip the high-tech acronyms, the techie bells and whistles, and focus on the benefits to your client. Concentrate only on the services you offer that bring them real value, like customer satisfaction or service levels.
Marketing Strategies. To date, managed services has been about the technology, but today’s successful MSPs are more focused on how to run their business well and deliver value to their customers. They know the importance of a successful business model, targeted sales strategies and value propositions and they are marketing all of that to their clients as part of their managing services portfolio. But the driving force behind the push to invest in a sales and marketing strategy is the company’s commitment to sell the customer on the value the MSP can provide.
The New Marketing Model. Successful MSPs know that technology alone is not going to change their business. They know it’s all about creating a business model of managed services and equipping themselves with the skills to run their business and to market it to a targeted audience. To build a successful marketing model, you need to do three things:
- Define your product (managed services) from the client’s perspective and sell it that way. Let client’s know the advantages of this approach. Let them know you can provide them with software and spread costs over a number of clients. Tell them you can build more application experience than in-house staff. Assure them that your key software systems are kept up to date, available and managed for performance by experts. Let them know they will always have access to product and technology experts. Show them you can reduce their costs to a predictable monthly fee.
- Know your client and let them know you know them. Let them know that you know it takes them six to 12 months to commit to a services program. Speak to them in their own language by speaking to the pains that you know that they have because they are common in the industry. Then show how you are uniquely qualified to resolve these pains and problems.
- Use sales and marketing tools to your advantage to reach your client and, use only those with a proven return on investment. Schedule as many visits and meetings with the client as you can to advise them on service levels and to discuss new and emerging technologies to further improve business performance. Invite them to events like small business luncheons to get their thoughts and opinions on business trends or use of technology. Prepare hand-outs describing the benefits of predictable, flat-rate, proactive managed services programs. Create ongoing marketing and PR campaigns to announce new software products and technologies. Actively solicit customer endorsements.
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