Packaging and Delivering Scalable vCIO Services
Carrie Simpson, Founder and CEO of Managed Sales Pros talked with Denes Purnhauser, CEO of ReframeYourClients, and shared the most common mistakes IT managed services providers make when it comes to building their vCIO offerings, and how you can increase your MRR with the correct approach.
The topics in this webinar were:
- Why vCIO services are critical to keep clients engaged in the long run
- The five biggest mistakes managed services providers are making with their vCIO services
- Why service productization is the reliable way to scale a Managed Service Organization
- How to make vCIO services scalable with service productization
- Process of service productization
- The right pricing model for MSP and vCIO services
Read More about Managed Sales Pros and cold calling best practices.
Delivering Business Focused QBRs
ADAM WALTER AT VIRTUAL C
You would like to be a high-value business partner in your client’s eyes rather than a basic technology service provider. Your Quarterly Business Review process is a critical part of influencing their engagement up to a higher level. Watch this recorded webinar with our virtual CIO expert guide, Adam Walter, who has shared his 5 step process to make any technical QBR into a business-focused one.
6 Best Practices of Top Performing vCIOs
ADAM WALTER AT VIRTUAL C
Watch this interview with our virtual CIO expert guide, Adam Walter, to learn how to be more engaged with clients by finding best practices for becoming a trusted business advisor in 6 single steps.
Where the MSP serving software industry is going
All our accolades to the development people in the Connectwise Team and the super beta users; after three months of development we’re happy to announce the Connectwise integration is live.
I know integration is a boring subject and I don’t intend to explain the details of the features here. But the development process and the results have been prompting many to wonder where the software industry and specifically the MSP servicing software industry is going.
Ours was not just a simple data based integration. Our tool is actually running inside Connectwise with customized screens. One doesn’t even need to log in to our native tool to use all the features inside Connectwise, like execute Account Management, vCIO activities and running discovery workshops with prospects.
The question I am raising is: are we actually heading to where we have only one application that runs our MSP, and all the vendors create “modules” for that application?
1. MSPs ultimate need
In an ideal world you as an MSP would use only one application to manage EVERY task in your organization. That’s an ultimate verticalized application taking care of everything and managing all modules.
The obvious limitation is that such a system requires you follow set processes for every single area of the business, which makes it hard to adopt. Thus the current model of having a base PSA and many integrated applications makes sense. The drawback is that these integrations are in all different shapes and sizes, the user interfaces are unique and most just give you the ability to transfer data across applications.
Clearly there’s a need for a faster learning curve, and more flexibility for IT managed services providers to adopt more and more tools to their stack.
Based on the technology available today we as a vendor community were able to create just such an ultimate solution.
2. Required Effort
Let’s first see the current reality. Creating integrations involves almost the same effort as creating the product itself, dealing with moving parts, planning, alignment, version control, testing in different environments and so on.
We used the fairly new Connectwise API feature to embed our application into theirs. We’re sending information back and forth, so we created special screens that show in their app. Our need to hide our client navigation requires additional screen designs too, so there’s been a lot of work in trying to match to their design and environment.
The same additional risks and effort had to be there when iOS moved from the old design to the new. All apps had to adopt the new iOS design to comply with Apple.
Surely the platform provider (now Connectwise) will see a need to give additional support to developers and act as a real platform to enable them.
3. Growth opportunities
For a small bootstrapped startup like many smaller MSP spin off vendors like us, there’s no bucks for promoting our products. We rely on the channel and try to piggyback on other well established vendors. The strategy makes sense involving more hard work than dollars.
That means if the platform is open and supportive and has all the processes to promote a niche solution to a larger audience, smaller companies have more options. They can choose to be a “module” only. They can do the integration selling to only one platform’s users, then later expand to become a stand-alone product. In this way the marketing, sales and promotion costs can be minimized.
Thus more and more startups can develop real solutions for the MSP community because the entry level is lower to start something. Can you count all the companies spun off from an MSP scratching their own itches? DeskDirector, IT Glue, Passportal, Brightgauge have all been able to grow and have a sustainable business model. Can you imagine running your business without those awesome solutions? How many others have died because they weren’t able to push it through?
However this puts a high risk in the startup’s business and changes to the platform can kill the initiative overnight. Certainly as an MSP you don’t want to invest to a product with no firm foundation.
That’s why the platform has to have policies to protect the integrators, and increase the overall value of the platform.
4. Conflicting strategies
The platform owner and the integrator can have overlapping functions, and conflicting strategies need to be addressed.
I’ve been watching the open conflict between Connectwise and Keseya. Both have PSAs and RMM solutions integrations back and forth. The goal of both parties is to be THE platform. The question is how it affects the user experience. Could there be any strategic limitations from companies on the integration side which hurt the user experience?
However this conflict can be smaller and more operational. Another example is when Autotask decided to put the “Dashboards” and “Metrics” to their strategic scope and developed features around that. Integrator partners like Brightgauge invested a lot to create integration and offer Dashboards to Autotask users. Brightgauge is a far superior tool for dashboarding but if the platform starts developing peripheral features for their product around the integrator’s core business that can lead to conflicts of interest and confusion for the clients. Shall I use Brightgauge or can I use Autotask for dashboards?
Conclusion
Our integration, moving our product into Connectwise, raised many strategic questions. It’s an interesting time to be in this industry. To provide a more integrated experience is a need from the managed services providers standpoint. To get integrated and give a better experience to managed services providers is the duty of the vendor community. Becoming a platform provider for the MSP industry is clearly a movement for major RMM/PSA players. It will be interesting to see how we can leverage the true opportunities to make the industry better for everyone.
5 false Myths of Managed Services
As we have been talking with hundreds of Managed Services around the world we have been able to identify several common beliefs, and even myths shaping their thoughts.
The biggest problem here is that these beliefs were valid in the past. The times when the MSP model founded and spread across the world, these concepts were helping people to sell and execute services. However as the market went forward with the tectonic shift of consumerization, cloud, mobile and the overall maturity of IT, these beliefs are no longer valid.
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Myth #1: Offering vCIO as an add on to the Managed Services
Offering the vCIO service inside the Managed Services package was a natural step in trying to get back in the boardroom. It was more important to the service provider to show that, despite everything being done remotely, they’re working hard and proving it with ticket counts and reports.
It made the vCIO more an “IT infrastructure manager” role rather than a “IT executive” role. It led to three problems.
- First, the vCIO capacity of the contract does not scale with the size of the organization like other MSP related services do. IT scales up with the complexity, changes and developments of the clients. That means ball-parking a user based price for a Virtual CIO is unlikely to be appropriate. This results in either the price being too much for the market (they don’t want to buy it), or the contract being more work than revenue supports (you don’t want to sell it).
- Second, because it was a reactive rather than a proactive step from the MSP standpoint, it was more sales effort to differentiate the commoditized IT infrastructure services. There were no real processes behind the services and deliverables, no real value proposition, expectations were set inconsistently across the customer base, and the result was delivery not meeting expectations.
- Third, creating a solid offer on virtual CIO involves capacity time with a very expensive resource. That makes the MSP offering more expensive compared to the competition. For the client, the results and benefits of the "vCIO of the infrastructure" don’t make much sense. Customers are apt to compare prices ‘apples-to-apples’ between competing IT managed services providers but rarely are the service offerings that comparable.
Myth #2: Everything is packaged all in
When the MSP packages were designed in the middle 2000’s the value proposition of the MSP package was “keep the lights on”. The value proposition reflected the basic Helpdesk, desktop and server management. It was fairly easy to deliver, not so complex, and had well defined boundaries to the service.
If you see a competitive offering nowadays it’s full of IT Security, Application management, Advisory (vCIO) services managing hybrid complex modern environments with legacy stuff. The value proposition is no longer what it used to be. But as we package more and more goodies into the offering somehow the boundaries and value proposition have been lost.
We had only one iPhone model back in 2007 with one size, one colour and one storage. Now we all know of three different sizes, four different colours and countless storage options available. Even Apple, usually offering as few models as possible, had to follow the customer requirements as the market got commoditized.
Many MSPs are now unbundling their current services to different logical products, as well as bundling them to service offerings which are standardized, but give the client a choice other than buying or not buying the offering.
Myth #3: Value is in the “stuff” not in the consultation
In the good old days when an Exchange Server project was $20,000 or more, MSPs across the globe added “consultation” hours for free as pre sales activity to make sure the clients were going to buy the initiatives. Then as vendors pushed more and more high value network devices, backup and disaster recovery tools and virtualization, the “free advice” become the norm as everybody was making money on the devices and projects and not the consultation.
Now the landscape has changed dramatically. SaaS brought the idea for clients to transfer all IT expenditure to Operational Expenses rather than investing capital on buying software or hardware. The other trend - Cloud - has brought the customer community the democratization of software packages. They can buy the biggest corporate software package in the world called Salesforce.com (you make sure understand it is way no longer a CRM only) and can start with $25 per month.
In this landscape the free advice does not make any financial sense because there are no big ticket projects to bury the acquisition costs.
The value is no longer on the applications but the consultation to select the applications, implement them and make sure it’s used and well integrated. The IT consultation has to be paid regardless of the solution size. It can be literally a $2000 project to help them select a $50 per month project management application.
Myth #4: My target prospects are the companies with IT problems
Before the MSP space got saturated the sales process was more straightforward: get a prospect with visible IT problems and pains, show them some network assessment of how bad theirs performs and how we can help, and the sales was done. Most MSPs didn’t even have any marketing or sales process - the hot prospects were just coming through referrals.
Now if a prospect has any real, visible IT pain we might see them as a huge opportunity. But think about the following: why was the prospect not able to solve this problem before?! Maybe they didn’t see the value in IT, didn’t want to pay for it, or their industry is stuck in the past? There’s a chance the company is not going to turn into a class-A client. The flipside is that these type of companies need the “basics only”. They will check the competition and price will be the most important factor.
The bad news is that the pond of companies with real visible IT problems is shrinking every day, while a growing competition is fishing on it.
However there’s now a growing number of clients who’ve been served by an MSP for years. They have no backup issues, they know that IT is an investment and they see the changes and the opportunities. They are implementing SaaS applications comfortably, and leverage technology in nearly every part of their business. They are a potential customer for new and innovative services. These clients we cannot reach with traditional marketing, sales and referral channels.
The future “A Class” clients of yours are already served by an MSP. Going head to head is not a good strategy because it leads to a price war. However addressing their IT 2.0 / MSP 2.0 problems and communicating more effectively can lead to establishing relationships with executives who are open for the next wave of IT services and know they’ll not get it from their current provider.
This is fishing in a growing pond where nobody is fishing now. Choose where you want to be.
Myth #5: Account management is a sales activity
As MSPs have been providing more complex services the account management activities become more and more important. It can be anything from regular client visits, helping the engineering team close project deals, escalating issues and upselling different services.The selection criteria for Account Managers is more sales, a clear motivation from the MSP perspective.
On the other hand, as we see the complexity of the client’s ecosystem rising the “IT Management Challenges” increase too. That means the client needs more managerial resources to maintain their complexity and be able to realize opportunities, recognize threats and stay competitive with technology.
Now our sales account manager meets with IT management demands from the client perspective. He does not have resources or services to enhance the business and manage the traditional MSP issues during a Quarterly Business Review. The client will be interested in the engagement with the Account Manager because he has pains he want to solve. Unfortunately the Account Manager has no resources to solve those problems and the engagement will decline.
That is why the Account Manager role should be called “Client Advisory” and should be switched from the sales role to a service role. The service has to be defined and tracked the same way as we do for engineers. They have to have annual, quarterly, and monthly activities with clients, creating IT strategies, developing software roadmaps, helping them select applications, and conducting basic training and business related reviews. These services can help the client (and eventually get more project orders as the result) and also open the door for higher level stand-alone vCIO services.
Conclusion
These beliefs were valid in the past. As we move into the post-Cloud era the foundations have been changed, so we have to change our approach and adapt. With Managed Services Platform we’re working hard to create tools and processes for the activities we need to stay competitive in this new Managed Service landscape.
Managing "unrealistic" expectations
I just watched a hilarious 2 minute Youtube video where a comedian recounted the tale of someone righteously indignant over the atrocious inconvenience of the wi-fi breaking up during his trans-Atlantic flight. It made me ponder the trend of setting unrealistic expectations when it comes to technology. We have a short memory for problems fixed, take progress for granted and miss the chance to revel in our achievements.
Then I was thinking that perhaps this reminds you of a type of client of yours who is spoiled by all the progress and never satisfied. Who set these unrealistic expectations? How can we make sure we're not creating the problem ourselves? Check out this quick video and see what we can do to prevent it happening.
On a personal level I encountered the erroneous popular expectation in my own family, while travelling through the Canadian Rockies having a Facetime conversation with my brother on a highway somewhere in Europe. The line broke 4 times, and my brother was so frustrated he nearly threw the phone out of the car. At that instant Apple was a poor service provider without any consideration for him. Now, my brother is a perfectly sane person, so I realized that there’s a common misconception that’s easily reached...that instant and constant integration and global flawlessness should be expected from technology, and everything should be as strong as my wi-fi at home.
Now think of your clients, who will have a similar tendency to set expectations quite high. They don’t have a detailed understanding of the complexity of their network, applications or the necessary integrations. Nor is that their job. When you’re doing your job well they’ll inevitably start to take it for granted. Millennials especially are used to constant internet access and expect mobility across all devices. Some legacy corporate systems are still years if not decade behind that.
Who’s to blame?
The misconception itself is unavoidable. The public can’t be expected to all learn IT infrastructure, the world is just too big a place to cover with connectivity, and the competitive free market we all believe in includes proprietary and innovative fundamental disparities. The neglected measure lies within the marketing, sales and account management - the delivery of the message. Of course, service quality can be an issue, but that’s a reasonable expectation, and purposefully set in our contracts. We have to manage the unreasonable expectations of our clients about their corporate environment. Everything around technology is dynamic: your offering, your solution stack and their environment, so expectations cannot set for years (lie static in a contract). They must be readjusted frequently.
Often the sales process is over-ambitious, marketing collaterals can describe “ideal” situations where everything is perfect, or account management is promising resolutions for an irate client are rather than resetting expectations.
How can we reset the expectations frequently?
The solution is surprisingly simple. The secret is we have to actually ask for the expectations of our clients regularly (quarterly, bi annually) and adjust our priorities and perspectives accordingly. Just stating this isn’t enough. We have to understand what they think and see whether our services satisfy their expectations. If not, they may upgrade to a higher level service, or we need to communicate the realities of expectations and service. A proactive process is ideal, and it’s usually worst to address the issue during a complaint.
Let’s take a look at what we need as a process for this. We need some items in place to make it happen.
- The questions have to be “loaded” questions reflecting our services. In that sense we can directly couple the issue to one of our services. It also gives us the ability to gauge how well they understand our value creation.
- We have to make sure we can address the idea of responsibility. There might be solutions that prevent the problems, but somebody has to be responsible for the decision to buy a service.
- The questions should “educate” them and help them understand some basics, or help us raise a complex issue and explain its intricacies.
You might have a questionnaire with 10-25 questions (depending on their size) to get a 360 degree view of their perspective.
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with five cyber security roadmaps in 30 days
Which statements are true about the company's Information Security? (select all that apply)
- We have secure control over all user/admin/internal/web passwords.
- Our devices are protected from virus and malware at all times.
- Unauthorized people can't get access to our email.
- Our email is separately tracked and archived.
- Unauthorized people can't access information stored on laptops or mobile devices.
- None of the above.
The questions are loaded with the following services: Password Management, Managed Endpoint Security, Managed Email Security, Managed Email Archive, etc. That gives us the ability to see whether they have those services and what to expect.
They have to make decisions whether they need the service, usually some type of add-on. If it’s included with the package they’ll understand the complete value proposition of our fully managed service.
The questions both educate and introduce the opportunity to get more clarification. Then, your sales people, account managers or vCIOs can elaborate on the details.
If you go through those questions every once in a while you can keep them aware of all the stuff you do for them as well as re-set expectations in this dynamic industry. This eliminates unrealistic expectations of greater functionality for free, and help us avoid overdelivery.
We can use it with current clients as well as during the sales process. The important part here is the discussion, communication and engagement with the client. The service delivery comes later.
Conclusion
Unrealistic expectations are common across the MSP market, and users are, to put it bluntly, spoiled with great technologies and misled by over-promising sales, marketing and account management. The solution is a frequent expectation resetting meeting through a Quarterly Business Review or a sales meeting.
3 Best IT reports for MSPs looking to better communicate with clients
Having been inspired by the business model canvas, we started our own IT Management Canvas almost three years ago. We’re thrilled to see how creatively people adopt the canvas with the related questionnaire and instigate vibrant client engagement. Through our development of vCIO and IT Security related assessments, the new canvases have been born. Let's check out the revision of the original IT management Canvas, the IT Security Canvas and the vCIO Canvas.
Upsell your clients with strategic QBRs and IT strategy meetings
IT Management Canvas
The 7C canvas is our original IT Management Canvas, developed to display and investigate the entire performance of a client’s IT, rather than just the traditional infrastructure. It elevates the conversation from the nuts and bolts to the business context of their IT, creates an IT Development Roadmaps, and enables development of business-minded IT strategies.
The original ITCq questionnaire can help the Account Manager, Virtual CIO or sales executive to assess a client's maturity. This is then used for traditional audits, maintaining internal compliance and in the continuous effort to make their IT more business focused.
The main strength of the canvas lies in its ability to make a client’s IT more relevant and facilitate a conversation around the current state of their system and opportunities they could exploit. It helps get aligned on the mission with your clients, differentiate your company when meeting your prospects, and generally enhance engagements.
Analysis of the ITCq will direct problems to services like general IT support, managed firewall, Office 365, virtualization, vCIO, Application Management and other IT related services.
Download the canvas in a PDF format
IT Security Canvas
For many MSPs the natural progression is toward Managed IT Security focus. The challenge involved here is to find the balance between the very high-level services like compliance, documentation, audits, training, and the low-level intrusion detection, risk management and a vast array of other technical details.
The IT Security Canvas and the NIST Cyber Security Assessment create this balance, including Human Resources Management, Access Control, Service Control, Risk Management, Network Protection, End Point Protection and Policy and Compliance as main aspects of concern.
We created a questionnaire to assess and score the client's IT Security, and score the seven security dimensions together. It works the same - you put a widget on your website and clients and prospects can click to complete the questionnaire, and you get their scores.
By nature IT security is a complex issue, and thus difficult to disseminate to the untrained masses - your clients. Again the canvas is a big help to exhibit for the client in one page all the main aspects of their IT security. It dramatically assists in understanding this broad subject.
It also directs problems and missing pieces to IT Security services, such as IT Compliance, Risk Management, Intrusion detection, Managed Email Security, Managed Desktop Security and so on, mixed with consultative and technical services.
Download the Canvas in PDF format
vCIO Canvas
In the case of handling the traditional Account Management (or as we call it, vCIO Light) services, the 7C IT Management Canvas is more than enough. The more sophisticated stand-alone vCIO packages ranging from $1.500 MRR to $6.000 MRR, however, need more support. We created a separate questionnaire for assessing their IT management maturity and a Canvas to handle the elements visually.
We make the IT Management and Leadership visual through the building blocks. IT Vision, IT Readiness, IT Project Management, IT Leadership, IT Governance, IT Plan and IT Execution are the main elements of this Canvas.
The focus here is on the comprehensive management of IT. When you find a gap, a misunderstanding or other issue, usually one of the vCIO services will be the solution, such as budgeting, vendor management, or solution selection.
Again the same purpose applies: the questionnaire helps us gauge their maturity and identify their problems, and directs them to specific services.
Download the vCIO Canvas in PDF format
Conclusion
The common challenge in all these approaches is getting across the idea of how much needs to be taken care of, the myriad benefits and critical risks of such a technical subject, usually not well understood by the client. If we don’t start with a platform of engagement and education we’ll miss the chance to help them. We are the ones in the know, so we must be the ones who get the message out.
Your success depends on proper understanding and communication with your clients and prospects.
Terrible buying process for Managed Services
People are talking about MSP sales processes when it comes to discussion of new client acquisition. I believe we should see the process from the customer's perspective and realize that the buying process for them is terrible. Given the current typical buying process, a working future strategic relationship is becoming less and less likely. Let's take a look why the process is broken and see if we can figure a fix.
There are three major underlying issues causing this trouble:
- Unknown criteria of the decision
- Vague decision making processes
- No compelling differentiation among choices
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Issue 1. Would you buy a car for your spouse through an RFP?
A request for proposal (RFP) is a solicitation, often made through a bidding process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit business proposals. (Wikipedia)
RFPs are useful tools for firms who can precisely define a request, the services involved, that is innovative and isn’t yet mainstream. Some, however, are just fishing, and end up selecting by price. They don’t know how to make the best decision on the provider, so it comes down at the cost.
The problem for us of course is that if they’re not looking at the other (non-price) properties of the decision, we’ll have a hard time to winning the deal at a rate that will let us provide excellent service.
RFP does not permit the two parties to get to know each other, which hinders the ability to align on a strategic relationship which will lead to the maximized value creation.
Quickfix 1. Actively define the criteria of the decision
If we’re able to precisely nail down the criteria of a decision, our job would be easy. Unfortunately like the car choice for our spouse, most decision making is not logical but emotional, and the criteria seem to be endless. A car can be sold or left in the lot based on its colour alone, or entirely on its reported performance in crash tests.
Our truly superior approach, that actually does help our clients streamline, isn’t getting the chance. We have to use an emotional metric to sway an emotional decision - that you are the genius of technology and have the relevant attributes and skills to assuage any doubts they made the right choice - even at double the price.
We’ve been using the ITCq - IT Competitiveness Quotient to measure how competitive a client is with their technology. These have 56-165 criteria respecting customer size, all logically related to long-term success through better adoption of technology, but at the end of the day when they have a score like 35 out of 100, there will be an emotional aspect to the decision. This is something that needs attention... and we know how to make it better, and can show measurable results.
Issue 2. Would you teach a farmer how to sell potato?
Prospects will always try to second guess the pros on how to buy Managed Services Provider services. They don’t want to be involved in the discovery process (just gimme a price), want shorter meetings (I’m busy), try not to make business decisions on IT (moving to the cloud is a technical issue) and so on.
Every client is different - their circumstances, legacy systems, people, management maturity and so on. For an Managed Services Provider to be in a position to offer anything substantial takes time. The client may see this as a sign you’re not moving forward.
If they don’t see any specific process of engagement they start trying to control the situation and sidetrack you even with a process in your mind.
Quickfix 1. Show them your process and stick to it.
One awesome member showed me a laminated card the other day. It showed a process of how to create an excellent IT Service provider relationship in 7 steps.
It started with a first meeting to check the potential fit. Then it went to an IT Strategy discovery workshop (used the ITCq process) to understand the business related problems and how the IT needs to align with it. Then it moved to data gathering on systems, documentation and infrastructure followed by a technical audit. The next step was the first instance of any talk about price and a contract.
Visible steps were required for a great relationship and none of them was redundant. Our member showed their client that this is how it works. The Managed Service Provider was able to drive and lead the process.
Again the process was visual on a laminated card...I wish I could share it...drop me an email and I’ll get you in contact with the author.
Issue 3. Are you selling a freaking winter tire?
When looking for commodities, there’s a few criteria, and there’s price. But MSP isn’t a winter tire, is it. You need to make the distinction.
Before you go relying on your track record of fast and professional service, consider this: everybody makes the same claim.
Quickfix 3. Eliminate competition with consultative approach
One: let the client be understood. We have to understand their priorities, realities, goals, personality and then only then can we differentiate ourself.
Two: let the client find out what makes us different rather than telling them yourself. Let them make the decision unconsciously that we are the right fit for them.
Both of these are a natural result of a perfectly conducted consultative sales process. This process focuses on probing questions, listening, summarizing the findings, and expressing the solution and the results.
Probing questions on typical pain points (again an example for that is an IT Competitiveness Quotient questionnaire and report) gives you the talking points to explore the different IT related opportunities and dig deeper only where needed. The questions help drive the conversation and will tell way more about you, your company and your thinking than you can get across by yourself.
After getting deep, summarize the issue and get an understanding about priority. Hint to a solution with a client story to give them the confidence that you’re on the top of the game.
As the process unfolds we cover all their pain points, and differentiate ourselves. They’re confident we’ve already solved these problems (priorities for them) and are a great partner to consult.
Conclusion:
We can blame our clients, the markets or the competition because we are facing price pressure and commoditization, or we can embark on many proactive solutions. Let's apply these three quick fixes and rock your next sales meeting.
Two ways to differentiate your MSP
Two weeks ago we posted the interview with Verne Harnish, author of Mastering the Rockefeller Habits and Scaling Up! The interview has inspired many of our clients and readers to think about particular aspects of their business. I’ve personally been experimenting within two of those aspects lately, based on his thoughts: Hyper Specialization and Service Productization. I just wanted to share an update on how we’ve developed what we learned.
Win new clients with it sales software
Hyper Specialization
From the chats I’ve been having with many of you about this topic, it’s apparent that this is going to grow in importance in the future. The classic Managed Service Provider business is still all about solving the same problem for everybody: keeping the lights on and delivering peace of mind, regardless of the industry, size or client maturity. As we move forward as an industry these problems and challenges are going to deal more with the business model or vertical specific issues rather than general infrastructure.
For example:
The problems we’ve traditionally faced have been slow email, backup fails, need for cloud storage, etc. These issues are general needs for every type of company.
The problems we might see now and will see more in the future will be more like “We need to store tons of videos and music files in a searchable format”, “ I have many outsourced people doing production for me, how can I work with them and easily share documents on different projects ?” and so on.
These examples come from a real-life small record label. So this label’s MSP - a member of Managed Services Platform - collected all the issues the music distribution company had and polled a couple others too quickly about general challenges. They then designed a special package called “Cloud Office Suite for Small Record Label Companies”. It included the traditional MSP stuff such as endpoint security, help desk and proactive maintenance, but also bundled together the service with a special storage application (managing the meta tags and media files), project management app (Basecamp license + implementation + support) and many other integrated small applications solving their problems from their perspective as a record label.
As I witnessed this coming together it became pretty clear to me that to getting in front of this kind of prospect with Hyper Specialized Package offers will be a natural process. I can easily imagine pulling out problems relevant to the client to create interest, and am also sure these problems aren’t likely solved by their current MSP or internal staff.
This kind of package addresses our customers’ problems precisely and bundles a solution together that specifically speaks to their needs. I’m curious about the results of others, but I’m confident that this will be making a big change in the marketing of MSPs.
Productize the MSP services
One other thing I’ve gleaned while talking with some of you - these ideas have been started already but actually creating the hyper-specialized bundled packages for the verticals is, at least, non-traditional, and something quite new. This is the principle of productizing the service.
Because we can’t just bundle services together from a marketing perspective, this is actually a great opportunity to wire these processes together with the execution.
I see people playing with special service bundles aiming at micro companies (fewer than 10 staff and low budgets). Putting their data and systems to the cloud, and giving some basic support and value added applications like Office 365 + Todo + Calendar scheduling + note taking applications together solves their problem in a non-traditional way. Giving them classroom or webinar based training can help them adopting the basic applications. There’s also a way to eliminate the helpdesk (and its cost): to support only an internal champion rather than every individual. Now again MSPs are able to attract these small enterprises and do a profitable business.
So if you’ve kept up with our updates lately, we support those initiatives with new service bundle functions too, helping to put together service bundles based on your standard processes. Also because you’re now free to create services, your imagination is the only limit to creating offerings to verticals and productizing your services. Last but not least, graders and the new questionnaires will dramatically help you communicate with and qualify those prospects quicker and sell more.
I am quite excited to see how this trend develops. Looking forward to your stories!
Scaling up your MSP with Verne Harnish
We are continuing the “MSP 2.0 bestseller” series in March, as well. No question, one of my all time personal favorite books is Mastering the Rockefeller Habits from Verne Harnish. It helped me to apply the paradigm of “work on your business instead of in your business”. For many Managed Services Provider leaders this book has been a foundation to building their businesses. He’s followed this with his new book Scaling Up - Mastering the Rockefeller Habits 2.0. I had a chat with him about the required steps for Managed Services Providers to stay on top of their business and to start Scaling Up!
Verne is straight to the point, so put on your seat belts and get your notepad open, this is going to be a high-paced trip!
Differentiate yourself from your competition and
become sales ready in 30 days
My take-aways from the video:
- Focus on marketing - start with a weekly meeting and make marketing a priority. The most successful tech companies always have a non-tech member in the team with a strong marketing focus. If you would like to excel with velocity, check the least obvious of the 4P (product, place, price, promotion) - the pricing. This is the most undervalued aspect but has the most impact on your differentiation and bottom line than the rest.
- Hyper Specialise - differentiate yourself by specializing in an industry, vertical, or specific problem and become the number one IT service firm in that specialty. It gives you the differentiation power while lowering your marketing expenses dramatically, and gives your clients a huge competitive advantage from working with you.
- Strategy also includes saying no - saying yes to every opportunity is great if you’re finding your place in the market; after that it’s going to hinder you in scaling up. Once you reach 3-5 years experience, you should have a firm scope of what you do and for whom, and how integral that focus of your expertise is to your and your clients’ success. Stick to that.
- Get into the Executive Suite - getting to the executive suite and being included in the client’s strategy is not an option anymore. Everything outside of that conversation is a commodity. If a service provider wants to be in the high margin arena, they have to take on a strategic role with their clients, period. Becoming a trusted advisor or a consultant is not difficult is you follow the next point.
- Leaders are readers - “read the freaking manual about business” not just technologic manuals. Or listen with Audible, read some Kindle, watch YouTube, whatever. Learn, learn, learn and make it a policy for your team too. Pick 40 books, get others to read some, report on the great ideas found in them and get implementing. Start checking out Verne’s reviews of the best business books every year on Fortune.com: 5 Best Business Books in 2015.
- Use Demand Driven Pricing - The hidden gem here is in Confessions of the Pricing Man: How Price Affects Everything by Hermann Simon. Demand-based pricing (or customer-based pricing) is a powerful shift, turning low and non-profit industries into revenue successes. In the US airline industry alone this shift brought $22 billion in increased revenue. The "all in one" pricing strategies were successful for MSPs in the past when execution was the bottleneck. Now, however, those who don’t accommodate the customer’s requirements and adopt some sort of customer-based pricing can suffer.
- Be agile working on your business - use sprints, agile methodologies (Scrum for example) like software developers do. Set your bi-weekly goals and work on them every single day. If you want to move faster you need a faster pulse. Use daily huddles and focus on the one or two things you’re going to do that day to close on your goal. For more advanced Service Providers, set goals for your clients - quarterly and monthly - and keep on top of them together in your weekly huddles.
- Have a peer coach - and hold yourself accountable. First have a quick chat with him/her and detail those things you commit to every single day. It has the effect of making you accountable, and choose wiser goals in your personal and corporate life. Verne has had his peer coach for years now! (We should organize something like that internally, come to think of it).
- Productize your services - product based companies are adding services and service companies try to productize their services. It’s the trend. Service providers who deliver defined, “tangible” products offer more choice to their clients and give a better buying experience. This is part of demand driven pricing - implement a service catalog with service bundles and balance your productized services with the customer's demand.
Verne is a generous teacher: check his site for all the goodies:
- Sign up for Verne’s weekly insights and join the 75,000+ business leaders every Thursday for a handful of easy to digest business ideas.
- Check out all the free goodies in the Scaling Up website. You can find many one pagers, templates resources to Scaling up your MSP.
- Grab his books in Amazon - Master the Rockefeller Habits, The Greatest Business Decisions of All time and Scaling up (with all the downloadable templates) and work on these ideas right away.
- Join in the movement and get the equivalent experience of 1000 books at the Scale Up Summit, May 24-25 in Atlanta. Meet other purposeful business leaders like yourself and get inspired!
Thanks to Verne for taking time to share his wisdom!
What is your pink cable?
This is a motif that’s had some traffic in the last few weeks in several situations, coming up in conversations about differentiation, going the extra mile, remarkable service, engaging clients, building a brand and the use of stories in this business.
One of our managed services provider clients told us a story about a fashion design client in Los Angeles with fashion conscious California team members. The office is artistically designed of course, with bricks, standing desks and an open cafeteria with bar tables. Lots of nice, creative radiant people having lattés while working makes this the place where techs are making up reasons to go every day.
He had some work out there and got inspired by the environment to get expressive, so he bought pink cables instead of the boring black ones.
He was just having fun. He didn’t predict the result...
Differentiate yourself from your competition and
become sales ready in 30 days
The reaction was extraordinary. The whole staff gathered quickly, coming out from their offices telling each other “hey check this out”. He was surrounded by people in no time, inspired by his one little choice.
This is the kind of situation service entrepreneurs dream about.
From “the IT guy” he became an instant star of customer care and known for remarkable service. He got everyone’s attention and for a little while IT became the important thing. Not because of well designed backup, virtual servers or smooth applications, but because of a set of pink cables.
This was instant differentiation from the rest of the IT companies sniffing around, make him the lovable service provider who cares. He became part of the team instead of being a cost line item in the books.
I like this story…. It tells a lot.
The ultimate question you should be able to answer with your team is the following:
What is your Pink Cable?
4 Disciplines of MSP Service Development
One of the most under-appreciated success factors of an MSP is its capacity to develop services. We’re the purveyors of Managed Services; there are hundreds in the repertoire of any given MSP. This keeps us busy - going from concept to a product that can be sold and delivered is a long road. While product based companies have a process for product development, we service companies too often overlook the value in this powerful business practice, where all our innovation, differentiation, profitability and growth can be formulated in advance.
The trend of fragmentation in services - into verticals, delivery tools, integrations - just multiplies the need for planned process.
The usual development process for managed services providers is to do a project - develop something that solves a problem for (and with) a specific client and standardize it later. This can lead to long term future revenue, but without a clear process mixing up service development and the real revenue generating activity of the company will not only kill our internal productivity, but likely our relationship with the client, if everything they see is always in beta testing.
Let’s identify some basics to ensure our process is better than the average and pull ahead of the competition.
1. Value Proposition
The first important aspect of the service development process is the proper Value Proposition. We’re always ready to sell gadgets, tools and things we can use to solve something. Finding the problem it can solve usually comes second - “Hey, we have a Mobile Device Management feature in the RMM tool! Great, let’s sell it to clients.”
This is the approach of the average and uninspired MSP. If we instead use the Value Proposition Canvas, we start by understanding the client’s problem before designing the service itself.
We seek to discover things the client wants to get done, the obstacles in their way, and the results or gains they hope to get. This is the right hand side of the canvas. Then we can design the service value proposition on the left to solve the problems and the deliver their requested results. We build a bridge connecting their issues with the benefits of our services. Lastly we craft the service description itself.
Let’s see a Value Proposition canvas for the Slack and vCIO services to see how it works in real life. We even have a complete blog post for that one.
In that sense we know in advance precisely the mission of the service - why the client needs that - so if we develop it further all marketing, sales and delivery efforts will be aligned.
Development will also be made more agile. For example we’ll be deploying different maturity versions of the service. The first instance of Mobile Device Management may only cover basic functions like wipe and remote deployment, but later will be covered with BYOD policies and internal compliance.
We may even find we cannot solve the problem, or the problem isn’t actually worth the effort and expense, and we can drop the service development fairly early, so we and the client can both invest our time in better pursuits.
2. Demand Generation
The second step is to create some Demand Generation materials. I know...how can anyone not want to pay for our obvious expertise? We have the skills, but the customer inevitably makes the buying decision. If we can’t explain the service and its benefits clearly, we can’t drive demand and there’s no reason to proceed or invest further.
We have to learn fast, and active materials are best at getting quick feedback on our thoughts. Sending a one pager is not interactive - it won’t have the specifics - which feature is the most important, for example. Graders are great tools for asking questions about the problems clients have with a particular issue and actually measuring our marketing effort, the copy, the delivered benefits and interest.
Demand Generation is part of the Service Development process, not something marketing folks do after we finish. It gives us real-time feedback and clear understanding of what really needs to be solved, a crucial objectivity to the process to make sure we develop the service for the client and not for the engineer.
3. Sales
Pricing and packaging is a big deal for services too.
- Is the service included in an MSP package or stand alone?
- Does the service have tiers, or should we scale it with GB, user, device?
- Does the service has a definitive process such that we can price based on the resources we put into it?
- Is it an open, listed price or customized per proposal?
- Do we sell it directly or through the account manager?
Again this is can’t wait until after the development process; it is part of it. We have to go out and test our assumptions. We can take a little advantage of our “early adopter” companies to go through experiments. We need the clearest understanding possible of all aspects before we scale.
Sell the service to the early adopters without a price tag. The goal is to find out whether they see the value without any price attached. Once we confirm the need we can find the price they will pay for the solution. In this case we can measure the value and the price independently. If the value isn’t compelling it won’t need to proceed to a price conversation. If it is a value, then we specify everything, and then create the perfect solution that both works and fits their actual budget.
To early adopters we can always offer a discount in exchange for their participation. We can get marketing contributions like testimonials, interviews etc. We can ask for contribution - content samples, real life data for presentations, and we for a flexible delivery schedule. We’ll only help ourselves if we state the discount clearly up front.
4. Delivery Processes
The last piece of the service development process is the Delivery Process definition. Usually we don’t consider this part from the beginning, but rather on an ad-hoc basis.
We start services sometimes as one time projects. A client needs something and we bring it to them as a project - making the common mistake of failing to look forward. We do so much to make one individual project come true, when we should treat every project as though it will become a repetitive service, so we generate service delivery process prototypes during our project work.
Therefore we’re going to need a quick service delivery prototyping tool. We’re going to use it to create service processes in real life and be able to reuse the materials later. Many people use Project Management or Process Management planning tools to create a project plan, or a process description. These are good for when we create documentation, but aren’t flexible enough and lack the feedback from real life as discussed above.
The best way is to fire up lightweight project management tools like Basecamp, Asana, Teamwork, etc. These have the flexibility for a prototyping situation (for instance your PSA’s project management is too robust, not flexible, lacks collaboration), and allow testing in the real world. You can open a workspace and quickly input the process deliverable items. Templates, Excels, Word docs, notes, todo lists, and everything else you think you need. As you start working on the project you’ll see a refinement of your efforts. Later of course, as we finish the project we can reverse the process, moving those todos and templates and deploying to a robust professional services automation when our goal is no longer flexibility but performance and efficiency.
Let’s put it together
To recap, create the Value Proposition, and test it internally first with broad (vague) definitions, then move forward with interactive Demand Generation materials to define the ideas more clearly, create Sales materials and scenarios of the Pricing and Packaging, then create agile Service Delivery processes.
We’re going to separate Production from Development. The development folks are going to hand hand off their work to the production team to deliver it. In the case of a small MSP we can at least separate the process virtually, if not physically.
As we need to be developing more and more services it will become harder to keep ahead of the curve without a solid Service Development process. Consider the services you’ve put together already, and how they’ve developed in terms of these four stages. It’s never too late to implement proven techniques.