6 strategies to make MSP services more tangible

One of the most common and largest hurdles for MSPs is difficulty expressing our value proposition properly, and hence differentiating ourselves.

There are two fundamental aspects of our industry responsible. First is the abstract nature of the proposition. The problems we solve are less tangible, like “competitive edge” or “staying ahead of the curve” rather than “keeping the lights on”. The second is the more managerial and higher level services such as solution selection, and team alignment and integration rather than executable defined processes like device management and remote monitoring. 

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Without a doubt that which is more tangible and more clearly defined is easier to explain, sell and even deliver. We try to answer the question: how we can make our vague and complex services more tangible.

The process below will first identify the different types of services you have, then set up a structure to help manage this process. Then we’re going to demonstrate the practices to enhance different types of less tangible items into a more tangible format. You’ll see how you can actually transform the most difficult to monetize services and make your service portfolio more ready to explain, sell and even deliver.

Let’s go through this short process quickly and see what is going on…

We’ve created a mapping tool to help us visualize the suite of different services we have regarding their type and degree of clarity. The service can be any activity or process you do for your clients.

You can do this easily with your team. Get out your flipchart/white board and sticky notes. If you’re more tech savvy you can use the given PPTx template.

1. Determine the type of service: Management or Execution

On the vertical axis we see a grade of services, management type or execution type. 

Managerial type activities include making plans, having meetings, brainstorming new ideas, thinking on the big picture, managing people, aligning your team, and educational initiatives. Professional Services, Account Management, Technical Account Management, and vCIO related activities are typically managerial activities. 

The execution part is where you actually implement something, fix things, solve particular IT problems, manage devices, deploy applications and so on. Level I, II, and III support, engineering and solution architect works are execution type positions.

2. Determine whether the service is more tangible or less tangible

On the Horizontal axis you see whether the service is more tangible (clear) or less tangible (less clear). 

More tangible services have more physical attributes. These may be attached to a device, an application, a specific deliverable (like an excel sheet, word document), are easy to define and explain. They also include services defined by events or processes such as regular meetings, calls, emails, feedbacks etc.

The less tangible services have no firm definitions, no real processes behind the task, instead consisting mostly of ideas, goals, and vague offerings: starting a project, brainstorming a business problem, evaluating processes and so on.

3. Find the most problematic services

As you can see you’ll often find that Management type services tend toward the less tangible region of the chart while Execution type services are usually more tangible by nature. This means as your clients are pushing you to be more “strategic” or more “business savvy”, what they’re asking is that you deal in services that are inevitably less tangible. 

Let’s apply this personally. I bet if you go through your service portfolio you’ll find that the services you call “problematic”, “less profitable”, and “annoying” are on the right hand side - less tangible. It’s no surprise, less tangible services are harder to manage.

Let’s choose the services you want to improve by making them more clear and explainable. Circle them 

Now we’re going to apply one or more of the Six Strategies and see which function to move them into the more tangible side.

We’ll use an example here to go through these items. The service that probably eats most of your time is setting up projects. Taking some issues your client has mentioned from discussion to proposal is a long process that we are likely to do without being able to monetize. We’re going to take this service which we give them for free and construct a solid, tangible service with the following strategies.

Strategy 1: Apply a specific deliverable to the service

This first strategy is all about having outcomes with more tangible deliverables. It can be any type of document that demonstrates to both the client and our team member what is expected to be the end result of the service.

Example: Our service is quite intangible at first: “solve a problem”, “manage an issue”, “create a business case”. We can easily turn this into a very specific item with a template. We use the “10 point exercise” for these type of cases. It’s a quick exercise and at the end we’ll have the issues and problems spelled out and prioritized by the team, plus a list of possible next steps as action items. Showing the client such a completed template will bring substance and help them understand the value. Instead of just saying “have a meeting” we are going to deliver tangible evidence of our managerial activities so real value gets recognized.

Strategy 2: Apply specific meetings, workshops to the service

The second strategy creates clarity by applying some sort of specific “workshop” or “meeting” to the service. This is an active strategy of making a vague pursuit more tangible.

Example: We have a slick template for the “10 point exercise” and it gets completed during a “10 point exercise workshop”. We start with vague issues, problems and a misaligned team. We gather them into a workshop and ask everyone their main concerns, issues, problems and perceived opportunities about a given topic. We write it all down, then ask them to distribute 10 points across the answers on the chart. After summarizing points we see together clearly which major items are aligned or misaligned and we can expand on them. Have another round and convert those major items to specific action items. It all takes 30-45 minutes in a workshop that turns a vague input into a specific output.

Strategy 3: Apply a specific process to the service

This third strategy is to attach a very specific process to the service. We can have deliverables and we can have events, but we should also have a set of very specific steps we go through. Standardization like this creates clarity.

Example: We can put on paper the specific process of a 10 point exercise, and present the client with the plan for a workshop, with a briefing in advance. Explain what they can expect as a follow-up, like a template message with the appropriate action items. Even better we can chain together these exercises to encourage a wider vision of these esoteric processes as well. For example the first exercise will be the definition of the problem that leads to different options. We can then manage those options in other 10 point exercises which can lead to continuous solution selection process.

Strategy 4: Apply a cadence to the service

The fourth strategy is going to make the individual service item to a recurring service item. If we give a cadence to a service - such as annual, quarterly, monthly or even weekly - it will tremendously increase clarity of purpose.

Example: Clearly our clients need problems solved and business issue resolution all the time. Every company is working on their bottlenecks, so even when we do ‘fix’ something, something else will come along to keep us busy. Nobody wants to sit back and say “good enough.” In this case we can turn this “Business Issue Management” 10 point exercise of ours into a recurring service. Let’s say we have three 10 point exercises every Quarter to manage different issues with our client’s IT. We use the Quarterly Business Reviews to identify the problems we need to manage and to review the results of exercises. 

Strategy 5: Put the service into a clear context

The fifth strategy is to address the problem/solution couplings within a bigger context. This is communicating the function of a given service in context of your overall service portfolio. Ask questions and lead discussions that exhibit your other services working together with this one. If you show the services next to each other you’ll demonstrate their value when playing together nicely. It’ll be seen as a higher level service built up from smaller components designed to fit together.

Example: We have our “Business Issue Management” service now quite nicely defined with templates, workshops, process and cadence. However we do many other things as well and they need many other services too. Let’s list those services in a questionnaire and put some structure around it all. Let’s say this service will be the part of the “Business Alignment Service Type” which falls into virtual CIO services. From that perspective it becomes clear that the virtual CIO has the job of identifying issues and problems of the business and addressing issue management and resolution. Again it gives the service a higher touch and puts it to a context with other activities all critical to a successful structure.

Strategy 6: Put the service into a framework or tool

The sixth strategy is to put the service into a bigger set of services. We touched on that in Strategy 5, with the catalog discovery perspective, and now we’re going to use it as a delivery perspective. If you use tools to group your services together they will communicate more fluidly and foster aligned synergies and notable efficiency.

Example: We have our “Business Issue Management” small service defined among many other services the vCIO can do. Implement the services to a tool that lets us interact with a client for another boost in clarity. For example, use a Customer Management - Project Management tool like Basecamp.com. We can put the 10 point exercises results into it, collaborate with the client and facilitate chat and discussions, and even use it during the Annual Planning. We’re creating a supportive environment where we and our clients are executing services together.

Next Steps:

Now go through your service portfolio and pick some to focus on making more tangible. Apply the strategies one by one and see which work best.

If you can see the process make sense but want to save some time, we’ve applied the six strategies for most of the IT management type services already. It makes Technical Account Management service pretty clear and made vCIO service very sellable and executable from a $1.500 - $5.000 Monthly Recurring Revenue range (with all related vCIO Projects excluded of course). 

There are more than 30 services with all six strategies applied with templates, processes, events, cadence, and a sales questionnaire in a customer facing delivery tool.

If you’re interested in these practices, let’s have a quick chat and learn how quickly you can implement them.

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Trending Topics in the MSP 2.0 Peer groups

A few months ago we started sessions of real peer groups, to get people together to discuss real issues, problems and challenges we’re all facing and hopefully to come up with some individual plans that boost the accountability of process execution. From these I’ve compiled a list of topics that are front-of-mind among participants. I can report that the discussions dealt with the problems in a very forward looking manner, with creative solutions and not stuck in status-quo thinking. In my opinion these sessions are giving a unique insight into where the industry is going. Let’s see the topics one by one

Develop a Scalable

Account Management and vCIO Operations

in 30 days

1. Structure needed in vCIO services already sold

There’s a growing number of cases where IT managed services providers are able to sell a $4000 - $8000 MRR stand alone vCIO service. These sales are happening usually with a client or prospect who’s been looking for a full-time CIO as an option already, but the vCIO service were more appealing with their flexibility. The challenge is to reverse engineer back to structured, processed deliverables that meet the value agreement.

2. Differentiation with business consultancy on the website

This is a general trend of changing the focus of our websites from a collection of IT related items into a suite of IT strategy related consultation. There is still some debate on whether the original website should be fixed, or a new website is needed in a separate domain. Most people agree however that the website’s goal is not to be a “marketing engine”, but rather to function as a substantial support through the sales process; helping to qualify prospects and to differentiate this MSP from the herd.

3. Modular pricing methods instead of all in one

Not surprising is that customer needs are changing dramatically in the IT scene. The traditional “all in one” value models no longer seem to help close deals. Modular pricing balances out the standardized delivery with partially customized offering, while retaining the efficiency and accountability of standardized prices. Contributors are currently working on the model for the service stack, offering both traditional MSP related IT management services and even general SaaS applications as well.

4. Capturing the Micro SME (5-15 people) market in a profitable way

Many MSP have difficulty selling to micro clients in a profitable way. Since these firms tend to function entirely in the cloud, most of the traditional MSP package is an overkill for them. They do need some kind of support, but more likely a self-service rather than a fully managed service. Models are being formed for a solution applicable to this demographic with higher performance and lower resources based on 100% cloud stack.

5. Clearing the difference of the MSP 1.0 and 2.0 offering

The MSP 1.0 and the 2.0 model can nicely play together, however mixing the two without a clear separation of roles and processes can be harmful. Letting a virtual CIO manage ticket escalations and focus on infrastructure projects can easily kill the initiative. The best way to achieve clarity is to design a Business Model Canvas with MSP 1.0 and MSP 2.0 items separated. This will help managers, employees, and clients alike understand the non-obvious differences.

6. Ways to start the stand-alone vCIO

For many MSPs there exists an internal mental hurdle to offering the virtual CIO as a separate service not bundled in. It seems easier to bundle at first, but the lack of clarity, agreement and expectations make it impossible to execute profitably later. Different stand-alone one-time services are instead created to trigger the monthly recurring vCIO services.

7. Annual IT Strategy process to upsell vCIO to existing clients

Related to the previous topic, this challenge is to start pitching the vCIO to our clients. Many members have been working on the “IT Strategy Process” to kick off their vCIO initiative. Most understood that pitching the vCIO service without clearly stated needs and benefits doesn’t work. But creating an IT strategy (the process is 7-8 hours) is worth the time and a well presented IT Strategy with many deliverables will pave the way for the vCIO monthly recurring work.

8. Closing deals faster

Lastly we noticed a common lament: that for many IT companies it’s fairly easy to get a positive conversation about the Virtual CIO or other high level MSP services, but that the discussion often remained abstract, in the realm of possibilities, and deals were not closed. That’s why picking 1-3 items to quickly solve will show the tangible value to the client, leading to closing more - and more expensive - vCIO deals. The group actually together summarized that this experience was needed, as it is a new product/service category unlike traditional MSP services.

Conclusion:

If you see the value in these 8 major topics the Peer Groups are working on you’ll see that this is a unique and powerful tool, and very forward thinking. I’m impressed by people’s creativity, entrepreneurship, clarity and persistence - a room full of people from all over the world, not complaining, and doing what it takes to put their IT companies ahead of the curve. So thumbs up, good job!

Teams vs individuals for IT management roles

Baby boomers, Gen X, Millenials: the different generations in the workplace set some challenges for IT leaders and service providers as well. Who’s best suited for the vCIO role?

I came across an illuminating infographic in the last week that discusses the different strengths and weaknesses involved in these demographics.

Not surprisingly the Millenials - those born after Generation X, in the 80s and 90s - are often (keep in mind this is statistics, and there are always exceptions) the most IT savvy and most adaptable to new systems. However they tend to lack proficiency in communication, collaboration even some problem solving skills.

Gen X - those born after the baby boom in the 60s and 70s - excels at communication, problem solving and relationship building. They fall short of the Millennials on the tech scale, and they’re not the leaders in executive presence.

Baby boomers - the post-war bunch - are the leaders as executives and mentoring, again unsurprisingly, are mediocre to weak with tech saviness and adaptability.

To the desired end of maximizing the strengths of your MSP, it would be nice to be able to foresee your best choices CIO, IT leader or vCIO. In the service provider industry most of these roles are filled by a team of people. So from that perspective, how can we leverage these different generational strengths to fulfill the leadership role as a team.

The key is to bridge the gaps in talents - to mix these generational aptitudes in pods or modular teams together.

• Generation-X people can focus on communication, client facing, and business development, based on their general strengths of revenue generation, relationship building, collaboration and problem solving.
• Millennials are most likely your best bet for the implementation of solutions, planning and do the engineering work mostly. They can adapt to and manage changes in concepts and technology, as they’re more up to date on it.
• Baby boomers will probably excel at dealing with the senior client interactions, and can also be mentors to the rest of the team.

This still leaves the question: who should lead those pods? As we see the bridge generation is Gen X with very good collaboration and relationship building strengths, which can be tapped to lead the teams.

Indeed these are generalizations, but I think they can still be a guide in one’s thought process to envisioning the structure of your team based on these statistical inferences. Just being aware of such trends can help you build teams based on combined strengths rather than searching for an elusive master of all skills needed to deliver value to your clients.

STRUCTURE, MANAGE AND AUTOMATE YOUR ACCOUNT MANAGEMENT AND VCIO PROCESESS

Quick calculation formula for vCIO opportunities

The other day I made some calculation with a client about vCIO services. Fortunately it is very easy to calculate your opportunity in creating a profitable and scalable vCIO service offering.

We’ve simplified things for faster calculation, but it’s good to clearly understand what’s at stake. We see three categories in which we can lose or earn money.

Develop and operate a scalable and structured vCIO operations

1. Cost of Free Advice

The cost of free advice is the lost revenue opportunity resulting from the inability to charge our clients. It can be anything from casually chatting about their plans to putting together project proposals and so on. You know when it’s happening...

Cost of free advice = [Number of clients] x [Average Free Advice in Hours per month] x [Hourly Rate]

For example a small size managed services provider with 20 MSP contracts spending an hour per account giving free advice (yes you spend way more than that), with a $200 hourly rates leaves $48,000 on the table. I know you may not be charging $200 now, but creating a separate service and do value selling can do the work. Just today a client in California sold a $3.000 MRR vCIO to a School District over phone. The competition offered $150/hours rate but he won the deal with $225/hours internal calculation with value based pricing. :-)

2. Cost of unproductive work

The second category is about your IT management, quarterly business reviews, manual daunting document creation, planning, project management, consultation, vendor management and more role. The cost arises from doing these tasks ineffeciently, without processes, templates or even an automation tool, spending more time than you can spare. You’re pushing your tech to be productive, buying all the RMM, PSA, you name it, but the highest paid individuals have nothing to leverage...

Cost of unproductive work = [MSP contracts] x [Hours we may save] x [Hourly Rate]

We will be very conservative here. Let’s say we may save 25% of the time of our vCIO resource today, which we all know is a fragment of the opportunity. Let’s calculate one hour per virtual CIO per account per week: this means the savings will be one hour per month. It leaves another $48,000 on the table. Processes, best practices tools all helps to drive the fat out of the current processes.

3. Cost of opportunities

The third category is all about the opportunities. Based on our experience, prospective clients of more than 20 seats are open for what the virtual CIO has to offer. If the starting service fee is not more than 20% of what they’re paying for the managed services, it’s an easy sell.

Opportunity cost = [MSP Contracts with 20+ seats] x 1.2 x [Upsell effectivity]

Let’s say our MSP has 10 contracts with more than 20 seats. The average MRR contract for them is $3500. In the next year 7 of them will be transferred to a very new vCIO offering, which will generate $4900 additional MRR for the seven clients, or $58,000 new revenue per year. Imagine what can be accomplished if we sell just a basic package for 25 of these companies! Converting existing clients is not that difficult if we know the tricks. Usually an annual IT strategy planning process can create the business case. If the plan is well done, it is obvious somebody needs to manage the execution...

Sum up the numbers

[Opportunity] = Cost of free advice + cost of unproductive work + opportunity cost

$154,000 per year is the toll our managed service provider is paying for the lack of vCIO pricing, packaging and basic processes.

If your numbers are high, you can be happy because the opportunities are huge. If you have a smaller client base and you see a smaller figure, don’t be discouraged. Your competition that’s undeserving of their clients is an easy target for you to go upstream and serve larger clients.

Now do your math and see which is your greatest potential ROI!

Let’s share, what is your number?

How Slack app can be a revenue generator for your MSP

Last week we went through how we can stop giving out free advice and making consultation a revenue generator. Let’s see that in practice. Our example today is Slack app, the latest silicon valley unicorn (1B+ valuation). Slack, in most cases, is a free tool designed to enhance your internal communication. So how can we as cloud service providers deliver value and earn revenue with this great tool.

Customer Segment Profile

First, we need to understand a problem most of our clients have. The sector of the industry we’re focusing on now is companies whose teams work together on processes, projects, and collaborating with both vendors and clients.

Jobs to be done: Like so many other aspects of modern life, most of them need to deliver more value with fewer resources.

Pains: Typically they communicate over email, getting 100 or more emails a day, without a clue as to how to handle this volume. They cc each other excessively just to keep everyone in the loop, and use a host of applications like Project Management, CRM, plus service automation, and so on. Even these are mostly cloud based, with no integration, so every one of these systems needs to be checked separately if they want the whole picture.

They’ll also try out new apps on a weekly basis in their search for solutions, install a few, run the 30 day trial, all while not having the time to properly evaluate them - and like Sisyphus’ rock they keep finding themselves at the bottom of the hill again.

Gains they are looking for: They want an overall improvement in their communication each other, vendors, and clients, so they can focus on their work instead of emails, and would love to get answers, reasonably quickly, from a system, application, or from each other regardless of location - in the car, office or at home.

But they’re already too busy...the last thing they need is the added task of creating this solution. What’s missing is someone to listen to their issues, understand them, figure a solution, and then not only implement it, but also train their people and support them in the learning curve so that they can get back to the business of their business.

We’ve observed that this is quite typical. even though we know the tools are out there...they just don’t get used or aren’t implemented and trained properly. That’s nothing new to us in IT: Owning tools is easy...finding the right one and using it properly is another matter.

Value Proposition Map

Discover how Slack with the proper consultation and implementation can help them achieve this communication improvement.

Gain Creators: As a product Slack helps teams communicate within a single space. This can happen in private channels, one to one communication, public channels, you name it, and it can manage topics according to need. It also integrates with thousands of applications, and so ususally gets the sought after information from disparate sources without logging into those applications. In essence it creates a unified platform for company-wide communication and replaces internal emails almost completely.

The tool is the first step. Also required however is the creation of the business case, context, and the process to properly implement it, training users, creating basic policies and enrolling the entire team and the company overall. Of course we could leave them to do all this on their own, but our value proposition is to make this process successful from the get-go. This is actually more important than the tool itself.

Pain Relievers: Teams are now working in all kinds of venues and access the information from a myriad of devices, anytime, and anywhere. They always have to share files and documents with each other. Even with cloud based file sharing it’s a time wasting task - to copy / paste the links, then use another app to send. Another problem is after sharing, nobody’s aligned on where the file came from, and have to re-check the email to access it again. Slack eliminates this speed-bump entirely, leaving the file in context, and with its robust search engine, one can find it easily with any other system of communication.

Still, most users will have questions, and Slack doesn’t have real one-on-one support that incorporates an understanding of their business context...it’s rather more general help on features. Our support can fill this gap. We’ll often be able to offer our technical skills in integrating many other applications into Slack - a not so obvious task. We can be the ones to make those integrations work and enhance them over time.

Product & Services

The ultimate solution for the opportunities / problems of the client is a Slack Implementation Project.

• Needs assessment
• Project kickoff
• Implementation
• Project management
• Training
• Documentation

Because this implementation project is largely common among all who would have it, it can be templated easily, so from our perspective is streamlined. A Slack implementation project in this sense with initial consultation, implementation, technical set up, training and initial support can fall into a $2500 - $3500 range. It leads to an additional MRR for support and subsequent enhancement projects.

Marketing/Sales

The best way to market this is with an eBook or a Grader. You can see an example of a Slack grader here. It asks the following questions from the client:

We can quickly score their answers and see whether Slack can be useful to them to show, try, and implement. It can lead us to a quick product tour and a kickoff meeting for the needs assessment.

Delivery

The delivery part is a canned project with

• Project Plan
• Process descriptions, hints and tips
• Pricing and packaging document, contract, agreement
• Task lists for the milestones
• Tasks for the necessary deliverables
• Meeting memos, agendas to manage the project efficiently
• One-page checklists for the discovery meetings
• Presentation decks for education/training
• Basecamp.com live client facing workspace with everything necessary to facilitate smooth communication with the client

Conclusion

Slack is a great tool, and boosting the tool with our implementation services is a big hit. Clients will understand that we’re no longer just a general infrastructure service provider but a real business ‘wingman’ or ‘wingwoman’ for them with respect to the creative use and implementation of technology solutions. It ushers us into the trusted advisory role and helps us reframe our clients to see that IT is not just cost-savings, but a huge competitive advantage.

The Fall of the Era of Free IT Advice

Many IT managed services providers (MSPs) and internet telephony service providers (ITPs) are suffering the challenges of charging for IT consultation. The IT industry has taught its customers that we sell big expensive boxed packages that come with free consultation, placing the value in the big boxes and none in the advice. There are no big expensive boxes anymore, but still the advice remains free. However a systemic shift is taking shape finally reversing this conundrum. It is about offering low-cost SaaS applications and solutions with high-grade consultation fees, placing more value in the advice rather than the tool.

Generate client engagement with five quarterly business reviews in 30 days

What has happened?

Let's go back over what happened. We sold expensive systems to SMBs such as MS Exchange with servers. The process of selling these projects included high-level consultation: checking the environment, creating architectural designs, and putting together migration plans well before we got the deal signed. Part of the sales process was to create a complete Project Plan (many unbilled hours) for the investment, deployment, and implementation of those items. Because everybody made a decent margin on those package items plus the accompanying service project and because the closing rate was high, we were happy to include the initial consultation work in the sales process.

But over the last few years most SMEs have been moving into the cloud to some extent. They are buying Office 365 monthly subscriptions instead of buying servers and exchange licenses paid upfront. We do earn commissions, but is there more? Do we need to plan things out? Do we need to integrate the systems? Do we need to do consulting work? Sure we do, and it’s just going to grow as the system gets more complex.

The fact is that clients never really get used to paying us for IT advice and IT consultation, but now we don’t have those big lucrative projects to cover our work.

Rise of the SaaS applications

The SaaS model is widely misunderstood. Most people think that the main benefit of SaaS was that you don’t have to install the application, making it easier to use. That’ just one of the perks along with all the other technical advantages such as mobility, platform independence, data storage and so on.

The big deal of SaaS is the business model. You might think that this is all about paying monthly instead of buying the license. This is a different and very important aspect. Paying $100/user for a decent CRM for five users is $18,000 for three years. The same with on premise, is you’ll pay the upfront license + 20% upgrades every year. Without the hosting fees it’s around a $12,000 CRM package just to start; we often forget that there are always implementation costs - we’ll get back to that later.

From a psychological point of view, paying $500 per month is a much lower hurdle than committing to a $12.000 upfront fee, if you sign a 12 month contract, which is now less often required. It makes SaaS applications selling easier.

From the perspective of the application developer however, this is a whole new game. Now the application company does not get $12,000 for the license upfront, and risks losing the client at any time. The app developer has a bunch of upfront costs developing the tool, and then more selling it. You (believe it or not), marketing, and sales and customer management can quickly eat up 50% of the lifetime value of the client. That means the motivation for the application developer is no longer just to sell the tool, but to acquire and keep the client as long as possible, and to upgrade to the highest package possible.

Now the goals of customer and the application developer are aligned: get as much value out of the application as possible. The big deal of SaaS is common motivation.

Distribution of work with SaaS

The second big shift very few people yet see clearly is the change in work distribution. Providing a $500 CRM service for five users is a pretty lean operation. This equals 3-4 hours of consultation rate, so the SaaS provider has no financial support to do the work for the client. The client has to do it for themselves.

Take a look at Hubspot. Hubspot is an inbound marketing application. It helps you put together a decent website, blog, email workflows, calls to action and to run a great web based system.

They have to educate their customers on inbound marketing strategies, copywriting, blogging, sharing content, grow-to-hack, choosing the right color for the calls to action - you name it. If they don’t, the customer is not going to build up a decent system, and won’t see the expected successes, benefits, or value, and will eventually drop out.

Hubspot is an extreme example of how much a client needs to put in to make an initiative successful, even with a great starting product.

The best part is the following: most clients have been there, done that and know that IT initiatives are the hardest to manage, and that they require their investment. Buying Hubspot and figuring it out along the way doesn’t work, and the costs of not paying attention are higher.

However most customers don’t have the resources or the people available to learn the best color for the calls to action and how to increase the traffic in the Facebook page. They rely on Hubspot certified partners to do the job. These partners are helping clients implement the tools, and further along the way. They have a huge upfront charge to kick things off as well as additional monthly recurring charges. In most cases the overall payment for the partner far exceeds the payment for Hubspot for the tool itself. 

The paradigm shift: they are paying for the success, not for the advice...

The latest IPO and stellar growth of the Hubspot partner community is proof this is happening.

Put it together

Ok. Let's recap the points:

1. we see that the old model was to sell the big upfront project with free advice, 
2. we see SaaS companies motivation is now 100% aligned with the customers’ success
3. we see clients are willing to pay for success if it is made tangible

What’s the point, you might ask? How do we make money as MSPs, we don’t know Hubspot!?

Many SaaS based applications are more affordable than complex packages and usually solve one problem, such as:

• Project Management tools (Basecamp, Asana, etc.)
• Lightweight CRMs (Zoho, Sugar, etc.)
• Process Management apps (ProcessPlan, ProcessStreet, etc.)
• Collaboration (Slack, Hipchat etc.)
• Meeting Management (Lucid Meeting, Do.com, etc.)
• Integration tools (CloudHQ, Zapier, etc.)
• Vertical based solutions

We can continue this list for a long time. Any ordinary 20+ sized company would need one application at least from the app categories above.

Let's check our SaaS application grader which helps you and your clients understand what part of the business is not leveraged with a lightweight web app:

The problem is still that they don’t have the resources to master these applications; they don’t have the time to choose, learn, implement and integrate. Even though these apps are solving basic problems, understanding the business process and implementing a Trello.com card system for managing it isn’t a trivial effort. Most companies don’t perceive a part of the potential these tools could do for them.

That’s the void; what’s missing. Both the application developer and the customer need this role filled.

How do MSPs make money with that?

A traditional MSP is not going to make a dime with this model. They are infrastructure focused companies, not application focused companies (yet). But they can easily step into this role, because they have the support and the client base, and are already familiar with the applications world.

1. Do not do hourly rates, but fixed scope projects

Selling it for $150 per hour is not going to work. But selling Slack the internal chat tool, putting together the basic processes and rules, with ten channels and five integrations for $2000 and $100 support per month is workable, predictable and drives success. The vCIO is the ideal candidate for those projects. He knows the business, understands the processes and can communicate the need.

2. Oversee the portfolio, not just the individual apps

As you deliver more and more apps to clients, someone has to be the owner of them, or there will arise islands of different types, with no integration and no control. Again the vCIO is ideal for the control of that management role: making decisions on which apps to implement, governance, subscription management, etc.

3. Come from the business world, not the technical

Don’t provide "ProcessPlan" as an app. That is not a value. Provide operational excellence with well defined processes and automation that uses ProcessPlan to deliver value. Again, being a virtual CIO, you are going to easily spot these opportunities and make it happen.

4. Have a platform, a business application solution stack, and vertical focus

For a base IT infrastructure, Office 365 or Google should be among your choices, and for all the typical applications - calendar, note, workflow, project, collaboration etc. - there should be a stack the engineers know can bundled together and integrated. Also be familiar with vertical based stacks for accountants, law firms, professional services, etc.

5. Test it, live it, support it

It’s important to use the same stack internally (you probably already are) so that your team has experience with it. The support will be more “User Enablement”, helping them with hints and tricks, to take away some of the heavy lifting from the vCIO’s shoulder. The Virtual CIO is busy doing the planning and the implementation. Then the team is backed to support it.

There are cases where managed services providers have bundled together a “SaaS Office Suite”, reselling, implementing and supporting many applications per user. In this case it’s an addition to the current MSP package but with licenses, subscriptions and services inside as well.

Our MSP switched to this mode 18 months ago and are now packaging the full SaaS application suite with all desktop support and remote monitoring in one bundle. That is a client experience of value.

Conclusion

Let's shift the paradigm from "Expensive boxes with free advice" to "Cheap applications with paid advice."

This is the fall of the era of free advice and the dawn of the profitable vCIOs!

Execute your IT Strategy: interview with Gary Harpst

We are continuing the “MSP 2.0 bestseller” series in January, as well. The pick for this month is Gary Harpst - Six Disciplines of Excellence. Gary has been a part of the IT industry since being the founder of the well known ERP solution Solomon Software that was sold to Great Plains then to Microsoft. After the acquisition he shifted his focus to one question: how to help companies to execute their strategies. He has put together a very solid methodology in a program called “Six Disciplines” and written a book about this topic. This book is in my top 10 business books and has changed my way of thinking.  I was privileged to meet him in person and have a long talk about these challenges.

Execution is one of the biggest issues of managing any type of company.  As a vCIO or trusted advisor you not only need to have great insights and offer solid advice, you need to actually execute their IT strategy as well. If you’ve read “E-Myth” by Michael Gerber you’re familiar with this idea of working on your company. Gary put together the practice behind it - how you actually do it!

Listening to Gary and reading his books not only can teach you to be a better leader of your IT company, but make you a better service provider as well. It shows you practices and processes to reliably create rock-solid strategies, align your people to them and then execute flawlessly.

Read Gary’s books, check his blog, and learn the wisdom of someone who’s been there and done that!

Gary’s second book is available in his website now for free, so let’s grab it as soon it is available!

7 Requirements for a Scalable vCIO Offering

The MSP 2.0 model is catching fire around the world. Many MSPs have already started to design, sell and deliver vCIO services. Adding $2.000 - $4000 of vCIO monthly recurring revenue (MRR) to a current 40 seat $5000 MSP MRR is now doable but requires some preparation. We’re going to take a look at the requirements (which can be easily overlooked) of the delivery to make sure we make it profitable.
All seven requirements center around a common set of principles: realizable expectations, efficiency in execution, excellent communication, and transparency.

Let's see the requirements one by one:

1. Cycle based pricing

We’ve emphasized all along the proper pricing strategies of the vCIO... how and why to separate it from the MSP package (except for the vCIO Light type services that are boosted Account Manager or Technical Virtual CIO activities attached to the MSP package). The key is to put the defined vCIO activities into separate cycles, define the resource allocation for each cycle, then annualize the hours needed for the certain activity and divide it by 12 to arrive at a Monthly Recurring Revenue. Also for each and every activity the vCIO will do is a process and defined deliverables are set in advance. It is not a consultation on an ad-hoc basis. Rather there needs to be a clear, planned process behind every service we offer.

Example: We do a Quarterly Planning Session, a Project Review, a Selected Application Training and a Budget Review. These are the services we do every quarter, and altogether eat up 10 hours per quarter, or 30 hours per year. (We have just three quarterly cycles because the fourth is considered the annual cycle). Our expectation of hourly revenue for this (just for internal planning) will be $200. That means a budget of $6.000 budget for the year. Therefore, the MRR requirement for that will be $500. Of course, we add up the annual, monthly, and weekly activities as well in the calculation of the full MRR requirement for delivering this service.

Tool Hint: the given calculation sheet is used to create different plans for different sizes/scopes of vCIO plans. See what is and isn’t inside the package, and do "what if" analysis based on the given time and expected revenues.

2. Separated Ongoing and Project-based agreements

In the MRR pricing, we can only include ongoing services. Do not even start on projects without separate vCIO Project agreements. What we can do regarding separate projects in the ongoing plan is to manage a Project Portfolio...review projects from outside, report to the CEO, have a fixed amount of resource to coach, help internal people managing different IT related projects like application implementation and so on. That leads to predictability. Individual projects have to be managed individually.

Example: let’s say during the annual planning the customer has five projects: two of them are technical MSP focused projects, one is an Application Integration project managed by the vCIO, and the other two are smaller projects managed by the internal team. The responsibility of the vCIO is two-fold.  First is to make sure the projects are well defined and ready to go for both the vendor (MSP) and the internal team. This is part of the annual process, and the time is allocated ahead for those project kickoff meetings, planning and so on. The second responsibility for the vCIO is a secondary agreement that manages the Application Integration project. First, it manages the planning of the project and then the project management itself.

Tool Hint: the methodology and tool can give the best practices to maintain proper scope and clearly separate the ongoing and project-based activities. Doing both will allow us to leverage the synergy, while reporting will still occur separately.

3. Well defined services

Each and every service line item needs to be well defined over several properties. We need to  get an overview of what goes into the agreement and establish the needed skills within the service, the marketing and sales materials, tools being used and a time budget. As well the service cycles must be integrated.  To this end the Annual plan is going to be the base of the Quarterly Plans, the Quarterly Plans will include Monthly Progress Reviews, and so on, set up as a visible framework. The more specific we are in a service the clearer and more effective we can be both for the client and internally.

Example: The IT Strategy Planning Process is done every year. It takes 7 hours to complete and consist of three meetings on Preparation, Planning, and Finalization.  The defined deliverables based on templates are an IT Development Roadmap, Quarterly Execution Plan, and Strategy Governance Plan. There are nine steps in the process, with warnings and pro tips.

Tool Hint: gathering all services related to the vCIO is critical in setting the right expectations and ensuring we deliver what we promise. Create a framework and tie the services together.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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vCIO Module Orientation

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4. Customized Agreements

When setting up our vCIO plans, we are going to present three or four different templates, like Light, Basic, Pro, and Enterprise. These templated vCIO service offerings are designed to ease the process of setting basic expectations. However we can’t think that our clients will sign up to any template precisely.  Each client is different and has individual needs. We want to avoid the need to generate custom pricing every time of course - it’s too much work to deliver ten different agreements to ten different clients - so we fine tune the templates and just slightly customize the parameters. We can take out one or two line items or change the needed time allocation for select services. The backbone of the contract will follow the template but will have room to conform to the individual client as well. Like successful automakers you offer a choice of a few sizes and models, and then further customize on a finer scale.

Example: A manufacturing company of 50 people is aligned with the Pro package ($2500 MRR), and they have two main locations.  The Annual Planning will be in one place but the because the team is separated the quarterly activities will eat up more time. We can allocate a little more to the quarterly activities and delete the user training entirely.  Overall we get retain the $2500 MRR with the same profitability by adapting the plan to the situation.

Tool Hint: in the tool the contract module allows you to customize the agreement based on the template. You can add and remove service line items and adjust the hours. Further since you may be utilizing junior vCIOs for some cases, or your CEO will be in on the Annual Planning, you can adjust the internal hourly rates line by line. It promotes the right expectations and strengthens your profitability.

5. Executable deliverables

You know you have the skills, tools and resources to operate a vCIO service at a high level. You are ready to do annual planning sessions, discovery business sessions and so on. But how precisely defined are those activities?  You don’t want to engineer a new launch system for every spaceship. Have a standard best practice with todos, notes, agenda items, templates to make it a smooth practice. If our deliverables are not specifically defined with properly set goals, even with these processes, we can neither manage the vCIO service nor the client involvement. The devil’s in the details.

Example: The vCIO goes to a manufacturing company and starts the Project Visualization workshops. He has the meeting agenda items in a template, the goal he has to reach, the time slot for the meeting and knows the next steps. The vCIO can explain the process quickly to the CEO, that they were just gathering basic information now, and the next step is to make the selection criteria for choosing vendors. The client likes that there is a process for that, sees the momentum and decides to let the vCIO initiate the planned service right away, and skip the next sessions.  Thus clear definition of deliverables reduces the disruption and time involved as a result of client-side disruption.

Tool Tip: Every vCIO service line item is well defined yet gives room to adapt for the vCIO. There are task lists, tasks, agenda items, meeting memos and template files. It has all the execution ability for the vCIO and full option to improvise if needed.

6. Transparent workspaces

A vCIO performs a very high-level management job that can be boring and not so visible sometimes. Negotiations with vendors, internal project meetings and keeping people accountable in weekly huddles are usually not seen by the client executives. Things are going to go well, and projects will be delivered on time, yet directors can get complacent and forget they were ever issues. We can’t just create value, but must also prove and demonstrate it consistently. Smart Client-facing Workspaces are the tool to keep our sponsors informed about our activities. An intelligent collaboration tool, it can send the essential digest to the upper level.

Example: The vCIO is finishing the monthly review and checks off the items done that week, and the projects completed. Then in the chat he applauds a job well done and thanks a particular member for the overtime last weekend. Then come the plans for next month based on the activity templates, and updates completed items of the IT annual plan. Now the system sends a daily digest to every team member showing the last items on the discussions, the completed todos, the updated memos and so on. The CEO has a quick glance on the incoming email and gets a reassurance that his vCIO is working 24/7 for his company.

Tool Hint: While most IT companies are using PSA solutions like Autotask and Connectwise, they are limited. These applications work best for IT teams and not for client executives. We integrate with Basecamp as a lightweight project management and collaboration application to make things light enough but still easy to manage.

7. Management Dashboard

Many IT managed services providers see offering vCIO services as a good idea, but without proper processes, vendors, and management maturity, scaling the standard MSP practice can still be a nightmare. If an MSP is able to reach 12-15 people level it can accommodate 1-2 vCIOs full time. Even with workspaces and processes in place some activities will become overwhelming pretty soon.  How can we stay efficient and overlook 10-20 clients with 1-5 projects and ongoing services for each without losing our minds or our clients? That’s why we need one dashboard for someone overlooking the vCIOs, and one for the vCIO as well to prevent overlooking the team's tasks and responsibilities.

Example: An average quarterly cycle defines 40-50 tasks easily for a vCIO. Having ten clients is going to scale up 400-500 tasks for the cycle.  We need a way to reduce the clutter, to hide the less pressing tasks and show what matters. We can slice and dice the dashboard quickly for individual accounts, contracts or projects. This gives us the peace of mind that we can handle that load of activities, and stay sane.

Tool Hint: We’ve designed a layer as an umbrella above every project, and ongoing workspaces for vCIOs to operate. We get every task, deadline and assignment there. At the start we see just the big picture, then as we delve into accounts and then to projects we drill down to the specific tasks and deliverables.

Conclusion

Take a moment to think of each of these 7 requirements not being in place. What if we don’t have the proper process for the vCIO, how would it affect efficiency, the management, the headaches and so on. How could each one enhance your current possibilities, profitability, and peace of mind? How could they help you build up a professional service company and distinguish yourself from the competition?

Transform your MSP sales approach

Branden Baker, President of Integration Technologies from Hawaii is a modern Tom Selleck. He shares a story about the transformation of his IT sales approach.

His team had not been able to close any managed services provider deals for more than a year. But he got involved in the virtual CIO conversation and after only a few weeks he landed his first monster six-figure deal. 

START GROWING WITH MSP SALES RELATED RESOURCES FOR FREE

5 KEYS TO GENERATE, QUALIFY AND CLOSE MORE SALES
Have you ever wondered why you struggle to communicate your values to your prospect, why prospects stay with their current provider even when they’re not happy, you have a hard time closing deals that weren’t referrals, or you just can’t find a way to consistently close sales? This recorded webinar with our MSP sales expert guide, Mark Woldman, will show exactly where you are going wrong and help you develop a plan to move your sales forward. 

CLOSE MORE DEALS WITH A PREDICTABLE AND REPEATABLE MSP SALES PROCESS

Watch this interview with our MSP sales expert guide, Mark Woldman, to win over new prospective clients by finding best practices that will help your MSP become Sales-Ready. Here you’ll learn key concepts and practices that will move your sales forward!

Break Your IT Sales Barriers with Ian Altman

We are starting our "MSP 2.0 bestseller" monthly book review. We want to start strong, so the first book of this series is the new consultative selling holy bible, Same Side Selling. The co-author, Ian Altman, CEO of Grow My Revenue, is a sales visionary, bestselling author, Forbes contributor and keynote speaker.

While speaking with Ian it became clear he knows how to win the hardest battle IT managed services providers have ever faced: commoditization of the IT infrastructure services and the resulting price pressure, shrinking margins, and the lack of differentiation from competition.
One of our MSP 2.0 movement members suggested I read the book: Same Side Selling - A Radical Approach to Break Through Sales Barriers. He had told me that this is 100% aligned what we do in the Managed Services Platform IT Consultative Sales program. I read it and I was flattered. Most of what I’ve read on the subject involves large complex concepts, but this book was very simple, very practical and quite an eye opener. I think everybody who’s a little serious about MSP 2.0 should read his book.

You can read his articles each week on Forbes.com. If you do a search in business trends, he comes up #1. Business luminary Seth Godin recommends Ian’s latest bestselling book, Same Side Selling, as one of two must-read books on consultative sales. Ian is host of the Grow My Revenue Business Cast. He started, sold, and grew his companies worldwide to values of more than one billion dollars. 

I had a chance to chat with Ian last week and he was able to carve out time with us for a quick interview. The fun part is that he knows the industry well, so we had a great chat. I am not going to try summarizing the interview, as I think it’s better to just hear him for yourself.

Thanks again to Ian. Check out his webcasts at his website: http://www.growmyrevenue.com