The MSP Stories that lead Managed Services Platform projects
Some of you have been asking us about our background, who we are, and why we’re doing Managed Services Platform.
Our Challenge
One of our companies at first was an IT managed services provider. We’ve since reintegrated it into our holding company, but think telling its history will be illuminating...
We discovered that while our clients always needed consultancy on IT in general, we lacked a viable model to do it both properly and profitably. We’ve tried to incorporate the consultancy into the MSP high-end package, and tried to do T&M. Neither approach was satisfactory.
But the pressure just gets heavier as we’ve been witnessing the evaporating services on our MSP practice, accompanied by ever increasing needs of the clients for IT management, vCIO, and 3rd-party-project management, all while IT gets more complex in terms of organization management.
7C IT Management Framework
We’ve created a checklist questionnaire, the aim of which was to improves sales of our services while setting the stage for prospects. We tried to ask the questions we knew they were trying to formulate to express their needs.
We gave this questionnaire an easy to follow structure and designed it to produce a score for each taker. We’ve identified seven critical aspects of IT competitiveness today, and because we were able to pick seven words starting with the letter “C”, we called it "7C.
Once we started to send this out to prospects and clients it became a dynamic tool. The software behind the analytics that produced the score and report was popular too. Also, because it was about business terms, it helped somewhat demystify IT. It covers all the aspects of the activity of IT management that 40-200 seats company need to know about.
Reframing Your Clients
One of our ventures at this time was with our other company - where we became a Country Developer for a General Management Consultancy methodology. This was a general company development framework with strategy building, organization, execution, and alignment. Uncommonly at the time was that it was a true 100% consultancy business, though it had a monthly recurring service model, a project for implementing the framework, and recurring service revenue to maintain it.
We got curious; if general consultancy was able to work out with a recurring service model, it must work with IT management, as well.
We then started to implement the principles of the general management methodology to IT. We listed all the duties of a vCIO, from client discovery to strategy creation, quarterly planning, documentation, audits, vendor management, execution, communication, leading the internal users, IT admins, and so on.
We end up with a framework like ITIL for small clients, with implementation, project-oriented and ongoing activities. We put all this into various packages and started to offer it SEPARATELY from our MSP contract.
The kicker was that we had charged a lot for the implementation of the IT management framework.
Our value proposition was that we were able to get you from 28 to 75 in 6 months with the implementation of the framework. CEOs were able to grasp this measurement thing quite adeptly.
That was the tipping point. We have more than doubled our size in nine months. We’ve added several new clients, and several new doors are opened with the productized SEPARATED vCIO roles.
We even acquired a client who had MSP but with weak vCIO role, and have done more than a dozen “implementations." The sale itself, not to brag, went rather easily, because the result was very tangible to the clients. Everything from strategy to roles, activities and documentation, etc. is dealt with by the software. When they saw the vision and the results, they ordered the project. Then to maintain every part of their IT ecosystem they ordered the Virtual CIO services.
Everything about us follows from this story. We wanted to share our questionnaire, the scoring, the model, the pricing, and the packaging to the MSP community. Because we are running so many things at once (we are starting a pure MSP 2.0 company in Canada with no MSP resources), this venture has long held a status of our pet project.
Along the way Autotask and GFI saw an opportunity in what we’re trying to do. Both of them supported us in a big way to be able to move forward. Those guys are just awesome!!!
We’ve now pulled off a website and have a handful of companies using our beta, but are still fine-tuning the package to be able to help other IT companies the best we can
MSP 1.0 vs. MSP 2.0 [video]
MSP 1.0 is not widespread yet as a business model, and there is already the new 2.0 model.
What are the key differentiators between the two models? The following will refer to an average MSP 1.0 and MSP 2.0 practice.
We are assuming that the MSP 2.0 model is heavily supported by an MSP 2.0 framework, which is crucial. The differentiations may seem simplistic, but our aim is to show the possible limitations and challenges of the MSP 1.0 model, and the opportunities of the MSP 2.0.
Keep in mind that MSP 2.0 is not a substitution of the MSP 1.0 model. It is an expansion. You can move your existing 1.0 services forward, but with 2.0 as a companion the new options are going to be very promising.
Tech Value vs. Business Value
Giving someone a technology solution is not necessarily giving business value. The technology solution is only a part of the complete solution. If it is an ERP, the software is just part of the internal processes, interactions etc. If it is an email system, it’s also integral to the entirety of company communications.
The business value of an ERP project to is to enhance the efficiency of their processes, through automation and streamlining. The business value of the email system is an effective, well-processed, internal and outside communication system with secure limited access.
The technology is 30%; the rest is HR, management, controlling, etc. With MSP 1.0 usually the MSP does only the technology part of the project. In MSP 2.0, they become the leader of these projects; evaluating vendors, conducting the project management and quality control, as well as implementing the technology. This is a very visible difference in value to the customer.
Techy Slot vs. Trusted Advisor
The general limitation of the MSP 1.0 is that you are a technology service provider, and you provide value by providing technology. Yes, we know, this includes you providing business sense for the different solutions, but you don’t usually receive the following call: "Hi, we need to expand our operation abroad, and we need your expertise." or "We want to penetrate the new market segment and establish a sales representative system. Let’s figure it out together."
More likely it’s in the form of “‘You guys know any accounting packages which can handle foreign currencies?', or "Can you guys deploy a server for MS Dynamics CRM to us?" You’re pegged into the "Techy slot."
That’s a noble role to fill if you want it, but you will find yourself waiting for them to realize they need something concerning technology - it limits your opportunities tremendously.
Instead with MSP 2.0 you give them business value, which means you are there if they have a major challenge, development, or other change in their business. You stay current with their vision and direction so you are able to become a Trusted Advisor, or virtual Chief Information Officer (a vCIO). You’re already there well before the issue with technology arises, and you’re able to alert them to an IT challenge and background support for their decisions. This vastly expands your billable opportunities.
Thin Focus vs. Broad Focus
In MSP 1.0 you focus on technology, and your part of the client side. Maybe you give them quarterly planning sessions, even some kind of strategy, but the scope of these projects is limited to your service scope. In MSP 2.0 you think of the entire operation holistically from the client's perspective.
You re-think your MSP 1.0 service as one piece of the pie, and now manage all the vendors, third parties, and even the internal IT team to some extent. You negotiate the support contract for the ERP vendor, sign the bill of the telco company and so on. Your focus is on the global value creation of the IT, not just the MSP 1.0 scope.
Low Level vs. High Level
Alistair Forbes, General Manager of GFIMAX is presenting the Concept publicly first
With this in mind you can see that the MSP 1.0 focuses on technology and low level execution. MSP 2.0 focuses more on high level management. Don’t think of one as better than the other, but rather as models with different scope and approach.
Most of the time, the low level ground work isn’t visible to the C level executives. They are not able to measure and evaluate costs. In high level work, you are dealing with them personally and you help them with their problems. Your visibility is entirely more significant.
High vs. Low Acquisition Cost
With MSP 1.0 you’re often being summoned by a client with some painful problem. If they do not have IT related issues, it can be difficult to convince them to move forward. Also since other problems will keep arising at unpredictable and distinct times, you can’t stay connected with the prospect and ready when they have the next painful issue. It’s necessary to keep the relationship going for a long time in order to be visible and trusted to let them know of impending problems to which you have solutions.
The process of starting a business can be quite slow and unpredictable. On the other hand, MSP 2.0 gives a solution to a general problem, and is not dependant on big problems and imminent pains. You are able to start the conversation any time. Reframing this approach will lead to closing more deals. MSP 2.0 means you can start a basic service and as problems and opportunities arise you can upsell your higher value MSP 2.0 services.
Hard to Acquire vs. Unique Value Proposition
The other sales-related problem in MSP 1.0 is not just the closure ratio and the long cycle, but the effort needed. Usually the entry barrier is very high. If there is another MSP vendor, even a poor performer, you have to be able to prove your service is better at the same price, and usually you have to bear some part of the switchover costs. This means a fight over minimal margins.
In MSP 2.0 your service is of a higher level with a very Unique Value Proposition. It does not really matter what the existing situation is on the low level. You can offer your services in a white space, without internal competition. This makes the process easier, without sacrificing the profits, and without high switching costs. Of course still if you are competing with any MSP they will be seen as redundant quickly.
Pushy Sales vs. Consultative Sales
MSP 1.0 is a quite competitive place to be, so sales tactics can be pushy with practiced sales techniques, closing strategies, and unnatural communication. It reduces the comfort of the prospect and erodes trust, because you need to talk them into something.
Immediate solutions to real problems are still in play, but this occurs less and less as the market saturates.
In MSP 2.0 with 7C, the sales technique is different: a consultative sales approach. You get to know them in a business and IT perspective, in casual meetings with questions, helping you and them both understand their situation with a questionnaire-based benchmark and report, conduct a workshop, and create an action plan.
The more consultative experience shows your value from the get-go. It’s also more natural, as you can demonstrate your valuable expertise in a formatted way and garner trust during the sales process.
No MSP Sales Process vs. Predictable MSP Sales Funnel
Usually smaller IT managed services providers don’t have any sales oriented people, so the sales process is absent and the acquisition and the upsell unpredictable. Even more mature mid-size IT companies lack a streamlined, well-controlled, transparent sales funnel with all the metrics and motivation for the salesforce.
MSP 2.0 with 7C IT management framework is both the sales funnel and the consultative sales process. If you have a clear message for the audience, the inbound marketing is easier. You have an inbound marketing tool, a discovery tool, questionnaire, analysis, report, workshop, action plan builder and first quarterly plan.
This sales process will identify the necessary relationships, rationally spread the responsibility and clarify accountability. Also, because the process is well-defined, you are able to easily educate the client for more predictable results.
You can quickly implement the funnel as an inbound marketing campaign, and expect new clients in 4-6 weeks. Even an inside salesperson can acquire good quality, targeted prospects in 2-3 reframing workshops, which, with a 50% closure ratio is 4-6 new clients every month.
Low CEO Awareness vs. High CEO Awareness
As we have seen before, general awareness of the MSP 1.0 services is quite low. Usually during the reframing workshop with existing clients, it turns out that they don’t know what you do on a weekly or monthly basis with their back-ups, policies, and so on.
You may have discussed it with them and they may have nodded to do it, but these don’t stay front of mind, especially if you are working so well that you avoid outages or firefights, and completely disappear. In MSP 2.0 with 7C, you are working with the CEO directly.
You solve their business-related problems, gather information for them to help guide their decisions, lead their virtual IT department with all the vendors and internal IT staff, and report to the CEO directly. This greatly enhances your visibility and awareness of the CEO as to what it is you do and how much value you actually deliver. It’s a different relationship, trust, and respect level.
Slow Progress vs. Immediate Results
Although managed services providers usually have a wide portfolio of services, the client often signs up for a limited part of it, and it’s a very slow process to upsell all the great new services. Why? MSPs are not really proactive, and the whole portfolio is rarely known as part of the client’s business lexicon.
The client sees separate services instead of the big picture you can bring. With the 7C MSP 2.0 this is different. It’s much easier for the client to draw a development roadmap for 1-2 years, and execute the development plan with the MSP, because you put your and other IT services into their business context.
You are able to gradually raise the maturity of the client in a measurable, accountable journey. This gives you a faster, more aligned process to grow on the client side. Everything starts with a very solid 1st quarterly plan. Executing it flawlessly will open the door to further development projects.
Commodity vs. Margin
Alistair Forbes, General Manager of GFIMAX is presenting the Concept publicly
Because the MSP 1.0 market is now so saturated, the competition is tight, vendors deal directly with clients, and services are in very tough markets. This is called a communization, where, at the end, services are differentiated only by price.
To avoid the communization and avoid lower margins and price reductions, you have to change or extend your model. MSP 2.0 with 7C provides the client unique benefit and business context, and a very powerful weapon against their competition, leaving you in a very unique position.
This way, you are able to sell your existing offers at a higher price, while also more streamlined, and very profitable. Also, because the MSP 2.0 model is very new and rare, it’s seen as a high value service worth a higher price.
Avarage Brand vs. Remarkable Brand
As a local technology company, it can be very hard to be seen as a remarkable brand. With all the communication, service delivery, and collaterals, 100% alignment is needed to give a consistent brand feeling. You have to have a very unique value proposition where everybody knows what’s behind it. Volvo is a safe car, Starbucks is a great place to relax, Apple is a great user experience.
MSP 1.0, doesn’t include these engaging messages. MSP 2.0 with 7C, it’s different. You can show a very stable user experience during the sales process, your messages, the service delivery, and communications. It is fundamentally more professionalism and inclusive while maintaining a friendly, down-to-earth feeling. Your brand will emerge and become remarkable locally with high referral rates and powerful communication.
Cloud risk vs. Could proof
The Cloud is disrupting the MSP 1.0’s main business and revenue stream, its infrastructure projects and support. All related services are changing, as well as the consumption rates. This is hurting MSPs. In MSP 2.0 with 7C, the cloud model is actually favourable. You can use the growing complexity and business impact of the several different cloud-based applications and services to sell to the management layer on the client side.
Mixing Cloud applications with on-site integrations and reliability concerns means security is a big issue. You can control the whole ecosystem and build a solid service, managing IT at a high level and ensure departments, technologies, approaches, and models of delivering IT are completely in harmony regardless of the client’s particular business model.
How to decide whom to transfer from Time and Material to MSP contract?
Identifying these companies is always a struggle, so here are a couple of tips to properly selling the MSP services.
I. Identify the segments we want to exclude
Identify which company size, culture, and verticals we have to exclude from communicating the values of MSP, freeing up our sales and marketing resources.
Size:
Usually under 15 users, the problems are not that visible, and the price is quite high to be able to sell the managed services. Try to sell cloud-based solutions to them and manage those like Office 365.
Culture:
If the company’s or the CEO's culture is to invent everything inside, they’ll want to do most of the jobs and minimize paying for extra skills. The T&M is ideal for them. You have to keep in mind that you are always educating your clients on definitions you want to sell MSP. For example, you may tell them good things about RMM and ProActive, then when they sign up for LogMeIn and think they are going to have the ProActive stuff.
Also, keep in mind that CEOs are often unable to take the long view about the value of the MSP. The problem here is that they are not going to understand the boundaries of your services. Therefore, they will think everything is included (which is not the case), so it’s a struggle to bill for the projects and additional services they are consuming. It will hurt your profitability because either you are working for free or you and your account managers are regularly dealing with misalignments and speed-bumps.
Verticals:
Very old-school types of verticals do not really go for MSP. They do not think of IT at all, and this is a cost for them. They do not even rely on IT - If it fails, it fails, who cares. So for them, the value is very limited.
Do not try to upgrade them. Either keep them and allocate lower-level people there and do not focus resources, or terminate some of the contracts and pass them to your competitor for a referral fee. Cleaning your portfolio can be very helpful, and most of these clients are going to change dramatically.
II. Identify the Time and Material contract that has potential and sell it
Identify the segment of the T&M contracts that have the potential, size, and culture but do not yet buy those services.
The main point to get across is that they could implement the MSP services into their business benefits. Usually we speak in “educated guesses” about these benefits. Proactive maintenance means more uptime; servers are always updated and secure. Our guess is that the terms "uptime," "update," and "secure" have specific business value to them, so they will see the overall benefit. In case they do, they already have an MSP service contract.
There are some who won’t see it. IT has nothing to do with their bailiwick. They’ve been successful without it so far and do not understand the connection between their benefits and your services. The connection so far is likely vague (general), theoretical (not practical), event-based (ex. disaster), and artificial (not real); so they do not buy.
Discovering the specifics these businesses care about and connecting them to a solution is a very difficult and time-consuming process. They may not participate in a first meeting if they don’t believe they have a problem you can solve. Therefore, you do not have even a chance to make it happen.
How we should hack the system?
1. Platform:
You must find a common ground or a common platform, and then you will be able to talk about the problem. The platform should be independent, business oriented, fast, reliable, and proven.
That means the common ground (as a IT benchmark, score, and measurement) is going to be this topic of discussion rather than your services.
2. Performance Measurement:
You have to face them with the truth in a measurable way...give them back a score and show them how much more competitive they are with IT, or show them the competitive disadvantage they now have.
This measurement process must be easy and fast. As a result, they are going to receive a score that represents their performance. Because they are currently in the Time and Material group they will score low. This means you can compare this with the standard for performance you set together, and then they will see the opportunity to improve their performance.
3. Social Proof of the Norm:
You must have social proof that the average companies are doing better on that scale. Consequently, you have to define a standard and set the standard as an official, independent norm. You have to show them benchmarks in their industry as well. Show where they are lagging against their competition overall. The norm is defined by the platform, the common ground.
4. Show the score of the MSP services:
They will see that there is a measurement and that their score is low. The small details are less important - the overall picture is low. You can then present the MSP contract, which will present a notably higher score. In ITCq, you can set your service offerings to the scores, so based on your service offering, a target score will come up, showing the exact score they could have using the different types of your services. They’ll see how they can outperform the others, and you can highlight how much and why.
5. Show them the financial benefits.
Now that the understanding of the value is there, you only still have to present the price, which should be high, but in comparison to the value, a good investment. You could set targets for 90 days and for a year, which you can guarantee. If the scores do not exceed those, you give their money back. Because everything is in your control, the scores depend on what you are doing; it is not at all a risk.
Conclusion
The way to switch to the MSP 2.0 contract faster is to divide the segments of the potential buyers and non-buyers and then use a measurable platform to create the sales for the clients who have potential.
Research: World of Virtual CIOs on LinkedIn
I was interested about the vCIO, vCTO, and Virtual Executive types of services. So my colleague Peter did some research on LinkedIn on the topic. Keep in mind everything herein is based on LinkedIn publicly accessible data...it’s interesting but there’s a limit to the depth of research you can do this way.So in general, I found that clearly the Virtual CIO industry is driven by the US. I can confirm this from personal experience, that American MSPs are much more comfortable with this term than European or even Canadian IT managed services providers.
- since 70% of vCIOs are hired by companies with under 200 employees, and 9% to large organizations (10,000+), there must be some local support need for interim or part-time high level IT executives.
- when looking at companies offering vCIO services, 97% have fewer than 50 employees and just over half (55%) have a staff roster of under 10.
Here’s our slide deck on our findings:
- 78% of vCIOs have more than 10 years experience, 16% between 6 and 10 - not surprising figures.
- the most essential roles of vCIOs are IT Consultant, Engineer, Sales, and Business Development. Interestingly 12% of identify as entrepreneur, in the sense that they are owners of an MSP organization.
- from what we see these vCIOs doing on LinkedIn, it seems that the largest collectors of these people is the cloud-related, and traditional CIO groups.
- 84% of these people exhibit little to no activity on the LinkedIn social network.
What I get out of this in summary is that there is no accepted academic definition of a vCIO, though companies do grasp the idea of a part time C-level executive assigned to the wheelhouse of their IT. The need is evident...just not widely recognized.
From this I see that we need to address the following: how to define and communicate the value proposition, the MSP sales funnel and the specific service offering that IT companies have invented to sell and deliver vCIO services.
The next step would be to define the vCIO roles and responsibilities and create a framework around their work. This would be required to disseminate this unrecognized need, and to enable the less resourced or less innovative IT managed services providers to start such services, and help the current vCIO practitioners to streamline their vCIO type of services.
See: 2019 Managed Services Platform vCIO Report and Managed Services Platform Account Manager Report 2019
