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.

1. 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.
2. 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.
3. 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)

1. We have secure control over all user/admin/internal/web passwords.
2. Our devices are protected from virus and malware at all times.
3. Unauthorized people can't get access to our email.
4. Our email is separately tracked and archived.
5. Unauthorized people can't access information stored on laptops or mobile devices.
6. 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.

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.

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

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.

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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!

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?

MSP Financial Intelligence with Larry Cobrin

Larry Cobrin, CEO/Founder of MSP CFO, has been working on a project to make financials available for IT managed services provider to make better decisions. In my first call with him I knew we needed him to talk about finances! I was fascinated by his insights about clients’ profitability trends, classifying them and taking actions for better profitability.

He shares a lot of hints and tips about different data you need to look into (which are mostly available already in your PSA) for your organization to make better decisions. If you feel you are leaving money on the table check out this interview!

Larry’s interview is available in a Podcast format here.

START GROWING WITH MARK'S 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!

12 mistakes most MSPs make with their Virtual CIO services

The Virtual CIO phenomenon is not new, yet the promises of the role have not been realized across the industry. Some mature MSPs who believe they have a functioning Virtual CIO practice, on closer inspection, still show challenges with delivery, scalability and profitability.

While we could go in depth to identify the root of these problems, instead here we'll highlight the twelve most common mistakes MSPs make with their vCIO. At the end of this article there is a questionnaire where you can measure yourself against other MSPs.

#update - We released this blog a year ago. This is an updated version covering the latest developments. It seems that the MSP 2.0 community was able to solve most of the issues during the last year. These mistakes now can be prevented. It has been a long year, for sure... :-)

Virtual CIO Strategy, Transformation Planning:

Mistake #1. Packaing the MSP and vCIO contracts together

Selling the vCIO built into the MSP contract makes you Virtual CIO of the IT Infrastructure. In this there are two pitfalls.

First, the vCIO capacity of the contract does not scale with the size of the organization like the other IT company 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, 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" do not 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.

Virtual CIO can deliver a major competitive advantage. It needs a separate service offering with a distinct pricing strategy.

#update - Working with clients around the world, we have designed a smooth transition from vCIO Light to a real vCIO services. That means even if you packaged together, there is a way out. 

Mistake #2. Not creating the necessary budget to get results

Let's say we have a 50 seat "sweet spot" client set up with the needed virtual CIO core services like: yearly, quarterly, monthly and weekly cycles. This could eat up 70 - 170 hours easily with automation. (We refer to the virtual CIO here as a general one taking care of every IT-related business aspect: reporting, management systems, applications, budget, vendor management and so on.)

If you use a base $150 hourly rate it could reach $2.000 service price per month or $40/user. Your MSP contract simply does not have the space for that.

Further you do not have the necessary processes or approach for that, and you can’t afford that much time, so you under-deliver on your promise of virtual CIO. This damages the concept and the possible future of the service.

Again, if you are not able to create the viable budget for the monthly recurring service fee and communicate the value, either you do not profit or don’t sell the service.

#update - there is a formula now for calculating profitability regarding virtual CIO services, the services and service delivery processes, as well.

Mistake #3. Not using a framework to develop the system

The vast majority of the Managed Service Providers we’ve been able to talk to do not use any framework for their virtual-CIO-related activities, so they don't have a system in place to successfully deliver them. Instead they operate as "consultants" or arm’s length managerial resources for infrastructure-like projects.

This means they are not able to implement a standardized IT management structure with proper plans, documents or databases that align services across the IT ecosystem. Nor are they able to streamline communication of the duties, tasks, deliverables and responsibilities of the virtual CIO correctly. This makes it hard to achieve the expectations of the client for the role.

#update - a complete structure is ready for the various vCIO activities like Planning, Project Management, Education or Execution. The closed loop vCIO cycles have been completed with Annual, Quarterly, Monthly and Weekly cycles.

Demand Generation

Mistake #4. Not attracting the right audience

Demand generation needs to target the right audience. The virtual CIO job is best suited for companies with 50-150 office workers. If the MSP wants to target a 20-30 or even a ten-seat client, there will likely come a painful realization of the lack of interest and of financial background. Those in higher tiers are left to figure out some system for managing IT. We can go there, but with coaching and support, as a complement the CIO or the IT manager.

#update - content and tools to qualify visitors are now available, like graders, ebooks 

Mistake #5. The wrong content

The partner of the virtual CIO is not an office manager, not the CFO or COO. The partner of the virtual CIO is the president/director/CEO - the top-level manager of the company. We know that placing this role that high is a challenge for the average technology-oriented service provider, like most Managed Service Providerss, but it needs to be there.

Most CEOs are not interested in backups, new MS Office versions or the cloud in general. They spend their time on increasing cash flow, boosting sales, organizing their companies, servicing their clients, and developing their management team. The MSP’s marketing content has to reflect those perspectives and turn those opportunities into solutions supported by IT.

This content has to be consistent across the website, emails, blogs, calls-to-action, in lead-nurturing drip email campaigns, in LinkedIn and other social media communications and in marketing collaterals: ebooks, guides and whitepapers.

#update - business related content is available in different formats like graders, ebooks, emails to quickly put business content to the MSP website. (even a complete Weebly based canned MSP 2.0 website is available now for early adopters)

Mistake #6. No clearly defined buyer’s journey

The buyer's journey covers the process that a prospect follows, from the first access of content to becoming and remaining a client. While a lot of MSPs have a decent website with a blog most of these blogs lack a call to action - no next-steps for the prospective customer, such as a downloadable e-book on the relevant topic.

These websites talk about available services instead of highlighting vision, possibilities and opportunities. The sales meetings are wired not to serve the clients and create instant value, but to "qualify" the techs - a focus on our opportunities instead of theirs.

The lack of a well designed buyer's journey will fail to attract the right prospect (the CEOs) to the website and assure them they will find the kind of service that will focus on their opportunities. The content needs to attract, engage and interest the right prospect with the wide scope on the business - make them eager to initiate contact and get a demo or have a meeting with the MSP.  

#update - various lead magnets have been developed to convert visitors to leads

Sales

Mistake #7. Not using consultative sales

Consultative sales is all about selling solutions. In solution selling our approach is not geared toward what to sell to the client. Instead we have a process to ask the thought-provoking questions that reveal overlooked opportunities and potential benefits. It is a process of discovery, of business opportunities where the MSP's solutions can help achieve their vision.

Virtual CIO is not a boxed product so it doesn’t have a standard price. Deep understanding of a customer's business is required before the solutions can be presented. Selling without context and understanding will put the virtual CIO in a very ineffective position, making it difficult to manage expectations.

This method is slower and takes more time, but necessary for engaging the client and crafting the offering within their business context. However exploiting business opportunities, and supporting them with technology solutions will mean more and higher value sales.

#update - consultative sales questionnaires, scoring, reports, targets, benchmarks and help are available for making the consultative sales easier

Mistake #8. Not selling the vision with stories

The virtual CIO's purpose is to make the client’s business more competitive in its marketplace, with the use of technology, to drive more revenue, cut costs and maximize the business continuity.

These general terms have to be in the context of the client and industry; we cannot really engage the client without selling the vision of competitiveness: being a better company, producing more revenue, and surpassing their competitors.

To sell the vision we have to craft compelling stories that grab the imagination of the CEOs.

#update - storytelling process for the first meeting with presentation slides have been created to help telling stories

Mistake #9. Not confronting reality with numbers

The reality of the situation - the hard data on the current state of business maturity, people, systems and numbers - sets the tension of the proposition. This tension helps make the buying decision.

The “score” needs to be readily attained and easy to understand in order to be compelling. That is why a business IT questionnaire that measures a company’s competitiveness with IT is a must. Without this, even if the vision is clearly defined, there are no quantifiable parameters to achieving it.

Imagine having a vision to run a marathon: a good start would be a full physical assessment. Make clear how hard you have to train, the time frame and the resources you’ll need to accomplish your goal.

#update - graders & new questionnaires are ready to get real with prospects and clients

Delivery

Mistake #10. Not using vCIO tools like automation or collaboration

Most IT companies are trying to use their existing PSA solutions like Connectwise or Autotask to manage their virtual CIO activities. It just doesn’t work, period. Again, the MSP 2.0 virtual CIO does not just focus on infrastructure. The virtual CIO has to manage people, processes and systems while communicating with the team, vendors and customers.

Most virtual CIOs do not have an integrated approach to managing all their activities in one place, or a system in which they can store all the IT management-related documents, memos, projects, databases, plans, budgets, and so on. Missing an integrated platform wastes a lot of valuable time for the virtual CIO.

#update - Basecamp integration is ready to collaborate with clients & vendors

Mistake #11. No clear differentiation between onging and project activities

Just as maintenance teams are separate from project teams because of different utilizations, focus, experience, etc.,  so should be the virtual CIO team.

One virtual CIO needs to manage the core virtual CIO cycles, like yearly planning, quarterly activities, monthly follow-ups, reports, weekly meetings, and so on.

An average virtual CIO could manage 10-18 clients, depending on the complexity of that focus.  Another virtual CIO has to manage the individual projects separately. It needs a different personality, different skills, tools and different daily and weekly routines.

#update - separated process for ongoing vCIO s     ervices and Project based vCIO services are available with templates and Basecamp workspaces

Mistake #12. IT-related service instead of business-related service

In a quarterly session, discussion should include questions about the client's cash flow, marketing initiatives, sales performance, internal projects, and competitor's moves first.

Then it can become a session with reports on the execution of the IT strategy, the quarterly plan, and the plans for the next quarter. It should not be focused on the technology roadmap or IT-related issues, problems, and challenges. It has to be focused on the business, processes, numbers, and business terms.

This can be difficult - there are so many cool IT projects an MSP can propose to a customer - however the conversation needs to remain about the business benefits and business accomplishments.

A successful CRM project is a great example. It highlights the improvements on sales collaboration, alignment, processes and results, instead of talking about the features of the technology solution.

#update - application related services (like Implmenting Slack) are available and also Business Modeling and other cool business focused workshops

Summary

Please check for these possible flaws in your practices. To improve on those, we strongly suggest signing up for the MSP 2.0 Quickstarter Tools. It has the tools to market and deliver the virtual CIO role right. If you would like to know more about the modern vCIO approach, let’s check this page.

#update - thanks for the contributors, our team and all clients to put this all together. A year ago it was just the mistakes, now the MSP 2.0 community can prevent those mistakes! Thanks guys!

STRUCTURE, MANAGE AND AUTOMATE YOUR ACCOUNT MANAGEMENT AND VCIO PROCESESS

Increase revenue with process related Virtual CIO services

Ryan Williams is a superstar CEO of the ProcessPlan SaaS application. He really knows the MSP arena well, as he is also VP of Business Development for the MSP Nexxtep. 

I was intrigued to have an interview with him because of my belief that IT companies are specialists in process. Clients need process management experts, but that’s usually seen as a management role, and not a tech discipline. Ryan has changed this with his tool: ProcessPlan is awesome software that can be used for planning and managing processes. It makes the process problems tech problems, so the IT managed services providers can leverage them to sell process related Virtual CIO services to their clients.

Let’s check out his ideas and have a look at how this great product integrates with Connectwise (See How ProcessPlan Can Help Your Organization), which we use both internally and as part of our vCIO processes.

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 QBR process is a critical part of influencing their engagement up to a higher level. Watch this recorded webinar with our vCIO 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 vCIO 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.