Tech and Teens

Apple Podcasts: https://apple.co/2NHRRDl
Spotify: https://spoti.fi/3AyHCUd

We’ve got a very special guest with us for this week’s episode: Lizzie Walter, my daughter! We’re talking about one teenager’s opinion on technology and how it affects school, home life and friendships. Here’s a glimpse into our conversation!

Adam and Skip: What kinds of technologies rule your life right now?

Lizzy: Snapchat and Instagram. I don’t have Snapchat, but most teenagers have them. I usually use Instagram over most other things, even though Instagram is pretty similar to Facebook.

Adam and Skip: When we were in school, we used to have books for classes and carried them around in our backpacks. Today, most people have Chromebooks for school. What do you guys use for school?

Lizzy: Google Classroom, a portal with all of our textbooks and video platforms, Google Keep for notes and Google Classroom to plan and keep track of assignments.

Adam and Skip: Do you trust these technologies, or do you feel the need to check on it and make sure everything is working properly?

Lizzy: I trust that it’s going to be there and give me the information that I need.

Adam and Skip: Google Classroom is pretty accessible. Given the choice, would you rather pick up your phone or your Chromebook?

Lizzy: I prefer my phone to quickly check assignments, but if I have to do something on a Google Doc, then I prefer to use my Chromebook because it’s easier to see and type on. And, It’s less distracting.

Adam and Skip: VR is the new, cool technology in town. How big are you on VR stuff?

Lizzy: It’s cool and all, but most of my friends don’t have a VR headset, so I can’t really talk to them or play with them on that. I have other stuff I can do with my friends.

Adam and Skip: What’s your digital life like at home?

Lizzy: We turn on the TV and everything that we want to watch is there. Sometimes we have to pay for stuff, but that’s becoming less and less of a thing. My phone, the switch and the Xbox are my favorite technologies at home.

Adam and Skip: It’s pretty normal to get mad at technology. Do you ever get frustrated with technology?

Lizzy: Yeah. I probably yell at my phone on a daily basis because something isn’t loading.

Adam and Skip: Do teens unplug or take technology breaks?

Lizzy: Some of us do, but not a lot. I feel like I need that every once in a while. I like being outside and it’s nice to get a break from technology. I really don’t think about how much I use my phone or other technology. I can see how much I use it, but it doesn’t really bother me because I am just used to it.

Adam and Skip: What do your friends think about technology controls or people watching over them on their devices?

Lizzy: I have gotten a few complaints about restrictions, especially when I run out of time on a game.

Adam: Can you explain to everyone what our deal is and how you get restrictions with your phone?

Lizzy: I usually get more restrictions when I am abusing the phone, spending too much time on it or downloading games I’m not supposed to. But, if I’m open with how I’m using my phone and my screen time goes down, then I get more freedom and my restrictions get loosened.

Adam and Skip: To wrap up, what’s one piece of advice you can give tech leaders and parents?

Lizzy: Restrictions are good because they help turn your kid in the right direction. You may think you’re being mean, but in the long run, it’s super helpful.

Just like at Humanize IT, good conversations and open communication help everything run smoothly. Thanks Lizzie for chatting with us about your take on technology! Join us next week for another episode.

vCIO: The Ultimate Guide

The vCIO or Virtual CIO (virtual chief information officer) term was popularized in the managed services industry to initially differentiate one MSP from another by adding higher-level management practices to their services.

The term has been overused and without a lack of an accepted definition, certification or agreement across the industry the term has lost its original meaning. As any MSP could claim to provide vCIO services it is no longer the main differentiator. Meanwhile, the service provided by vCIOs has become more relevant than ever.

That is why most MSPs have their own terminology for the vCIO role such as digital advisor, digital consultant, business technology advisor, and so on. 

Podcast That Bridges the Gap Between Business and Technology

I have long been a huge podcast fan. I listen when I drive, hike or while working out, but I had trouble finding something great to share with our MSP community. I told this to Adam Walter about a year ago and he took up the challenge. Now after hearing the 7th episode of his Humanize IT podcast, I decided to put out this blog for our audience to make sure the word got out. I love this new voice and narrative about how to differentiate, how to serve and how to run an MSP of the future. He has been interviewing the most forward thinking MSP leaders about how to make IT more human, how to drive great conversations and how to deliver business value to clients.

Check out the latest episodes here. Thanks to Adam for doing this for the community!

Based on Wikipedia Humanize means to "make (something) more humane or civilized." The main concept of the Humanize IT podcast is to bridge the gap between business and technology — a fun, educational podcast that will keep you relevant, maximize your value and help your clients see you as a trusted partner. In each episode, hosts Adam Walter, Skip Ziegler and other industry experts will show business owners, technology professionals and problem-solvers how to excel their careers with a new, more conversation-based approach to IT!

In this episode, they kick off the "Tales From Around the World" series.  This first episode features Richard Bauer, an engineer from South Africa's own Cape Town.  We hear about how they are being affected and some of the positive items they are seeing. From homemade pineapple beer to remote work strategies, we cover it all. Richard is a client of ours and a very forward thinking guy.

Tools allow us to either fix things more quickly or, if used incorrectly, break things in epic new ways. Bob Mohr joins them for a lively conversation regarding all the tools we amass over time.  Whether you're a plumber or a technician, we all have tools we trust, and there are always new tools emerging that we must adapt to and integrate along the way. Bob is one of the mastermind behind our vCIO programs.

As a business owner, you may be left wondering how to stay productive when your staff is working in different environments.  This episode will help you manage a distributed workforce. And, don't miss our most hilarious Fail of the Week yet!

 

 

In this episode, they dive in and discuss the effects of disaster recovery and business continuity facing us today. With the current COVID situation, this is a particularly poignant topic, They'll help you overcome and adapt to changes so you can thrive during this time. 

 

In this hard-hitting episode, we talk through how you can ruin a perfectly good idea by not being prepared and give you strategies to avoid this situation. I was the guest of this Podcast and man... it was a hard lesson when we prematurely scaled our MSP back. It still hurts.

 

 As a professional, it's your responsibility to not only deliver value, but communicate it, as well. If you don't take charge of your communication channels, you'll likely walk into a trap where you and your clients have differing expectations of each other. This podcast will help you ensure everyone is on the same page. 

 

 

As business professionals, we often get so caught up in the latest and greatest technology that we forget how far we've come. In this entertaining blast-from-the-past episode, we talk about problems from a bygone era — the days of countless floppy disks and crazy hardware. No matter how advanced technology gets, it's always good to remember where we started. 

Listen, subscribe and engage and again thanks for Adam, Skip and the Virtual-C team to made it happen!

Managed Services Platform vCIO Report 2019

Managed Services Platform's vCIO community has been growing year by year since 2014. In fact, we are most likely now the largest active vCIO community in the world with more than 600 members. With this news, we have decided to create a short report regarding how we typically see our vCIO members across the globe.

This community’s largest attribute is the language composition where more than 98% of our vCIOs are from any of the English-speaking countries around the world: 58% are from the United States, 10% are from Australia, and 8% are from Canada, while the rest are from the UK, New Zealand, and South Africa. 

DEVELOP AND OPERATE A SCALABLE AND STRUCTURED

ACCOUNT MANAGEMENT AND VCIO OPERATIONS

The most active vCIO movement is in the Eastern coast of the U.S. These numbers extend from New York, North Carolina, Ohio and Tennessee; however, there are two other states, Texas and Washington State, where the movement is growing most rapidly.

Other typical attributes from our community members are their unabashed professional and academic experiences. It has been confirmed that the vast majority of our vCIOs have university degrees and have each amassed more than 10 years of experience. More than 80% of them share these attributes.

The single largest essential trait for a vCIO is their IT prowess (50%). However, sales, IT consultancy, process and business development planning are also significant skills of their expertise. Interestingly, 8% of these vCIOs themselves are MSP entrepreneurs in their off-duty time.

Their offerings come from the fact that most of them are entrepreneurs in their own right, with most of their active companies coming from small businesses with 1-5 employees (This equates to about 15% of them) and 5-25 employees (48%). Many times their efforts, unfortunately, are in vain because the owner(s) are neither often able to delegate the vCIO role nor do they have enough time to fulfill that role themselves.

The other typical problem is that they try to implement the vCIO service quickly without any previous development training. They then continue a technical conversation with their clients without any business and strategic purposes. If a vCIO cannot deliver an engaging and recurring business consultancy in a determinate time, they will lose the profitability of these vCIO services. Ultimately, clients will keep looking at them as an IT technician and not as an executive-level business advisor.

Middle-sized MSPs with 25-50 employees already have dedicated vCIOs and can deliver profitable vCIO services while providing a valuable business consultancy. But based on our experience, the most successful MSPs with vCIO services are large-sized companies with more than 50 employees. These organizations can dedicate enough resources to scale their vCIO program and establish their own service definition, processes and best practices.

Most of our MSP members in the community with vCIOs typically have client sizes with 25-200 employees and offer between 10 and 20  services, most of which are related to the core IT infrastructure.

What this means is that although the core IT Infrastructure services and project revenues decrease constantly, cloud-centric and advanced security service revenues grow in their place. It should be noted that smaller MSPs usually deliver these services through outsourcing or assistance from an MSSP or CCSP partner. In order to develop these transformations internally for MSPs, we have launched our “Build a Better MSP” expert guide program with a wide range of building business solutions for the SMB space.  New services, like cybersecurity, identity management, EOS, cloud-centric solutions, are now all integrated, providing easy access for MSPs to learn and develop.

So who is a typical and successful vCIO based on what we see? vCIOs are dedicated professionals in a mid-sized MSP. They always have strong technology and consultative backgrounds as technical account managers. They tend to be systematic and process-oriented thinkers. They feel comfortable talking with small to medium size business executives. And last but not least, they understand how to put technological solutions into a business solutions context.

See previous parts:

• vCIOs in United States
• vCIOs in Canada
• vCIOs in Australia
• vCIOs in New Zealand

If you currently do not have vCIO services, but still intend to implement them in the future, we will be able to support your efforts with an exclusive coaching package and our client meeting report tool as well. 

20% rule of vCIO pricing

Here’s a mystery you all know all too well - pricing your stand-alone vCIO services so you’re not robbing your clients nor yourself...that trepidation when you’re putting together the proposal, or trying to ballpark a figure in a meeting. It’s always been a gamble. There’s a way to find the proper middle ground, following a simple process to help you to close more deals without risking a critical over or underestimation, of your client’s expectation or your services. Here is the formula...

We just call it a 20% rule....

The formula is quite simple. We take the client’s current expenses in managed services calculate 20% of it. This will be our baseline for a starter stand-alone vCIO package. Use this as the main rule of thumb, and we’ll take a look at some cases where we have to turn from this calculation.

Example. You’re talking with a 40 person firm eligible for a $125-per-user managed services program. That’s a $5000 MRR for the managed services. With your 20% stand-alone rate the virtual CIO program will end up at $1000 MRR.

Structure, manage and automate

your account management and vCIO procesess

Client point of view

Most often you’re selling the vCIO services as an extension of your managed services, and you’ve seen eyes spinning at the mention of the cost. But you know about the pricing effect: if the add-on service is too small, like 10%, they can feel it’s not worth mentioning, and why isn’t it in the package anyway? If it’s too much, like 40-50%, then it’ll come with the price of a totally different service category. We must keep an eye on our psychological influences.

• 20 % is an easier upsell to an existing company
• 20% is what you can give as a month of free trial
• 20% is what they’ll readily risk for a 3 month trial period

So from a buying perspective, it’s not disruptive, complex, nor risky. It’s the predictably happy medium.

Your point of view

We need to check the viability of this service from your end too. As we design a vCIO offering we must list out the diverse activities which are part of the package, check how frequently we do those activities, and calculate an annual workload, for an honest basis for the price. Usually we use $200 per hour to calculate a monthly service fee. With the 40 person client as an example with $1000 MRR, we’ll see 60 hours budgeted for a year, or 5 hours monthly. That’s a reasonable amount of work for that size of client.

We’ve developed four different vCIO Packages:

• vCIO Light - typically a teaser service at a cost of $250/month to perform, and great for triggering stand-alone services. It’s also good for small companies (check later).
• vCIO Basic - $1000 - $1500 MRR, suited to 30-40 person companies or bigger companies with less maturity. This is the typical bare minimum with no weekly cycles.
• vCIO Professional - $2500 - $3000 MRR, for the 40-70 strong SMEs where you can start to develop seriously and begin to integrate with the management team.
• vCIO Enterprise - $5000 - $6000MRR - when you’re going to nearly substitute a full-time CIO/ IT manager. This is only viable for 70+ situations.

If you’re interested in these packages, make a quick call and we’ll show you the processes, marketing, sales materials, workspaces and all the associated reports and tools we provide for a complete, professional execution.

Remark 1: Projects

Projects are never included with a stand-alone vCIO program, just annual planning, budgeting, some project scoping, some application selection, quarterly planning sessions, monthly reviews and so on. Every project is a separate item. If their IT strategy is to choose and implement a cloud based CRM solution and integrate it with Zapier to their accounting system, that’s a separate project. We can manage it as part of the service portfolio if someone else manages the project. If, however, we’re responsible for the implementation, that again is a separate line item.

Remark 2: Small Companies

As you can see, if you have no budget for at least 30-40 hours of work annually, even at $150/hour (which will end up at around $400 - $500 MRR) you cannot really accomplish anything as a vCIO. The $400 - $500 MRR with the 20% rule will give you the $2,000 MRR MSP service. Even if they have a $100/user rate it will work with a 20 person company. This clearly defines the boundary, that below 20 people there is no viable, profitable vCIO service possible. You can’t generate enough revenue, and the client will have no budget to execute projects. You might quote a $200 - $300 upcharge for "Client Advisory" services to perform the basic Account Management activities like QBR/Annual Planning and some consultation every quarter. Though extremely limited, this is their call. If they don’t want to pay for it, you still can’t do it for free.

Conclusion:

Don’t complicate. If the client asks about vCIO, just say: "Our rule of thumb is around 20% of what you pay for the managed infrastructure services."  If they’re not interested to the service with this estimate, there’s no way you can deliver your services viably with a lower price point.

3 previously posted Managed Services Platform blogs about vCIO sales:  

• How to Become a Trusted Advisor With Strategic Client Meetings
• Managed Services Platform vCIO Report 2019
• Managed Services Platform Account Management Report 2019

3 previously posted Managed Services Platform research about vCIOs

• vCIOs in United States
• vCIOs in New Zealand
• vCIOs in Australia
• vCIOs in Canada

Packaging and Delivering Scalable vCIO Services

 Carrie Simpson, Founder and CEO of Managed Sales Pros talked with Denes Purnhauser, CEO of ReframeYourClients, and shared the most common mistakes IT managed services providers make when it comes to building their vCIO offerings, and how you can increase your MRR with the correct approach.

The topics in this webinar were:

• Why vCIO services are critical to keep clients engaged in the long run
• The five biggest mistakes managed services providers are making with their vCIO services
• Why service productization is the reliable way to scale a Managed Service Organization
• How to make vCIO services scalable with service productization
• Process of service productization
• The right pricing model for MSP and vCIO services

Read More about Managed Sales Pros and cold calling best practices.

Delivering Business Focused QBRs

ADAM WALTER AT VIRTUAL C

You would like to be a high-value business partner in your client’s eyes rather than a basic technology service provider. Your Quarterly Business Review process is a critical part of influencing their engagement up to a higher level. Watch this recorded webinar with our virtual CIO expert guide, Adam Walter, who has shared his 5 step process to make any technical QBR into a business-focused one.

6 Best Practices of Top Performing vCIOs

ADAM WALTER AT VIRTUAL C

Watch this interview with our virtual CIO expert guide, Adam Walter, to learn how to be more engaged with clients by finding best practices for becoming a trusted business advisor in 6 single steps.

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?

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!