The 5 Levels of vCIO Operational Maturity

By Denes Purnhauser on January 30 2015

The Operational Maturity segmentation makes a lot of sense when trying to understand where to go with vCIO services and which next possible steps to take.
It demonstrates the current maturity of services in a descriptive way, explains the differences, and provides hints and tips toward the next step.This article demonstrates how to proceed as a virtual CIO with respect to levels of operational maturity.

 

STRUCTURE, MANAGE AND AUTOMATE YOUR ACCOUNT MANAGEMENT AND VCIO PROCESESS

 

vCIO Operational Maturity Level 1

The virtual CIO in its most fundamental version is an ad-hoc advisor for IT infrastructure needs. If the general MSP service does not contain this particular service, the service provider needs to have a high-level managerial discussion about the IT infrastructure.

In order to be able to sell higher level projects and services, the delivery could be free advice, or it could be based on a very limited charge. It could be initiated by the vendor (as a solution opportunity), or it could be proposed by someone on the client side (via problems).

This service does not contain any level of regularity nor a disciplined approach, however, year ends and quarter ends could be excellent opportunities for these types of reviews and conversations.

• Goal: readily available advice on IT infrastructure
• Regularity: ad-hoc
• IT/management focus: 80% - 20%
• Time investment per year: 1-5 hours
• Challenge: how to charge for the service
• Value proposition: a better understanding of the infrastructure

vCIO Operational Maturity Level 2

For more mature IT managed services providers, getting only ad-hoc and free advice prevents a business from being profitable. A more structured method is needed to add service to the fixed MSP package.

Remote monitoring and centralized services are a huge step toward efficiency, but limit natural meetings and face time with clients. The motivator for these companies is seeing their trusted advisors more in person.

The structured approach means annual IT roadmap planning and quarterly business reviews. These meetings aim to bring the MSP services to the table and discuss opportunities and problems with company leaders.

The limitation of these services lies in the IT infrastructure focus. The MSP does not concentrate on other aspects of the business — IT solutions, services — but on the IT infrastructure.

• Goal: create a structured layer of IT infrastructure management
• Regularity: annual, quarterly
• IT/management focus: 65% - 35%
• Time investment per year: 5-10 hours
• Challenge: to engage the clients in the IT infrastructure conversation
• Value proposition: to help the client to get more from their infrastructure

 

vCIO Operational Maturity Level 3

The limitation of the IT infrastructure focus is preventing the MSPs from becoming trusted advisors in both IT and the business. The Quarterly Business Reviews lack client engagement, real business value, and push toward the MSP for an IT infrastructure specialist role when the IT infrastructure becomes a commodity.

MSPs realize that customers need IT management in general because their IT complexity has increased. It has created a void in leadership roles in mid-sized organizations.

To fulfill this role in this maturity level the IT companies detach the vCIO services from the MSP contract and focus. The vCIO service becomes a separate service focusing on the whole IT instead of just on the infrastructure. It is a general management role in the IT discipline rather than a high-level role for the IT infrastructure.

It is a very structured approach to annual, quarterly, monthly, and weekly cycles and processes. The cycles define the roles and services of the vCIO with responsibilities and documentation..

The primary focus of the vCIO is to raise the IT management maturity with policies, regulations, education, and productivity of the system, finding general solutions to the different problems and implementing those accordingly.

• Goal: help the client take advantage of their current opportunities
• Regularity: annual, quarterly, monthly, weekly
• IT/management focus: 50% - 50%
• Time investment per year: 25-40 hours
• Challenge: separate the service from the Managed Service contract and mindset
• Value proposition: help the client utilize IT for business

vCIO Operational Maturity Level 4

This level of maturity of mid-size clients requires a proactive way to leverage IT in order to promote operational efficiency, continuous improvement, and lean operations. These clients need a more IT-savvy, agile workforce. It requires a more mature vCIO service, where the vCIO is focused on process, management, and business. They use IT as a resource in order to build a better company. They take a proactive view of internal and external collaboration, communication, the analysis of process bottlenecks, and the reporting needs of managers. A big part of the job is finding bottlenecks and developing a viable, integrated solution, getting confirmation of the proposal, and implementing the solution.

The vCIO focuses on operational excellence with ongoing and project-based services. This requires more time and business application focus. Though many jobs will be done locally many others are sourced on a global scale, and creating and managing the solutions marketplace is significant.

• Goal: help the client take advantage of their current opportunities
• Regularity: annual, quarterly, monthly, weekly
• IT/management focus: 35% to 65%
• Time investment per year: 35 to 60 hours
• Challenges: scale the vCIO service, adjust to the business model
• Value proposition: to build a better, more efficient company using IT

vCIO Operational Maturity Level 5

In level 5, the objective is to influence the general strategy of the company and gain a competitive edge with technology. A new product line, different sales distribution channel, or game-changing technology are new ways of monetizing company value. It requires extensive industry knowledge, a vertically-related solution stack, and a high level of consultation skills. It focuses on technology and IT-related strategies and therefore has a limited scope and room to play. Usually, knowing what is hot in the world of technology and the implementations of those solutions could leverage opportunities for clients.

The execution is the second issue. Finding opportunities is one thing, however, often these initiatives are hard to manage, involve multiple disciplines, and need substantial project management. That is why at this level the vCIO needs to have greater capacity to deliver value. Most of the time customizations, custom software, and application development are necessary for success as these nascent solutions and products are not yet proven or mature.

On the other hand, to implement and make successful projects, a higher level of IT maturity is needed for the client as well. The vCIO has to educate the company and make sure the general knowledge set is present, so that the team is able to adopt new technologies successfully.

It is the highest possible added value for the business.

• Goal: give the client a competitive edge with technology
• Regularity: annual, quarterly, monthly, weekly
• IT/Management focus: 20% - 80%
• Time investment per year: 60-120 hours
• Challenge: focus on technology-related solutions instead of general management
• Value proposition: competitive edge with technology

Remarks

Managed services providers have to move sequentially from lower maturity to the highest maturity. It is not possible to start at level 4 without having the practice and experience from the preceding levels. This rule applies to the clients as well. The customer has to be mature enough to be able to adopt projects and initiatives at the higher levels. The higher the maturity, the more vCIO work is needed, not just for the projects, but to manage the documentation, policies, and more complex environment.

The MSP contract has to be separate from the vCIO contract from OML3. If the two services are one, it means the vCIO is MSP-focused, and it is OML2, regardless of the skill set and richness of the service. The biggest hurdle is to move from the OML2 to the OML3. On one hand, it is a separate package, pricing, and service. On the other hand, the business and consultative skills are as important or more than before. This could require new skill sets for the company or extensive education in consultative skills.

 

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Build your MSP with the help of virtual CIO services

By Myles Olson on January 14 2015

Colin Knox is a true entrepreneur in the managed services provider industry. He’s been operating a very mature and well-polished boutique managed services provider in Calgary, Canada.

He’s also been recognized by Penton Technology Group in the ‘MSP Mentor 250’ which lists the best of the best managed service provider executives, entrepreneurs, experts, coaches and community leaders.

Colin’s service philosophy involves helping people grow and to that end giving them a chance to learn and develop into virtual CIOs. His business growth focuses on high level services.

In the interview I tried to learn how he was able to put this together.

I was interested to learn Colin has just exited from the day-to-day operation a couple of months ago and is dedicating his full attention to a very interesting project. I honestly did not realize the full impact of this before our talk.ortance of this before the talk.

If you’re interested in learning the stories and real-life examples from somebody who’s made it, watch the video and grow your business! Then use the 9 decisions worksheet in our MSP 2.0 Virtual CIO Service Delivery Quickstarter Kit to begin your transformation to a modern MSP.

 

 

 

Use the 9 decisions worksheet in our MSP 2.0 vCIO Service Delivery Quickstarter Kit to begin your transformation to a modern MSP. 

What is the one business skill MSP leaders can teach their clients?

By Denes Purnhauser on December 23 2014

If you look at any well-run IT managed services provider, there are plenty of robust, systematized and documented processes in place. Service businesses are built on process management. Service desk, deployment, migration, and communication processes always require tweaking to be stay efficient, and efficiency is vital to a great MSP.

To enhance this process we use tools like PSA, RMM and dashboards full of metrics to quantify health and successful management. If you’re doing this you’re already in the top 1% of MSP leaders.

In all of this you must analyze processes, written process documents, education of your staff and colleagues, and staff metrics and management. Essentially you become a practitioner of business process management.

Most of your clients need that type of knowledge and experience to boost their companies as well. You can use these to kick off the business discussion and show some value in an area that is natural to you.

Now that we know you have the faculty let’s learn how to act as a IT consultant in the conversation. We have a sheet dedicated to “power questions” for this process in our MSP 2.0 Quickstarter Kit.

Try this: setup a meeting with one of your clients and focus on just one business area, using some of the power questions in the Quickstarter Kit. Choose something like sales, operations, logistics or procurement. Ask about their processes and procedures, where they feel they excel and where they struggle. I bet you can find a technology solution related to the latter. Don’t take my word for it, just try it. Have fun.

What makes a good vCIO?

By Denes Purnhauser on December 3 2014

Typically there is a certain type of personality that is best suited to the vCIO role.

• They have some consultative background.
• Their “down to earth” mentality suits working with small to medium business.
• They tend to be systematic, process-oriented thinkers.
• They understand how to put technology solutions into a business solutions context.

Chances are you possess many if not all of these traits. But who else on your team also fits the role? The idea here we’re looking at here is nurturing and developing ideal vCIO candidates to build a hyper-successful MSP in the modern marketplace - something one can't do alone. Let’s take a look at what that will require. 

 

STRUCTURE, MANAGE AND AUTOMATE YOUR ACCOUNT MANAGEMENT AND VCIO PROCESESS

 

You might guess the ERP guys, former consultants or business analysts and even some tech employees are perfect fits, but this isn’t necessarily so. The real skill lies in understanding what it means to be a virtual CIO in the modern MSP 2.0 ideology. Most IT managed services providers who offer a vCIO solution are still using it as an extension of the infrastructure support offer, only on a higher level. As long as the solution is grounded in supporting networks and servers instead of the business and people, it will remain an undistinguished commodity and replaceable by the next, cheaper competitor.

The MSP 2.0 vCIO does much more: everything from managing all the IT strategy and policies based on ongoing goals of IT competitiveness and profitability, to all technology, vendor and channel management. This virtual CIO meets with the heads all departments and purposefully learns their needs. This vCIO knows the “why” of the goals of the CEO and of the company. Of course servers and networks are a part of this, but far from all of it. This is a way to open up substantial business opportunities. More information is available in our MSP 2.0 Quickstarter Kit.

Are your ideas for candidates shifting? Who do you think might fit this position best now?

We are offering some short but exciting webinars that cover many of these topics

Trusted Advisor or Technician, Which Pays More?

By Denes Purnhauser on November 28 2014

Most IT managed services providers we work with suffer a fundamental problem: the definition of who they are. The lack of a clearly defined definition of the business can be the biggest obstacle they face to success in the MSP 2.0 environment. The statement "I am a tech" needs to change to "I am a IT consultant." Unfortunately people often underrate themselves because they lack an MBA or they’re uncomfortable with so called “sales.” This limits them and their teams in engaging with more clients and prospects in a meaningful business way.

However, being a business consultant is just a role, a mode of operation, a mindset and the subject can be anything technical. Consulting is a behavior, a set of skills and tools that anybody can learn and implement. We are creating a series about being a consultant so you can harness the power and reframe how your clients see you.

In this first blog episode I will show you the circumstances in which it is better to act like a "consultant" rather than an "technician"

 

 

What is the consultative (trusted advisor) vs. tech (technician) mindset

First, many MSPs are under the false impression that they are having business conversations with their clients.

Be aware of this! For your clients, discussing the ROI of a VOIP is still just tech talk. Even having a chat about the financial aspects (OPEX, CAPEX) of the cloud is still tech talk. Discussing how a CRM could boost their top line is still tech talk.

The reason these are all tech talks is that in many cases the problem is created by the solution, not the other way around. This means we need to switch the conversation to talking about a potential business opportunity which the given tech-related solution could exploit. In most cases, the client did not say: "I have too much telecommunication expense", "I have too much CAPEX and want to transfer to OPEX" or "I have a sales problem” but with your expert consultation, they will be able to relate those to a technology solution you can offer. The client might be relating to these ideas in mind, but not in heart. Purchasing decisions are made using emotions backed up by logic, not the other way around.

Unfortunately the logical mind of a technician wants to speak of solutions in logical terms. That is the "I know what is best for you" mindset. And that is the telling mindset. This serves your business more than your clients, and ultimately makes your offering an expense, rather than an investment.

What if we address the business issues first and let them come to the conclusion that they have a problem? Spending time on questions and going deep into the subject not only means we understand them, but that they feel understood. Every solution we bring will be the result of a dedication to solve the problem stated. In this case, the tech projects become business projects.

This is the vCIO consultative mindset we need, and has nothing to do with having an MBA or wearing Armani suits. It is about sequence, tool set and mindset.
Let's have a look where we could use this mindset in our MSP practice:

 

All meetings with prospects

Every time we have a meeting with a prospect, we should wear the consultant hat. If we do, we immediately stand out in a big way. The main differentiation is that prospects usually expect to have a tech talk with a geek instead of a business conversation with an informed and experienced business consultant.

If we do not overshoot the role but just ask the proper questions and be genuinely curious about their business, we might hear something like: "Hey, I have been talking to other vendors and nobody was asking these questions..." This is the distinction we need to make..

Be open and try not to sell; you will make the sale eventually. If we trust ourselves and are courageous enough to go off the solution and focus on the issues and the problems that could form, then we are smart enough to convert those problems into tech solutions.

Firing up solutions without the business context is only noise for the client, and a false assumption for us that we have created interest.

 

Quarterly, yearly client meetings

I have reviewed many mature MSP's Quarterly Business Reviews. My conclusion is: reviewing MSP services like technology roadmaps during meetings is not the right way to engage clients. A consultative role lets us ask questions about their sales performance, obstacles of growth and the processes with which they are are struggling. We have to find out why the CEO is not able to sleep at night, and then help with that. In this case the meeting would be the review of their business instead of a review of ours.

Let's be proactive and challenge our clients. The best way is to start where we have experience. Every managed services provider is a process machine. Our MSP business model is all about processes, streamlining and automation. That is why every managed services provider leader has great experience with processes, human aspects, software automation, and so on. Let's start analyzing the client processes. You are going to find holes and great solutions that you can implement. These will come from your core business competencies.

 

Before and during projects

Technology Projects are a great way to leverage our consultative mindset. Before the project we should understand why the results of the project are required. What business benefits or deliverables will the project provide? Create a simple "Vision Statement" collecting the expectations of all stakeholders; this is a small investment of time but can be put to use during and after the project.

Use the "10 points exercise" from our MSP 2.0 Quickstarter Kit to have a better, common understanding about the goals, benefits, and expectations.

And believe me, not so many IT companies have asked the accountant or the operations manager what their expectations of the project are beforehand. So focusing on their problems and them as individuals will pay off in the long run and distinguish you now.

 

Any request, call we have from the client's C level

Of course, if a C-level executive calls you with a problem, there is something behind it. Most of us tech people immediately jump to conclusions, and search for solutions and so on. But our consultative mindset has to make the hard stop and ask "why?" Why do we even have a problem? Why do we need a solution at all? What are the goals, the circumstances, the context? In most cases, this is what the client really needs - to think through the problem with someone with an outside perspective who can help them to see different points of view. After a session like that you will get more phone calls about solving business problems than about fixing routers… (don’t worry, you’ll still get those calls too).

These are great ways to engage clients and open up discussions about problems that need to be solved. From this point forward nothing is going to be a tech-based project, initiative or conversation.
 

Conclusion

If you can just change this one thing about your communication it will pay off heavily. It differentiates you; it teaches your people how to communicate and it shows your client who you really are. This will help you to define your purposes and to communicate them accordingly. It will help you to stay always curious and focus on what matters to the client, instead of the perspective of the tech.

 

12 mistakes most MSPs make with their vCIO services

By Denes Purnhauser on November 20 2014

The virtual CIO phenomenon is not new, yet the promises of the role have not been realized across the industry. Some mature IT managed services providers who believe they have a functioning vCIO 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 IT companies.

 

vCIO 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 MSP related services do. It scales up with the complexity, changes and developments of the clients. That means ball-parking a user based price for a virtual CIO is unlikely to be appropriate. This results in either the price being too much for the market (they don’t want to buy it), or the contract being more work than revenue supports (you don’t want to sell it).

Second, 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 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.

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.

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

The vast majority of the managed services 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.

 

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.

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 MSPs, 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.

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.  

 

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.

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.

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.

 

Delivery

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

Most MSPs 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.

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.

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.

 

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 Tool. 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.

  

Our first book: MSP 2.0 - The Managed Service Revolution

By Denes Purnhauser on October 15 2014

I have to admit we haven't done a lot of blogging lately and there hasn't been a lot of new content, sorry. We do have an excuse: we have completed a book about the MSP 2.0 business model.

We got your awesome feedback on our content- thanks - including the observations that our ideas were all in little pieces, lacking real connection. We needed a more comprehensive and linear format to digest this new concept, and thought that the best way to do so was to write a book. Have a look at what we have to offer in this format, and how you can become a contributing part of the story.

The concept of this book is first to analyse the current situation and then to create the practical but holistic approach to make MSP 2.0 a reality. We wanted to deliver a business-minded explanation about the industry we are in. We have an MSP (Hauser Canada) that we plan to make successful over the next 5-10 years. Everyone sees the problems and the turmoil in the industry, but not the complete solution. We didn’t want to talk tactics, or how to sell the cloud, how to price, or package better. We wanted to show a very viable strategy toward the next evolution of the MSP model and what is needed to move quickly on that path.

We observed that while there is proven prosperity in the MSP program, on the ‘break and fix’ model, but we didn’t have a complete business strategy. It has been a long process to change the model, and most IT managed services providers still have a majority of these contracts. Our goal is to clear the slate and see what’s next:

Introduction:

The MSP 2.0 business model is a great blend of the MSP fixed-fee model combined with the much broader scope of IT Consultancy. This book illustrates that new model such that you can see how an MSP can build a scalable business around it.

Chapter 1: Business Focus or Technology focus:

Many IT companies says they are "Business Focused" but what does that really mean? What are the prerequisites to be able to make that claim? What is behind the value proposition?

Chapter 2: Why the MSP 1.0 model is broken?

Unfortunately, the initial Value Proposition of the IT managed services providers is broken. Nobody really cares about the infrastructure any more. It is a commodity, like electricity, and thus the subject is not part of the C level conversation. 

Chapter 3: Opportunity of the MSP 2.0 model

Meanwhile a substantial untapped potential is arising from the client side: the quest to be more competitive with the help of IT...to grow faster, service clients better, and communicate more efficiently. How do you address this huge opportunity?

Chapter 4: Why is it so difficult?

Do you remember how hard it was to switch from the ‘break and fix’ model to the MSP? There are two major obstacles along the way to implementing the MSP 2.0. This is going to be work too, but there are shortcuts.

Chapter 5: Requirements of the next generation program

If we want to tackle this in a systematic way, what do we need to address - the hurdles along the way we need to prepare for eliminate? What should be the scope for such a program, and what types of components should it have?

Chapter 6: The first Complete MSP 2.0 program

The complete program has many layers, like the framework, education, software, community, business building, and processes for each and every stakeholder. The client, who gets the value, the virtual CIO who delivers that value, and the leader of the MSP who is building the business.

Chapter 7: The Client Perspective

What does the client need to achieve competitive edge? Reduce the complexity of the IT, create transparency and a systematic approach to progress, ensure accountability, and effective collaboration.

Chapter 8: Virtual CIO Perspective

What the Virtual CIO needs to deliver is value in a scalable and efficient way: quick client discovery, implementation of core vCIO services and an IT management framework, effective management of IT Projects including collaboration with the clients.

Chapter 9: The Leader of the MSP perspective

What does the leader need to build a business? A Transition Blueprint Program, Self Assessment, Business Model Analysis, Creating the MSP 2.0 Value Proposition, Inbound Marketing Engine, Lead Generation engine, Predictable Sales, and Implementing the Virtual CIO services.

Chapter 10: The Roadmap for success

What is the typical roadmap for IT managed services providers of different maturities, size, and service offerings? What are the foundations and services needed to implement immediately and grow quickly?

 

STRUCTURE, MANAGE AND AUTOMATE YOUR ACCOUNT MANAGEMENT AND VCIO PROCESESS

 

Practice-building or Business-building Discussion

By Denes Purnhauser on September 4 2014

James Vickery, a very progressive MSP CEO, had a couple of thought provoking questions. We’ve created a short talk to cover the issues he was curious about.

The main issues we are talking about:

• Scalability of the consulting type businesses
• The capacity of an average MSP 2.0 vCIO
• Training and retaining high profile virtual CIOs
• Managing, motivating and keeping virtual CIOs
• Building the practice for ourselves or building a business
• Transitioning to the MSP 2.0 business model
• Importance of checking the current and future business model
• Importance of very consciously developing services

Check the audio file for the 20 minute talk here:

Open the audio in a new window: MSP_QandA_with_James_Vickery

 

More about James Vickery and his managed services provider "I know IT" here:

http://www.iknowit.com.au

If you too have questions like that, let me know and set up a short session like this!

 

START GROWING WITH MSP Business Building RELATED RESOURCES FOR FREE

 

6 Vital Elements of a Successful Business Building Process
REX FRANK AT SEA-LEVEL OPERATIONS
Watch this interview with our MSP operation excellence expert guide, Rex Frank, to learn how to make a profitable operation by familiarizing your managed services provider with the Annual Strategic Operations Plan’s best practices to leverage your RMM and PSA tools that will drive down costs, manage your engineers and guide behavior

 

The MSP 2.0 service offering in the 7C IT Management Framework

By Denes Purnhauser on July 28 2014

 

Upsell your clients with strategic QuaRTERLY BUSINESS REVIEWS and IT strategy meetings

Frameworks in general are good for:

• helping the service provider see all the client’s functions and service delivery areas
• helping the clients understand their situation and the context within a clearly defined system
• measuring the current state against the framework benchmark, define the goals for both parties, and attain team alignment
• creating a transition between the current state and the future state - the action plan

The goal is to move from an ad-hoc attack strategy to more systematic thinking.

This approach is more likely to give a comprehensive perspective so you can make an informed decision where to invest and where not to.

The 7C IT Management Framework was designed to solve the problems of small and medium sized companies. These companies do not usually have a full-time, fully trained CIO or VP of IT, and without a skilled person in that role, IT decisions are made by the wrong people, such as:

• The COO, CEO, or CFO, doing the job part-time, without the requisite experience of the full range of technologies and trends;
• The IT Administrator, doing the job but with no experience in managing projects or understanding business needs; or
• The outsourced, managed-service provider, with no understanding of the scope of the infrastructure and too technology-focused to have the most effective and productive strategy skills.

In many cases all employees work together on IT management. One will prepare a budget, another will plan the infrastructure, and a third will manage the projects. Often as IT managed services providers we are in the middle of this tornado, with no clear responsibilities, deliveries, or measurements. Everything is a bit foggy, but we try our best to do our best for the client.

The 7C IT Management Framework creates the following alignment:

• defining all the necessary elements that could be leveraged to get a competitive edge with technology
• measuring the current IT management maturity through a simple scoring system
• discovery of the business needs through a goal setting workshop
• creating an action plan to get to the target scores
  distributing the work and the responsibility across the IT ecosystem

The benefit is a competitive edge for the clients through technology:

• more revenue to leveraging technology on the Value Proposition, Marketing, Sales, and Customer Loyalty parts of the company
• lower expenses in leveraging the technology on the Operations, Business Processes, People, and Systems parts of the company
• maximized business continuity, ensuring smooth operations and minimizing the impact of ‘disasters’ on the performance of the company

The 7C IT Management Framework

The 7C IT Management Framework covers 7 critical management areas of IT and asks these questions:

• Continuous: What is the level of the IT security/NIST Cyber Security?
• Competent: How efficient and professional is the IT ecosystem?
• Charged: How proactive and responsible is the IT ecosystem
• Conscious: How strategy and business focused is the IT ecosystem?
• Controlled: How measurable, governable is the IT ecosystem
• Clear: How transparent or clear is the IT ecosystem?
• Cost effective: How well are costs controlled in the IT ecosystem?

These seven Cs are the key questions every CEO has to answer in order to have a competitive edge in IT. That also makes them the areas in which every MSP has to provide service, in order for the same goal.

As an MSP, you are providing value-added services to your client like backup management, disaster recovery planning, IT strategy building, and providing proactive services.

However, if you do not create a clear structure for clients you won’t inspire confidence. These are interrelated services, but if there are no defined boundaries, structures, or systems built around these individual services you will fail to maximize their potential.

7C, like any framework, is intuitively and expansively organized. The backup management and the disaster recovery are in the Continuous block; The IT strategy is on the Conscious block and the Proactive Services are in the Charge and the Competent blocks. If you can map every service you are doing and show your clients every management area in which there are deficiencies you’ll become aligned and effective.

Use 7C to map all your services and show the clients the big picture. It will also help discover the maturity level of your current service offering, and what services you should develop next.

7C is not a delivery framework. Its goal is not to tell you how to do better backups, or how to develop a better IT strategy. Its goal is to help clients understand what you are doing as an IT service provider, and for you to be able to get aligned on the service with prospects and clients.

One of the most important parts of 7C is the IT competitiveness quotient, which measures all of the 7C building blocks on the client side. It is an award-winning tool, which measures current maturity and generates an action plan based on the client's delivery areas.

Let's look at the defined service delivery areas based on different building blocks.

 

Upsell your clients with strategic QuaRTERLY BUSINESS REVIEWS and IT strategy meetings

 

1. Continuous: Services to Increase the level of NIST CYBER security 

Backup management implementation

Keep the data safe and sound, without any chance of data loss as a result of any single point of human error, lack of responsibility, or technical failure.

• Backup policy, regulation implementation
• Backup process implementation
• Backup process responsibilities setting
• Data recovery testing & implementation
• Offsite backup implementation
• Data recovery plan implementation
• Offsite backup solution implementation

Disaster Recovery Plan implementation

Have a plan for when a disaster happens. It is a practical document that walks through all possible scenarios in case of an emergency event.

• Business Assessment
• IT Assessment
• Disaster Recovery Plan development
• Disaster Recovery Plan implementation
• Disaster Recovery Plan audits

IT security best practices implementation

Implement the best practices that can help to drive a smoother, safer, and more secure environment. This involves both systems and people.

• Corporate Information Security policy and regulation implementation
• Corporate Information Security guidelines, education & implementation
• User role and Lifecycle management implementation
• BYOD management implementation
• Password management implementation
• Risk management implementation
• Ethical hacking testing services
• Physical IT Security protection implementation
• IT Security, policies and procedures implementation
• IT Security governance implementation

Basic IT security management implementation

Implement some very basic tools to increase the protection of the IT environment, devices, storage and systems.

• Mobile Device Management implementation
• Encryption management implementation
• Access management implementation
• Onsite data access management implementation
• Online access management implementation

 

2. Competent:Services for a more Efficient and Professional IT Ecosystem   

Managed Service Implementation
Create the most advanced and efficient IT service environment. The infrastructure management is a core functionality and has to be done in a very professional manner. Using the latest automation and management tools, centralized services, and monitoring key to success.

• RMM Service Implementation
• PSA Implementation for Ticketing, Project Management, and Asset Management
• Knowledge Base implementation
• NOC service Implementation
• Disaster Recovery Plan Implementation
• Asset Management Implementation

 

Proactive Services Implementation

Achieve high level proactivity. IT is here to maximize overall productivity, but often even if we have the latest software in place, the client team is not aware of the advances and can get frustrated when the interface moves buttons. There is no shortage of personal productivity tools around but they are losing their potential business impact when the team is not shown how to use them to create a personal operation system with to-dos, calendars, and emails.

• Proactive End User Training Program Implementation
• Proactive Internal Self Service Knowledge Base Implementation
• Proactive Personal Effectiveness Program Implementation
• Proactive Business Process - IT Alignment Practices Implementation
• Proactive System Integration Practice Implementation

 

Uptime Extension Services Implementation

Create and generate as high tenancy as possible for the given budget. You could influence the uptime of the overall systems with the professional services. Most of the job is proactive maintenance, standardized infrastructure, and redundancy. Discipline is the watchword here.

• Redundant Infrastructure Implementation
• Standardized Infrastructure Implementation
• Server Side Patch Management Implementation
• Desktop side Patch management implementation
• Life-cycle, Recycle Management Implementation

Virtual CIO Services Implementation

Manage the IT ecosystem at the most professional level possible. Most IT management jobs are done by one of the C-level executives with an internal admin assistant and perhaps a third party MSP. These three roles don’t cover the needed management capacity. A Virtual CIO and a third party IT consultant need to be in place for the following activities.

• vCIO Role implementation for IT Strategy Development, and Leadership
• vCIO Role Implementation for IT Strategy Execution, and Leadership
• vCIO Role Implementation for General IT Leadership
• vCIO Role Implementation for IT Infrastructure Management
• vCIO Role Implementation for IT Security and Risk Management
• vCIO Role Implementation for IT Consultancy, and Representation

 

3. Charge: Services to Increase the Level of IT Service Maturity

Managed Service Implementation
Implement Managed Services not just for the professionalism but to maintain responsibility as well. That means creating a service offering around the overall responsibility and accountability of IT using tools, policies, systems, and best practices to make sure nothing falls through the cracks and customer expectations are always met through assured alignment.

• Ticketing System Implementation
• Disaster Recovery Plan Implementation
• SLA and Ticketing System Implementation
• Dedicated Service Manager Implementation
• SLA for Overtime Implementation
• SLA for Special Device Implementation

 

Proactive Services Implementation

Create all the necessary proactive services to prevent problems or fix them as soon as possible. Monitor, optimize, and remediate if required. This is not just related to the infrastructure but for the business processes as well. 

• Proactive Maintenance Practice Implementation
• Proactive End User Training Program Implementation
• Proactive Optimization Practice Implementation
• Proactive Onsite Support and User Feedback Implementation
• Quarterly Business Analysis and Reviews Implementation

 

Responsibility Matrix Implementation

Manage the responsibility and accountability of many internal, external , and third party resources and vendors. On average a "Virtual IT Department" consists of at least 15 parties (ISP, Software Companies, Consultants, Hardware Vendors, and Service Providers etc.). Who is the boss? Who is responsible for what? The issue here for the CEO is that if no one is responsible then ultimately he/her is responsible. These workshops are a great tool to align and organize the team.

• Responsibility Matrix - Including the CIO Role Implementation
• Responsibility Matrix - Main Categories Implementation
• Responsibility Matrix - Education Implementation
• Responsibility Matrix - Main Categories Implementation with Ticketing System Aligned
• Responsibility matrix - Attached to the Contracts

 

4. Conscious: Services to increase the level of strategic IT focus

IT Strategy Planning Retreat
Create a rock solid IT strategy in a very short timeframe. Executives’ time can’t be wasted sitting and talking for days. What is the best practice for spending 4-16 hours of work to create a very solid IT concept, roadmap, or strategy? The answer includes processes, best practices, efficient data collecting, and decision making techniques.

• IT Strategy, External Review, SWOT Session
• IT Strategy, Internal Review, SWOT Session
• IT Strategy, IT Ecosystem, Infrastructure Audit Session
• IT Strategy, Business Modelling Session
• IT Strategy, Virtual IT Department Evaluation Session
• IT Strategy, Business Functions Mapping Session
• IT Strategy, Business Processes Mapping Session
• IT Strategy, IT Functions Planning Session
• IT Strategy, Strategic Initiatives Planning Session
• IT Strategy, Development Roadmap Session

IT Operational Planning

Create detailed guidance for the execution of the strategy. This should be a year long plan with all the deliverables, initiatives, projects, priorities, and responsibilities necessary for flawless execution. Most small businesses do not have these plans in place. They often see it as too much work to create them, so the cost/benefit ratio precludes it. Again the keys are the processes, templates, and best practices to do the work in the very small amount of time.

• IT Operational Plan, Budgeting Session
• IT Operational Plan, Capacity Planning Session
• IT Operational Plan, Priority Setting Session
• IT Operational Plan, Resource Redistribution Session
• IT Operational Plan Finalizing Session

 

IT Strategy Execution Management Implementation

Execute the plans adeptly. The agile methodology helps to create closed loop systematic rhythms around the execution. The key is to foster alignment on the deliverables and set expectations on time and budget. The most often overlooked factor is the personal time capacity planning. You have to set aside time for managing and doing all the project related work.

• Quarterly IT Execution Plan Implementation
• Monthly IT Execution Cycle Implementation
• Weekly IT Execution Cycle Implementation
• Project Execution System Implementation
• Quarterly Performance Management Implementation

 

Upsell your clients with strategic QuaRTERLY BUSINESS REVIEWS and IT strategy meetings

 

5. Controlled: Services to ensure a robust IT Ecosystem with Agile IT Governance  

IT Performance Management Best Practices Implementation
The goal here is to maximize reliability through implemented best practices. Quarterly and monthly target setting measures performance and creating action plans drives costs down and increases efficiency.

• IT Performance Management Framework Implementation
• IT Infrastructure Planning and Monitoring
• IT Management Planning and Monitoring
• IT Strategy Planning and Monitoring
• IT Vendor Planning and Monitoring
• IT User Development Best Practices Implementation

 

Strategy Execution Best Practices Implementation

While it’s great to think big-picture during the IT strategy session and develop fancy projects we need to reach our goals, we have to use specific IT related project and program management best practices to make sure that we are not just dreaming, but executing flawlessly.

• Key IT Initiatives Management Best Practices Implementation
• Key Project Budget, Risk Management Best Practices Implementation
• Key Project Visualization, Planning Best Practices Implementation
• Key Project Change Management, Communication Best Practices Implementation
• Key Project close Best Practices Implementation

 

IT Audits Implementation

Ensure everything is safe and sound and works as we think it should be working. The various types of audits not only let us sleep better, but also keep up awareness of specific areas. To create such internal compliance requires a higher operational maturity.

• Independent Auditor Service Implementation
• IT Audit Process Design Based on Best Practices
• Data Security Audit, Disaster Recovery Audit, Data Backup Audit implementation
• Server Management Audit, Network Audit, Server Room Audit, IT Services Audit Implementation
• IT Management Audit Implementation

IT Organization Best Practices Implementation

Organize the IT Ecosystem. This is a virtual department with 20 to 30 different vendors. Who is the boss? Who is working together? Who needs what information? How do we assist communication? It is worth the effort to establish order to get maximum value from our vendors and internal resources.

• IT Operation Process Best Practices, IT Operation Policies Best Practices Implementation
• IT Operation Manual Best Practices Implementation (Knowledge Base, Administrator's Guide, Responsibility Areas)
• Collaboration Platform Implementation, Ticketing, Project, Yearly, Quarterly Planning, Alignment
• IT Organizational Chart Design
• Competence Management and Personal Growth Plans

 

6: Clear: Services to maintain transparency of the IT ecosystem 

 
IT Reporting Practice implementation
Develop the necessary reports to be able to measure the performance of all departments and groups. What we can't measure, we can’t manage. This is not an exercise in flooding the C level with reports. It means delivering critical weekly, monthly, quarterly, and yearly metrics of business performance.

• Reporting Framework Implementation
• IT Infrastructure Reporting Implementation
• IT Management Reporting Implementation
• IT Strategy Reporting Implementation
• IT Vendor Reporting Implementation
• IT User Reporting Implementation

Responsibility Matrix Implementation

Establish clear aligned definition of who is doing what. Going through the 200+ responsibility areas, from checking on the backup to aligning the technology with the business needs is going to raise a lots of questions. Who should do what to make sure nothing is ignored or forgotten. Again the takeaway for the CEO is that if no one is responsible for an element of the matrix, ultimately the CEO is. It is better to know who does what before you need them to. 

• Responsibility Matrix Audit, Interviews and Workshop
• Responsibility Matrix Management Implementation
• Team Dependency and Risk Analysis

Internal SLA Implementation

The goal is to create the Service Level Agreement (SLA) internally. That means identifying all the necessary services the company need, make decisions on the needed quality, speed, cost, and create alignment on this. The internal audits could make sure the agreement is not just a paper on the shelf.

• Internal SLA Creation based on Template
• Internal SLA Enforcement

Efficient IT Management Tools Implementation

Use the most efficient tools as possible in IT management. If IT wants to make the company more competitive, it first needs to be competitive itself. Using the latest and best efficiency tools is key to drive costs down.

• Execution Management Tool Implementation
• IT Maturity Management Measurement Tool Implementation
• IT Document Management Tool Implementation
• Password Management Tool Implementation
• Budget Management Tool Implementation

 

Vendor Management Implementation

Make clear that the client is in the driver's seat and not the vendor. Vendor management means yearly negotiations on prices and services, switches if needed, mediation on tough problems, and enforcement of the service level agreement. Make sure they are creating the value we agreed on.

• ERP Vendor Management Implementation
• Telco Vendor Management Implementation
• Cloud Vendor Management Implementation
• General Vendor Management Implementation
• Printer Management Implementation

 

7. Cost Effective: Services to minimize the costs of the IT ecosystem 

 

IT Budget Management Services Implementation
Create and manage the most cost-effective IT budget. What is included in the budget needs to be strictly defined because everyone has to be on the same page when we’re talking about costs, expenses, budgets, targets, etc. Setting a budget is incomplete without proper governance, reconciliation, reporting, and solid decision making.

• IT Budget Planning
• IT Budget Controls Implementation
• IT Budget Reports Implementation

 

Operation Efficiency Services Implementation

Analyse all the IT related processes in the organization. Are there any new tools we could use? Is education required to use the current systems? Is there any integration that could be done to make their processes leaner? A service offering encompassing these topic is a great tangible source of continuous improvement and total quality management.

• Continuous Process Improvement Implementation

 

7C IT Management Framework and a vCIO Role Implementation

Manage every aspect of IT in a lean and straightforward framework. We create and implement the 7C Framework based on the 7C methodology.  We must understand that the vCIO is a high level IT Executive and can be a third party. The framework he/she implements, manages, and further develops is based on;

• 7C Methodology Implementation
• 7C Certified vCIO Implementation
• 7C vCIO Toolkit Software Package Implementation
• 7C vCIO Community, Continuous Education Implementation

 

IT Procurement Management Implementation

Manage all IT expenditures of a company and keep them as low as possible. Set up rules around purchasing, and create standards to achieve a homogeneous environment including managing all software subscriptions - key to keeping the costs down.

• Purchase Policy Implementation
• Standardized Device Policy Implementation
• Software License, Subscription Service Implementation
• Purchase Process Policy Implementation

 

Conclusion

The services discussed here are not new. What is new is the perspective. We can see the goal, see what the different services are about, and how to frame the services so that the client understands their value. It is an alignment tool to help clients understand their situation and to help them make informed choices.

You are able to help your clients without having capacity, knowledge, and experience in every service. You are able to be the one and only trusted advisor and vCIO, and outsource the rest of the work, with partners who excel at creating a budget, strategy, or security. That is your value in using the framework: being the big-perspective guide on IT, and ensuring the smooth, natural delivery of a professional trusted advisor.

 

Cracking the code of the future of MSPs

By Denes Purnhauser on July 17 2014

There’s been a lot of talk lately about a fundamental change in the MSP industry, and the subject may seem overwhelmingly complex. The change taking place is quite evident, but what’s inside the tornado? What is the force behind this change happening?

Understanding the underlying impetus will enable businesses to make more educated decisions where to drive their companies. Let’s demystify this change and put it in a very easy to digest format, as the core of the change is actually simple.

It is not our shortest Blog but I promise worth the read. You will see the change taking place and how it could help you drive enormous growth in the next couple years. So fasten your seatbelts!

We are going to use one of my favorite thinking tools to analyze and understand the situation: The Business Model Generation framework. We use this method nearly every day, to understand our customers and their business, brainstorm new business ideas, etc. We like it because it is very simple, very straightforward, and separates complex systems into simple components.

We’ll start by showing you the current typical MSP business model and why this model was the right answer for the market needs in the past. Then we’ll look at how the core of market needs have changed and the resulting changes that have been made to the business model.

Market need:

Think way back to when computers first came into the commercial environment and dramatically changed how we do business. These were large and complex systems and unwieldy from a technological perspective. For so many tasks somebody technical was needed to finish the process - to convert a picture, scan a document, set up a network, or just save a file. These tasks needed to be more user friendly and the users to become adept in these environments. The problem to overcome in was technological complexity.

So the IT support companies came to the scene and solved the problem of technological complexity. They have been evolving since, and the most mature format of this service is the Managed Service Provider model.

Let's analyze the classic MSP model, particularly to see how all the aspects of the current model are working together. We will then see how a small change on one part of the business results in adjustments in every field of the model.

Value Proposition:

The core value proposition of an MSP is reducing the complexity of technology. This is the ultimate goal and the value they are delivering to their customers. It can be stated in various ways: "run your business smoothly", "peace of mind”, "security and compliance", or "strategic IT design and decision making". Every company has its own style but all promise to reduce the complexity of the technology in their client's environment.

In order to fulfill this promise, IT managed services providers first create a so-called "Outsourced IT Team" service, which includes all the human resources as an independent unit. Clients do not have the necessary skills or resources to manage these teams.

Second, they provide an "IT infrastructure": design it, build it, manage it, and support it. The infrastructure includes all the switches, servers, desktops, and gadgets and all the software elements on them.

Very simply, this is the core value proposition: reduce the complexity of the technology with outsourced IT staff and IT infrastructure.

Customer Segments:

Channels:

The typical sales method for MSPs is word of mouth referrals. As with doctors and lawyers the performance of the provider is judged on criteria unmeasurable by the customer and in industry jargon that no outsider understands. This makes trust and reputation essential factors. An MSP could lose a client by dropping the ball on a deadline, or by neglect, but without these catastrophes it has been a comfortable space to be.

Most IT managed services providers do have some form of website; not so many have a blog or other educational content. However, these are very unlikely to create a "marketing engine", or to excel at collecting and managing leads. Also, most are made by the owners or directors, whose only frameworking tool is a "network assessment tool" which helps them discover the IT infrastructure of the client and give recommendations based on that.

Customer Relationships:

The Service Desk drives the main relationship between the MSP and its clients. While the most important elements in its service quality are the response time, the personalized services, and dedicated resources, many IT companies have outsourced this function and had a hard time afterwards.

In our terminology, account management is still part of the Service Desk, because it’s the management part of the service. Still, some MSPs claim to be vCIOs, though it’s likely that this service was made a part of the MSP package just to improve sales.

Moreover, Virtual CIOs have tended to concentrate on IT infrastructure planning and design, or on doing quarterly "business reviews" and neglecting other parts of the business. They operate without a process-driven separate service offering. The clear loss from this is that very few MSPs will get a call if from a client with a business problem. The client will call once they’ve solved the business problem and they need a new server. Instead of being a business advisory role in most cases it’s one of technology infrastructure advisory.

Key Activities:

While there are several models, there are only three main functions within service delivery: software, hardware, and service areas.

Among existing service areas, there are projects, system developments, NOC, and Service Desk. Some companies separate the project work and maintenance; others some separate NOC from Service Desk.

The HW/SW sales have typically driven the projects, and every 2-3 years major developments were taking place. These developments drove an enormous amount of fixed base revenues for the service providers.

Key Resources:

Key Partnerships:

Partnerships have been an overrated area of the business. The software and hardware vendors have been pushing this. They have to sell and MSPs became a channel for them, so they worked everything to sell through that channel. Fancy conferences and sticky account managers were replete until the Cloud era had come. Then as I think you know most of them turned away from that channel sooner or later.

Other more valuable partnerships were based on service delivery software. PSA and RMM solutions directed the quality and the efficiency of service delivery. These companies invested heavily to educate and help IT companies.

Cost Structure:

Revenue Streams:

In terms of revenue streams the most prominent have been the resource-based ongoing revenues, which could be Time and Material, Block of Hours, Retainer, or Recurring service models. Next are the project-based revenues, which usually include fixed costs. On top of these there is a shrinking margin of hardware and software sales.

So, this is the traditional MSP 1.0 model. I have spoken with around 100 MSPs in the last few years. I have read most resources and we have built two MSP-related companies.

Business model design demands the ability to see the patterns and the changes around these whole sets of building blocks. We have to see the precise nature of changes as well as other parts of the business model have to change to adapt.

So let's see what has changed in the last few years related to the classical MSP 1.0 model:

1. Using technology is gets less complex

The user experience of mobile devices has driven an enormous change in reducing the complexity of technology. Just five years ago the method of sharing pictures included taking a photo, downloading it, converting it to Jpeg, and then copying it to a USB drive. Now my parents are doing that all with their mobile devices. Just take the picture, edit if you want and easily share it through Instagram or Facebook.

The cloud democratized technology. Everybody can get the latest CRM platform with the swipe of a credit card. There are no implementation plans, consultants, or hefty projects needed. You can just start today and emerge.

Further the current generation of users is now much more comfortable with technology. The complexity of the technology became not just absolutely simple (like using iPhone), but also relatively simple to learn and adopt. Generation X and Y are more willing than ever to search online to solve problems themselves without calling a help desk.

2. Management of technology gets more complex

The market has fragmented. There’s both a multitude of applications around the web solving problems, and numerous corporate and private problems looking for solutions. These realities are often prevented from meeting, however.  Both client companies and vendors are specialized in niches, and the sheer numbers make getting together difficult to manage.

The impact of technology on businesses is greater than ever before. Everything is wired and a single point of failure could run a company out of business. Consider CodeSpace: a small company hosting websites, where a hacker was able to erase all their data, including backups. CodeSpace was forced to close their doors. Having a clear vision of all aspects of security, applications, access, vendors, costs etc. is still a management challenge.

The IT budget has also increased because many things that were outside of the IT budget are now included in it. Managing this budget is a complex issue as IT is no longer a technology challenge but a management one.

IT is clearly a strategic asset. It is not the infrastructure but the applications, the adaptability, and the culture are what the company is using,. It can be a differentiating factor among the competition based on costs and customer experience.

So the two major changes that have taken place are, first, the complexity of technology has been declining and second, the management complexity of technology has been increasing. These trends are interdependent and supporting each other.

The problem is that these two factors work against the current MSP model in a big way.

The first is undermining the basic value proposition of an MSP by removing the technological complexity. With demand decreasing, the services that the MSP delivers are devalued. It’s the first thing MSPs are witnessing: fewer client calls and some IT decisions are being made without them.

This is a typical "Red Ocean" scenario, meaning the competition is increasing and the market is commoditizing. This is not a good place to conduct business.

The second trend is creating a new demand, but this demand has not manifested as service requirements yet. There isn’t yet a mainstream service around the problem, so clients aren’t shopping around. While there are still opportunities to solve problems for companies but they aren’t able to translate the myriad choices into a service they want to buy.

Hence this is a typical “Blue Ocean” opportunity. There are few to no competitors. The market is wide open for influence and education and unique value propositions can be made, a new service can be developed, and at a higher value.

However, as you will see, you have to pay a price as well. A switch from the current model is no mean feat and there are many obstacles down the road. This is a higher risk, higher margin model.

If we can properly read all these changes, we then have to design a new business model around them to make a viable business.

So let's have a look at the so-called MSP 2.0 model. In this chart everything green is new, the orange is of reduced value and everything red is going to be obsolete based on the new model.

 

The New Value Proposition

1. Improved efficiency with technology: find how we can drive down client costs through automation, standardization; better processes, information, communication, and collaboration.
2. Competitive edge with technology: fuel client revenue streams with technology, better customer service, faster delivery, and better information flows.
3. Maximized business continuity: as the impact of breach is much higher than it used to be, so the IT security, information security, and vulnerability are going to become more important aspects in the business perspective.

 

“Management" is all about making decisions, creating strategies, planning accordingly, and executing projects. We have to create services around these three building blocks following the principle of the value proposition: We are going to comprehensively handle all the aspects of these management issues on behalf of the client.

This is not entirely new; every MSP has been doing some of this in one area or another. However, this puts it in perspective of the two major shifts. These must be fully fledged service offerings, and not just something we do for our clients as a side offering.

The New Customer Segments:

We have to seek out companies with more complex operation. This kind of service has not been developed for larger groups so we could have 150 to 500-member organizations as targets as well. We may not drive their whole IT strategy, but we could be a part of the Sales, Operation, or HR-related IT strategies. These are also small companies within larger ones with a particular focus. Harvesting those projects could be very profitable.

Also, we have to understand that being thought leaders, and not interested only in infrastructure, could open a lot of doors to larger organizations. This solves the problem of hearing “we already have an IT department” from larger potential customers.

The New Sales Channel:

If we want to sell this new value proposition, we are going to face new challenges. Nobody is buying it now, period. There is no such service around, and the market is still uneducated on these terms.

In order to be able to sell, we have to educate the clients, and we have to "reframe" them. For education, we need to create content and distribute it. A blog is a better start than books and case studies and is a common and effective avenue for content and inbound marketing.

Our value proposition is to increase something that is very intangible. The competitiveness with technology is a pretty fuzzy term. However, the actions and ongoing activities driving competitiveness can be measured. This is "ITCq" (IT Competitiveness quotient); a measuring of all the things related to well-managed technology. Using this tool makes it very easy to start a conversation with prospective clients.

Starting a conversation is one thing but closing deals is another. For that, the different workshops are a great option. We provide services to show our expertise, and then we can move on to important quick-win projects. Those projects are our foot in the door; and after successfully closing those projects, we can open up many other services. This is a seeding rather than a hunting sales approach, with the understanding that clients need time to adopt.

The new client relationships:

It is now apparent that our new core service offering is totally centered around a true virtual CIO role. The True vCIO deals with all aspects of the technology, not just infrastructure.

This role is going to fulfill all the needed high-level management roles, communications, and interactions. It creates all the IT strategies, roadmaps, budgets, and operational plans and manages all the projects needed to execute the strategy. This role is going to drive the perception of our services. The switching cost is considerable - we can still drop the ball on the delivery side if our vCIO isn’t dynamic - but if we stay active and communicate well, we have nothing to fear.

This is a business analyst or IT consultant role. If you don’t yet have one, hire someone with this skill. Set processes and job descriptions in place so you can train and set expectations for his or her performance.

The New Key Activities:

What are we going to doing differently on a daily basis? One thing is for sure: we are going to sell less equipment and classic software licenses. Instead, we are going to aggregate services and sell cloud-based applications based on a different business needs.

Because the vCIO services are now standing on their own, not attached to an MSP contract, we need to incorporate an "IT management framework" that comprises all the processes and deliverables that IT management now does and the vCIO is working on. The IT management framework is like a small ITIL, or any other framework, but more practical and automated.

We are using our own 7C IT management framework for that reason. The ITCq is the tool which measures all of the activities we have in the 7C framework. Implementing that sort of framework produces a decent revenue and creates a very visible form of ongoing services to maintain and further develop the client’s IT competitiveness. It contains yearly strategy, planning, budgeting, and auditing, based on templates and best practices. Everything goes into the software that clients can access, and which we can use to make what we bring more tangible and visible to the clients.

Because we are creating IT strategies, someone has to manage them. This includes overseeing all the IT projects the client is doing, but it could also be the specific third-party project management of a larger solution.

We will continue operating our NOC, Helpdesk, and traditional IT infrastructure services as long as it makes sense.

New Key Resources:

New Key Partnerships:

Here the change seems to be slight, but the importance isn’t. You could create a marketplace of cloud application providers. These could be niche players (solving a problem for a vertical) or general players (Google) in your marketplace.

The goal is to get some commission based on the sales of those services. As a vCIO, you are making decisions on behalf of the client, which means you are going to face problems and look for solutions. Your marketplace is the set of solutions looking for problems. You are the interface between the two worlds, coupling problems with services.

If you think five years into the future, 75% of an average client's budget will come from cloud-based solutions. It’s not difficult to calculate how much money an MSP could make based only on recurring commissions. A general cloud-based provider (Salesforce, Google, or Microsoft) could offer 8-10% of the sales recurring. A smaller niche provider could leave 20-30% of the sales on your side. Revenue could be coming in every month with just these partnerships.

This is a cloud broker model. However, we are not brokering just traditional cloud service providers, but every software company, because everybody will be switching to a cloud-based delivery model in the near future.

New Cost Structure:

New Revenue Streams:

Plenty of new possibilities here.

Conclusion:

These are two big trends of technology - it’s becoming easier to use while management of all the choices is more complex and creating a tornado. If you think you are going to be able to stay only a 1.0 MSP, cloud and reduced complexity is going to put you out of business. If you are not getting into IT management, you are missing the boat.

The new model will enter into the mainstream in the next few years. As it does the incumbents will have tremendous advantage over new entrants. The learning curves, the thought leadership, and the processes are hard to copy or implement quickly. In my opinion, someone who invests now and spends the next few years developing this model would be reaping the profits in the following 5 to 10 years.

During the next session, we are going to talk about the specific MSP 2.0 related Projects, Ongoing Services, and the natural adoption of the model in 12-24 months, so stay tuned. Subscribe to the Blog alert on the top right to make sure you get the new articles.