One of the most common laments we hear from IT managed services providers is over-delivery of too many different services. They feel they serve their clients more than needed and the services go unused by the clients. Account managers end up doing more IT consulting than they should, demands for IT consultation are unlimited, and the IT company invests time on IT projects that never start. Here we delve into the root of the problems and learn what to do about them!
Clients will start with questions like “What is the best application for this problem? Why are people not productive? How do we manage various IT related vendors?”, etc. However most IT companies do not have the right model for IT consultancy, and try to address those needs without a viable revenue model.
The result of over-delivery is diminished return on service investment. Not only do we do too much but at the same time we set unreasonable expectations with the client. We teach them that we do it for free, or that any request is covered already, and that blocks our ability to implement a profit model, if we even have one.
Let's quickly see the six causes of over-delivery and review a solution.
We have clear boundaries in regards to traditional tech related IT services, but the clients have new needs. IT Management related issues like application deployments and cloud transitions are increasing. Deploying Office 365 to a small business office is more of a consulting job than deployment now. MSPs are missing a best practice for creating boundaries of what is included in the traditional service package.
In many cases we do a IT consultation to sell something. They are interested in centralized management of IT, and we teach them about virtualization and all sorts of technologies to help them. What we do is IT consultation, but because we are selling the IT projects, we do not ask for it separately. This is fine until we close most of the projects and make money, but sets a precedent that we do free IT consultation.
Another fault in doing free IT consultations is that in most of our future projects we do not deploy anything in the technical sense. We keep doing the projects, but there will be less billable technology work. The client doesn’t separate the different types of work - a SaaS CRM integration (we do not deploy a server, just manage the project) from an On-Premise ERP update (we upgrade the servers that are behind, then implement the project). On the one hand we have to make money for the consultation and project management (because there is no tech related work), on the other we generate revenue by utilizing engineers.
Our account managers tend to manage the account health and satisfaction loyalty. Most of the time the job is about solving a technology based problem related to our services. However, clients do not naturally differentiate what is related to our services and what is not. Our account managers are thus likely to do additional consultative services as well (and often not realize it). In this sense, they are operating as a mini virtual CIO and managing the accounts IT related issues. The problem is that we do not charge for this service. Again we’re teaching them we do it for free.
The contracts and other legal items of the engagement may not be suitable for managing a dynamic and adaptive service. The technologies and client needs are changing faster than those formulas. We usually need to adjust to the client’s real needs a lot after we start the engagement, so even if we have a solid contract on the service side, it needs to be flexible throughout the process. After a while some contracts can even become obsolete, unable to serve the common ground with clients and our services.
Another factor is that some clients signing these contracts do so blind. They do not take the contract apart word by word, but just trust the service provider. In most cases they were referrals, and this can cause a misalignment in expectations.
Over-delivery can be caused by poor execution. We do not have well defined processes in place for consulting work, or if we do, they are not put into practice. It causes vague capacity plans, which we usually overshoot. We are not following best practices, and we tend to work on the same issues repeatedly, spinning our wheels and not moving forward.
We will consider a couple of ideas and thoughts about fixing the problem. This is not a comprehensive description, rather just some ideas that will lead to the solution.
A change in the operations or processes of a client is an excellent opportunity to create a well-defined and entirely separate service offering for IT management and IT consultation. We should separate the service, so everybody can understand why the traditional package does not have these items. We can still assure the client about what is in the background but if they have a need for more IT consultancy, then you can serve them in a better way outside of the MSP contract. We all have problems upgrading clients to something they might see as included in the service. We need to have a clear new service with a very professional approach, and deliverables that have clearly visible impact. Reduce how often they assume “this is included.”
Mapping out the clients different IT management needs helps to craft services with boundaries. The client's CEO may need some ‘CEO coaching’ and you give them three 30 minute sessions, one in person and two on the phone. They may need to work on their processes - a ‘Process Efficiency Workshop,’ and you give them one meeting per month. They need more training on the infrastructure of what they have, so line up an "IT Enablement Training series" every two weeks with different topics. Each session needs to be a step to solving the problem rather than a series of attempts to make the entire accomplishment.
The great thing about LEGO is that you can build anything with standard blocks. The result is customized while the parts are generic. The same idea is behind creating standard workshops, brainstormings, and teaching sessions. You can teach your organization how to do them. Your clients have different needs, and you can solve those needs by using a custom mix of standard blocks of services and deliver the series of standard elements as a custom result. Of course this is where the mapping of defined boundaries can influence selection of these modular blocks. You can craft your best offering based on standardized, tested methods.
Project Management is usually misconstrued as a by-product - not the real goal, but to get results, we need to do it. If we turn this idea around and make Project Management a product, it helps us a lot. This means we first need to educate clients about the value of well-rounded project management, and we have to make it more tangible. Implementing an easily put together productive Project Management method is crucial. These methods help determine and define the deliverables which are needed in their service. The automation behind this can cause additional benefits like more clarity, reporting, etc; however, most of the PSAs (Autotask, Connectwise) have project modules and they do not give us any Project Management Frameworks to use. We have to have our own and implement it within our professional services automations project modules.
We can use a well crafted virtual CIO package with deliverables and processes to offer a service with clear outcomes and deliverables in a scalable way. The packaging has to manage all the changing expectations with all the needed tiers involved. The packages need to be a monthly recurring subscription like your MSP package and at least an annual commitment. Craft an annual delivery plan for the client showing all the deliverables solving their problems, guiding strategy, and exploiting opportunities. This will help them see the goals and what you do to help them achieve them. You can put some to work upfront, as well as have monthly and quarterly recurring tasks, and have fully budgeted hours for the year. In this case, you can measure profitability the same way as you do for the MSP.
A profitable consulting business faces the same challenge as a beneficial MSP service - expectations of management and processes. The problem is common among managed services providers. The IT consultation is less tangible than the tech-related work. It is trickier to demonstrate the tangible deliverables of consultative services that are the basis of our profitable vCIO services. Designing services with clear outcomes crafted in a structural way is a critical first step.