The Evolving MSP

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Software Toolmakers Help MSPs Expand Their Portfolios

You've likely heard that there are only two ways to make money: Sell more to your existing customers or create new customers to sell to. You've probably also heard that selling to existing customers is five times easier than creating new ones. As they say, "In your heart, you know that's true."

The next thing you need are new things to sell to your existing customers that they want and haven't already bought. Back in the "reseller" days, that was easy. You just looked through your distributor's catalogs or the back of industry magazines and found new things, items and products your customers might like.

Now, of course, your customers do that for themselves, checking Amazon, CDW, computing and IT magazines or other Web sites to see what new products are available -- which is fine, since you hardly make any margin on most products anyway. This leaves you with only one category of new things to sell: services.

Many Service Options for You To Sell
This is good news! Services deliver solid margins for you and real value for your customer. This brings you to a few good questions to ask when seeking new services to add to your portfolio and sell to customers:

  1. Do my customers have need for this service?
  2. Do I have a reliable source to deliver and support this service with quality at a reasonable cost that I can make money on?
  3. Is this source a good partner to work with?
  4. Is this service consistent with the other services I already offer so it doesn't break my brand?
  5. Is this a service I can deliver myself either now or soon?

This last question leads to the classic broker/buy/build discussion. Are you better off brokering the sale from the source to your customer and receiving commissions? Would it be more profitable and easier to manage if you obtained the service from the provider and resold it to your customer at a profit? Ultimately, if you prove you have a market for it, would it be viable and more profitable to offer and deliver this service yourself? What would be required in terms of training and preparedness, and is it still worthwhile after you invest in that?

Creating Your Own Services -- With Help
Several software developers have recognized an opportunity to help and partner with you to provide the tools you need to create new services.

Way ahead of their time on this were early software developers like Trusted Information Systems (TIS), founded in 1983, which in 1994 created a toolkit that the integrators of that time could use to effectively configure and deploy its Gauntlet firewall. Unfortunately, that was back when many integrators hadn't yet developed the insight to charge for their services instead of giving them away for free (the awful four-letter f-word of the channel).

The next visionary was probably Citrix, which forged many tools to help its partners more effectively build the early virtual desktop interface (VDI) solutions. It continues doing just that to this day.

The introduction by Microsoft of SharePoint would launch a cottage industry that also continues to grow even now. Maybe the best-known and certainly among the earliest tool builders for the SharePoint ecosystem is Nintex. MSPs and systems integrators (SIs) should note that this highly successful provider of tools to create customized solutions on the SharePoint platform actually began just like you -- as an SI and early MSP. In 2006, as it created more tools for its customers, Nintex realized it could package those tools and sell them to what were then its competitors.

Shopping for Tools
Today, there are many software providers that no longer sell many licenses for resale to end customers. Instead, they sell what was once called a "consultant's license," in which the MSP purchases licenses to use on behalf of its customers. The customer never actually takes title to the software.

Early network management software companies like Level Platforms and SilverBack Technologies enabled the MSPs of their day to build network operations centers (NOCs) for their own customers. The MSPs would purchase sufficient licenses allowing them to use the software to monitor and manage their customers' networks based on the size of a particular customer's network. Were they to stop servicing a particular customer, those licenses became available to use elsewhere.

As Office 365 became more popular, companies like SkyKick and BitTitan introduced migration facilitation software that MSPs could use to migrate their customers from on-premises to Office 365. More recently, BitTitan evolved its MSPComplete software to launch a new platform, Voleer. This platform enables MSPs to go beyond monitoring and management and become proactive automators of many network and virtualization functions. Now, those MSPs not only keep networks running -- they continuously keep improving how those networks operate, and how their users operate them.

Add New Pages to Your Portfolio
MSPs should explore more than simply adding new services to their portfolios; they should also explore many categories of services that are either emerging or expanding.

Most MSPs manage network components and circuits. How many help customers manage the cost of their network operations? There's an entire segment of companies providing technology expense management (TEM) services in which they track, reconcile, validate and even pay customers' telecom- and datacom-related invoices.

The number of licenses and subscriptions that companies must manage to entitle their users is proliferating at an astounding pace. This has given rise to a number of licensing management companies that help customers maintain compliance and avoid fines and fees.

The Only Limit to Innovation Is Imagination
The core reason that it's five times easier to sell to an existing customer is trust. The customer already knows you and trusts you. You don't need to invest the time and effort it takes to initially earn their trust; you must simply work to keep it. Then they'll gladly give audience to any idea you introduce.

You need to challenge yourself to innovate and continue innovating. When you attend conferences, even the virtual ones we depend on now, visit the many software vendors in attendance. Interview them -- but this time you need to change the questions you've been asking. Instead of asking them, "What features do you offer?" or "How much margin can I realistically expect to make?" ask them, "What kind of services can I deliver surrounding your products or by using your products to service my customer?" That's a very different question, but it acknowledges that your services -- and not their products -- deliver the major share of your margin.

As you listen to their answers to your questions, engage your experience in selling to end customers and your imagination. Let the innovation flow through you and note your ideas. When you get back to your team, present your thoughts and let them help you develop them. Create your own unique new services, then go sell them at the kind of margins that only things with no competition can command.

What's in your portfolio?

Posted by Howard M. Cohen on September 08, 2020