Today's managed service provider (MSP) is faced with a challenge: The downright glut of refugee resellers that have migrated to the MSP ranks without doing the hard work is making it very difficult for those who have done the work to rise.
Some refer to it as a "race to the bottom" for MSPs as they try to deliver excellent service while competing with ridiculously low rates set by those who have no idea what they are doing.
It's really very simple: Great service providers beat out the rest because they know their costs. That's it! They know how much of the rent, phone, electric service and everything else to burden into their cost calculation so they can target a specific margin and arrive at a reasonable price. Without knowing how to burden their costs, companies can't afford to keep operating. So they cut corners, short-change customers and sully the name of MSPs everywhere.
It may be that some of the bottom-feeders will learn their lesson and rise to a reasonable level of professionalism. Others will go off and do something else. In the meantime, great MSPs find themselves challenged to find ways to distinguish and differentiate themselves.
My Mother Always Wanted Me To Become a Doctor
Those who have been reading my work over the past decade or so know that I'm a big advocate of developing IT to become a true professional practice like law, accountancy or medicine.
Over the next several months, this blog will serve to encourage MSPs to follow the example and the business model of medicine. That is, become specialists.
Cisco, Microsoft and others have re-imagined their partner programs to encourage specialization. Follow that lead. Seek to specialize and find your focus, your niche. Buy deeply into the reality that "you can't be all things to all people." You don't want to; it's too expensive and you end up being just like everybody else.
The Evolving MSP will offer many directions in which to differentiate -- specialties to adopt and make your own. These will include:
- The Cloud Services Provider (CSP)
- The Data Scientist Service Provider (DSSP)
- The Software-Defined Services Provider (SDSP)
- The Automation Services Provider (AuSP)
- The Artificial Intelligence Services Provider (AISP)
- The Internet of Things Service Provider (IoTSP)
- The Universal Communications Service Provider (UCSP)
- The Vertical Services Provider (VSP) -- many flavors!
As always, I seek to foster a productive, useful conversation. What are some specialties you've been considering? What do you think are the obstacles? Where do you think you'll need help from vendor-partners? What's your vision for your future? Let me know at [email protected].
Posted by Howard M. Cohen on January 04, 2021 at 7:49 AM0 comments
It's the IT equivalent of alchemy -- magically turning a large cost-center into a big profit-producer for client after client and, by doing so, dramatically increasing efficiency and effectiveness in their organizations without adding capital investments.
You take something often considered to be a "necessary evil" and convert it into one of the greatest strategic weapons in your client's arsenal. And you turn one of their biggest frustrations into your greatest illustration of innovation.
When you speak of alchemy with your clients, you are speaking with them about their business, not technology. You speak of efficiency improvements and productivity gains, and how they translate into profit contributions. More and more clients have come to expect this level of conversation from you. Here's a perfect framework for you to get in front of that expectation.
Measure, Manage and Mature Your Client's Use of Business IT
There are many, many IT maturity models from many different sources that you may want to embrace. Before you begin using this consultative approach, do a survey of as many as you can find. Based on what you learn here, evaluate each of them and determine which one you feel most aligned and comfortable with.
Generally, each IT maturity model will take your organization through the following roadmap:
Level 0: Ad Hoc
Everything must start somewhere, and business IT is no exception. Companies in start-up mode will very naturally purchase computers; they're considered a necessity. But most will do so with very little direction or planning beyond choosing their preferred operating platform and hardware manufacturer. Some formal IT maturity models refer to this as the "chaotic" or "ad hoc" stage.
Level 1: Reactive
Realizing that computer support is draining many people's time, organizations start to put more formal structures in place responsive to their frustrations. Many IT maturity models refer to this as the "reactive" stage. These assignments tend to create IT silos where different departments use different applications, data structures and protocols. Often, the outcome of this is a great deal of firefighting and lost time.
Companies that remain at Levels 0 or 1 for any length of time end up with personnel who are very frustrated with the "IT department," even if there isn't a formal one. They continue to view IT as a "necessary evil" that may often impede their progress.
Level 2: Proactive
Level 2, often referred to as the "proactive" stage, is where the real work begins. It won't be sufficient to simply improve on what was done at Levels 0 and 1. The company will need to learn to do new things, gaining proficiency in new skills like network management, user support planning and standardization.
To be impactful at this stage, the silos must come down and be replaced by standardized platforms, applications, data structures and toolsets. Level 2 shifts from a focus on efficiency to effectiveness. Level 2 is more about business integration than just performance.
Level 3: Defined
At Level 3, the IT department's goals shift to maximizing the value that can be derived from information, technology and technology-based initiatives for the business. People in the business begin to see IT as a service to their department. Most companies implement departmental chargebacks for IT usage at this stage, further incorporating IT into each department's P&L.
Level 4: Optimized
Frequently referred to as the "optimized" or "value" stage, this is the level at which IT must be fully integrated into the actual operation of the business. Usually led by a C-level executive, the Level 4 IT organization's services are inextricably linked to specific business processes. No longer is performance reported in terms of uptime or other technological metrics. Instead, the IT department reports on the success of its business outcomes and contributions to the overall operating profitability of the company.
Here at Level 4, the main concerns are flexibility, business agility, scalability and extensibility to rapidly respond to any new business opportunity IT may be challenged with.
Moving to Successive Levels
The following are suggestions for how to best prepare for each move up the IT maturity model.
Getting from Level 0 to Level 1 requires someone in your organization taking control of IT. Systems will need to be identified to help formalize monitoring and incident handling. Diplomacy will be at a premium as the attempt is made to get leaders of the various silos to work well together.
Prepare to move up:
- Evaluate existing policies as compared to IT industry policies.
- Make sure you're fully compliant with government or industry regulations.
- Provide extensive user training on IT policies to improve governance.
The next step to Level 2 will require greater familiarity with professionally led service management processes and project management.
Prepare to move up:
- Focus on how you protect your users' devices and your network's endpoints, including not only laptops, desktops and servers, but also tablets and even smartphones.
- Patching and updating operating systems, applications and security systems are critical. The only thing that can threaten your network more than failing to install a new patch or update is installing one that hasn't been properly evaluated to ensure that it won't disrupt any of your systems.
- Implement a constant vigil on user password practices. An astonishing proportion of users still uses the word "password," "123456," their spouse's/children's/pet's names or quick fixes like "qwerty" as their password.
- Some of your servers may need even higher levels of protection.
- Standardize, standardize, standardize.
At Level 3, fully formalized IT service management (ITSM) processes must be implemented before value can be realized. The executive responsible for incorporating ITSM must be able to function in the C-level suite and participate in strategic business planning, enabling IT to be woven into the fabric of every key decision.
Prepare to move up:
- Ensure all policies are enforced.
- Establish a routinized system for evaluating and distributing approved patch updates across your network for known vulnerabilities in operating systems and applications.
- E-mail must be archived in compliance with company policies. To avoid legal exposure, e-mail must be stored with provisions for rapid search and retrieval.
- Adopt a belt-and-suspenders approach to data backup.
- Implement software to help you identify behavioral anomalies that may indicate a user has had their identity stolen, or they are acting outside of accordance with established policies.
- Eliminate root access and administrator rights for anyone who should not have them.
Level 4 requires real vision at the level of innovating new applications for new and existing technologies that will fulfill the goals and objectives of the organization. Many IT departments become strategic profit centers at this level, so vision must reach far beyond just the technologies.
Prepare to move up:
- Provide the ability to view security incidents in real-time across the entire IT environment and correlate security events to discover root causes and prioritize remediation efforts.
- Combine data from multiple places in the network and deliver role-based dashboard reports to demonstrate proactive compliance and drive necessary remediation efforts.
While reading this, it may occur to some of you that it would be a good idea to figure out where your own organization currently falls on an IT maturity model. You're right.
Posted by Howard M. Cohen on December 28, 2020 at 9:06 AM0 comments
The quest for relevance continues. When you first became an integrator it was pretty straightforward. You were considered superior based on your ability to identify the best choice of server, storage, router, switch and other network components, and bring them together to build a better system solution, preferably at a lower cost.
Then came the cloud.
Suddenly, most of the components you brought together, and sold, were being operated somewhere else by someone else. You still got the opportunity to integrate routers, switches, firewalls and other networking components, but the servers and storage were pretty much lost to you.
Then came COVID-19. All of your users went home and were gone. They no longer needed your networking infrastructure. Every user was using their own residential infrastructure to communicate with a network core that was in a cloud datacenter or datacenters.
Feeling marginalized, are we?
Have You Ever Found Yourself 'Tech-Envious'?
Anyone who has ever operated a datacenter has probably experienced this and can tell you about it: You're at a conference or some kind of meeting of your peers. One of them tells you about this great new tech they recently added to their datacenter. Immediately, your mind starts spinning through all the ways your users could benefit from that tech.
But you don't have the budget for it, so you put it out of your mind. Still, it sure would be nice to have.
Yes, You Can Have It All
By now, you've probably extended your datacenter by integrating it with cloud resources instead of buying more hardware. Or you've simply migrated some workloads -- maybe more than just some -- to a cloud service.
Which cloud did you choose? Azure? Amazon Web Services? Google? If you've been there a while, you've probably started a wishlist of features and services you wish that cloud would provide, but doesn't.
So what? If the service you're seeking is available from another cloud provider, why wouldn't you use it? This simple question begins the drive to multicloud.
Each of the major cloud providers offers different services. Some are more focused on developers. Others are more focused on artificial intelligence (AI). With all cloud providers continuously expanding their menu of services, it stands to reason that they wouldn't all be the same. Some are unique to one provider or another. In some cases, the names are different but the services are the same. Some providers have subtle differences in the way they deliver a specific service. Each has its own idiosyncrasies, its own protocols, its own security requirements.
Sounds like something that would benefit from an expert integrator!
The New Integration that's Not So New
News flash: We've been doing multicloud for, well, as long as we've been doing cloud. Since the very beginning, we've been pointing out to customers that they can have the best-of-breed of each cloud service by identifying which one is best and subscribing. So you've been sourcing a productivity suite from one vendor, data backup from another, unified communications from yet another and so on.
This is not really different. You subscribe to the services you need from the cloud providers who have them. Your value proposition returns to what it has always been: You're the expert at how to make services from different providers work with each other seamlessly. You help your client select the right provider of the right services, configured in the way that will serve them best. Then you provision and deploy that service appropriately.
Being an MSP as well as a cloud solution provider (CSP), you then dutifully add it to your customer's monthly recurring bill so you can maintain and manage it.
Many platforms are emerging to make it easier to manage multiple cloud services from multiple providers. Mastering some of these, in addition to becoming fully versed in the differences between services from various clouds, potentially represents the next evolution of cloud integrators.
Posted by Howard M. Cohen on December 22, 2020 at 7:27 AM0 comments
Are you doing everything you can to get your clients to see you as their trusted technology partner? Stop. You're selling yourself short and severely limiting the revenue and profit you can be generating from each client.
You absolutely want to be trusted; anybody in business wants to be trusted. Trust is a core component of any lasting business relationship. But by focusing on technology, you're not positioning yourself where you need to be in today's IT industry.
What does a trusted technology partner do? If you're a client you probably think of the following:
- Helps select technology products that work well together and give great performance.
- Prepares those products, configures them, tests them and probably has them installed and integrated, as well.
- May offer some security programs, cloud services, storage networks, power protection, etc.
- May build and help maintain datacenters.
Is that really what you want to be known for?
Many MSPs have successfully occupied the space that a chief information officer (CIO) would were the company large enough to justify the expense. They do so by offering a "fractional CIO" strategy in which many clients share one CIO or virtual CIO (vCIO), and each pays a fraction of the cost. When you add up all of those fractions, they should total to much more than the fully burdened cost of that professional.
In a large corporation, the CIO is part of the executive team, a C-Level executive. Their responsibility is not limited to making the technology work -- that's usually assigned to a chief technology officer (CTO). Instead, the CIO helps the executive team apply technology solutions to achieve the overall goals and objectives of the company. They are fully involved in developing and setting strategy. Their job is not just the technology, it's the entire business.
Trusted Business Partner
To achieve positioning as a client's vCIO, you must earn the right to be considered their trusted business partner. You must be fully versed in how businesses succeed, and how each client is endeavoring to do so. You need to know their challenges, their aspirations, their goals, their objectives and their SWOT -- strengths, weaknesses, opportunities and threats.
You must be expert at applying technology solutions to support these, and to solve challenges to them. You must also constantly remain fully informed on emerging solutions, making your clients aware of those that may be of value to them.
You must be brand-agnostic. By not advocating for any particular brand of product or service, you demonstrate the objectivity required to ensure that you're always selecting the best qualified solution for each challenge.
You know you are succeeding when client ownership and executive management consistently include you in key decision-making processes -- especially, but not necessarily limited to, those involving technology.
Emanating from your Attitude
When people ask you what kind of company yours is, do you find yourself answering "VAR," "SI," "MSP," "CSP," "reseller," "computer company" or some variant of those?
Do you ever think about referring to yourself as a consulting firm? Do you think of yourself as having sufficiently deep and broad knowledge to call yourself a professional consultant? A real consultant -- not just the kind that went to the business card printing store and had them put "Consultant" under their name. Do you feel you conduct yourself as a professional consultant does? Do you have a clear image of what that looks like?
Your ability to promote and sell your firm as a professional consultancy begins with the mindset, the confidence and the concern you exude for your clients' success. Don't worry -- soon enough, clients will let you know if your confidence is warranted or not.
I called this column "The Evolving MSP" because that's what I see MSPs doing. As with any large group, some are leading the pack, maturing at high-velocity. They're adding consultative services. They're selling engagements. They're leveraging project management, agile methodologies and many other strategies to improve the way they deliver value to clients.
And that's what they deliver to clients: value.
There are also many in the middle still focusing on technology, but offering more services and profiting from them. Then there are the laggards who still think they can make a living selling stuff.
Going forward, this maturity leadership will become more and more critical to your survival and growth. Clients know they can go to office supply stores to purchase technology products. If they're going to pay someone else for what they do, they'd better provide real value.
What value are you providing to clients? I'd really love to hear from you about your journey to truly becoming a CIO for SMB companies.
Posted by Howard M. Cohen on December 17, 2020 at 7:48 AM0 comments
It's no secret that your experience, your skills, your expertise are valuable -- very valuable. They're the result of big investments. The mystery is why you'd ever give away any of the service value those investments have created. Yet MSPs often offer up their capabilities at no charge.
Learn how to leverage the art of assumptive selling to always receive the fees you've earned. What do you sell? There are so many ways to answer that simple question, and the way you choose to answer it says a lot about who you are, where you're at and what you should be thinking about next.
Are You a VAR?
No matter what you may think, the answer to "Are you a VAR?" is "No." It has been impossible or at least unwise to be a VAR for about 35 years now.
The description "value-added reseller" emerged from what I often refer to as "The Time of Becoming Really Stupid" for the young channel. IBM first called us resellers in August 1981 because "nobody but IBM can sell IBM." As ridiculous as that sounded to us, IBM did give us 41 percent margins at least on most IBM PC products, and everything was selling at list. Try to imagine that. Stop shaking.
It wasn't long before Compaq, Toshiba, RadioShack and others joined in. Realizing that customers could buy these products at list price from anyone, the first question we asked was, "What can we do to convince customers to buy from us instead of our competitors?"
We "cleverly" came up with the idea of giving away services along with the purchase of computer hardware. We would assemble, configure, burn-in, test and prepare systems. We would install them onsite. We'd load software. We would do whatever we could to beat what our competitors -- who had come up with the same ideas -- could do.
These were the short-lived VARs. We added value to the purchase to compete.
The Death Spiral
I was working at The Computer Factory at that time. It may very well be that we were the first -- or at least among the first -- to discount products. The death spiral began immediately and it didn't take long until we all found ourselves with margins of 1 percent or less.
If you were thinking about it, you realized you couldn't afford to give away services anymore if you didn't have the big margin to fund it. Some of us thought faster than others. Those who didn't went out of business pretty quickly.
Within maybe two years, the age of the VAR had come and gone.
The Rise of the Solution Provider
Yeah, that's my Luke Skywalker moment, and now it's over. This brings us back to the question of what it is you sell. If your answer is "Computers," good luck to you. You now know how long it's been since that made anyone any money.
If instead your answer is that you sell what you do well, you're on the right track, so full steam ahead. We're living in the age of the service provider. Maybe someday that will morph into "technologist" or something more akin to "doctor" or "lawyer" than "repair guy." For now, though, those who are making money identify themselves clearly as service providers. They sell the services they've become good at providing. Some examples:
- You're good at selecting, combining, provisioning, configuring and managing cloud services, You're a cloud service provider (CSP).
- You're good at data and network security. You're a managed security services provider (MSSP).
- You're good at monitoring and managing customer networks and remotely resolving anything that goes wrong. You're a managed services provider (MSP) along with almost everybody else and their brother-in-law.
Behold the xSP: The Service Provider of Tomorrow
One thing all successful service providers have in common is they give away nothing for free ("free" is, indeed, a four-letter word). They know there's real value to what they do and they look to be compensated for providing that value. That's professionalism.
I earlier alluded to one of the biggest problems they face. There are simply tons of MSPs who transitioned away from being resellers. Not all of them have that one thing in common that we just identified. They give services away -- sometimes for low, low rates and sometimes for f-f-free. Whether they charge for it or not, they're not very good at providing services. They would have been better off opening up a pizza place (people gotta eat).
Market forces will eventually filter out the wheat from the chaff -- the great MSPs from the other kind -- but there will still be a large crowd of MSPs to compete with.
Over the next several months we're going to explore answers to where great MSPs can go from here -- how they can differentiate themselves, find their niche, specialize in something and be well-known for it. How they can define their space, occupy it and make bundles of money.
Here are some of the future possibilities that await innovative, enterprising MSPs looking to rise:
- The cloud services provider (CSP)
- The data scientist service provider (DSSP)
- The software-defined services provider (SDSP)
- The automation services provider (AuSP)
- The artificial intelligence services provider (AISP)
- The Internet of Things service provider (IoTSP)
- The universal communications service provider (UCSP)
- The vertical services provider (VSP) -- many flavors!
Some of you may have already figured out that this is where we started with this column, "The Evolving Channel." That which does not evolve simply dies. I wanted to talk about the future, the possibilities, where today's MSPs can focus on going to next. Hope you'll join this journey and get some great ideas along the way. I look forward to hearing about the new, innovative practices and services you're creating, and the ideas you'd like to see this column explore.
Posted by Howard M. Cohen on November 12, 2020 at 11:13 AM0 comments
Today's IT requires more telecom services, more cloud services, more subscriptions than ever. Each one has its own pricing complexity to confound and confuse.
The MSP who is as adept at configuring the most cost-effective licensing and subscription strategy earns far more appreciation by protecting their customers' budgets. Here's some guidance on how to master the services catalog.
According to many "experts," monthly recurring revenue (MRR) is the holy grail of managed services. It's everything you want to achieve greatness, success, riches beyond your wildest dreams.
Any of you who have ever seen me in presentation live or online have probably heard me rail against this short-sighted nonsense foisted upon you mostly by people who have never worked a day in the channel.
Put in its proper context, MRR is an important source of revenue for you, among many others. If you stop to think about it, that makes it one of your customers' larger concerns. They're the ones who pay those "costs" that become part of your "revenue." Know what? They appreciate when you show concern about that, about those costs.
Coming at it from another angle, part of what you'd always like to do to improve client relations is to make your clients into heroes to their companies. What makes your client a hero more than saving money while getting much better service for their company?
And for those of you with the wisdom and ability to conduct your client relationships at the C-level, particularly the CIO and CFO, you know that these executives are as concerned about the operation of the business overall as they are about the technology as an enabler. When you speak to them in the language of budget, you gain even more respect from them.
Expand Your Portfolio
Business 101 teaches us that there are only two ways to increase revenue: create new customers or sell more to existing customers. And if we're listening to those earlier-mentioned pundits, we know its five times easier to sell to an existing customer than to create new ones.
All you need is something else to sell. Following this thinking, MSPs are best served by constantly seeking to add new services to their portfolio of offerings.
Here's one to consider: Call it "subscription management" or "license management," or call it "budget control" or "cost control" or just plain "holding on to more bucks." Doesn't matter what you call it -- the idea is to be the one who manages your customer's cloud subscriptions, software licenses, capacity management, cloud resource controls and other financial considerations that surround their technology. Help them manage the one thing that's most important to all of them: their budget.
More Here than Meets the Eye
When you pull this idea apart, there's much more to it than may have occurred to you at first.
The capacity management piece is simple, but it's very important because it involves the ever-hazardous PEBKAC (a.k.a. problem existing between keyboard and chair). One of the fabled "great things" about cloud is that users can request resources when they need them, release them when they're done and only pay for them while they were in use. That's great, until the PEBKAC neglects, forgets or otherwise fails to release them. Then you keep paying until someone notices those resources just sitting there.
Be the one who notices. The one who is constantly looking to make sure no funds are drained needlessly. Talk about heroism!
The plan lawyer part of this requires more homework, but it can really pay off during presales. The engineer who goes beyond technical design and identifies the best purchasing program to bring licensing or subscription costs down to a minimum is often referred to as "that genius who saved me money." Yeah, hero time again.
Those Were Appetizers; Here's the Main Course
The main cash cow is so big that an entire business grew up around it. Starting a few decades ago, a few insightful people realized that many companies were burning money due to mistakes or other incorrect billing for telecom services. They offered to analyze your telecom bills, and they did so on a contingency basis, taking around 10 percent of what they saved you as their fee. You paid them with found money. Nice.
As telecom became more complex, so did managing telecom expenses. These auditors found more and more to analyze for potential savings.
Today, telecom expense management (TEM) providers save their clients tens, hundreds of thousands, and even millions each year simply by correcting incorrect invoices from telecom carriers. Their wins come from many places beyond simple mistakes. Often, telecom circuits are not shut down when a company leaves a location. They continue being billed even though they're no longer in use. Kind of like those cloud resources. TEM providers hunt these down, then get them removed from the client's bill. Heroism.
The best TEM providers take the process from order to payment. They maintain a complete and current inventory of every wireline circuit, every mobile contract, every phone and other piece of hardware or licensing in a company's telecom "estate." They receive all telecom invoices, assess them, validate them against their contract and real-time utilization, and they'll even pay the invoice -- removing the entire telecom management burden from the client. Truly a total lifecycle service.
But wait, there's more! You know better than most that data and voice have long lived in two separate silos. Network managers run the data; telecom managers run the voice. They don't even want to know each other. But that's now changing right beneath their feet. Data, voice, video and more are all converging on a single network. How much sense does it make to closely manage telecom invoices and not cloud service invoices, datacom, backup services, disaster recovery, Internet of Things and more? It doesn't.
As a result, most TEM providers are advancing from telecom expense management to technology expense management across the board. In other words, not only are they enjoying the all-important MRR, they're also getting paid to manage it. Sweet, no?
Channel 101 Reminder
Being providers of technologies from providers with wide product selection, and also cloud services, if we've learned anything it's that we can always try before we buy. That is, before we invest in building capability, we can sell services obtained from partners and enjoy compensation from that. When we prove to ourselves that we have sufficient market, we can then build our own capacity and transition our customers back over to us when we're ready.
That said, my recommendation is that you Google "telecom expense management" and "TEM" (those so predisposed may "Bing it") and talk to a few players. This is such a big market that Gartner has a Magic Quadrant for it.
Add TEM to your portfolio and find your relationships with your clients deepening. It can't hurt!
Posted by Howard M. Cohen on October 30, 2020 at 10:06 AM0 comments
You're traveling through a land not of sight nor of sound, but of mind. Well, no, it's not like that. This is not another dimension in the multiverse; it's just another channel. But it's about as large as the one you're in.
If you're from the IT channel, I'm referring to the telecom channel, and if you're from telecom, I'm talking about IT. Two remarkably separate channels operating side-by-side and intersecting far less often than you might think.
Different Rules of the Road
While the economy that drove the origins of both channels -- aggregation -- is the same, the ways in which the channels operate are somewhat different from each other.
Originally, the IT channel was born of the opportunity for distributors and large retail organizations to aggregate the purchases of hundreds or thousands of resellers into one buying relationship that drove deeper discounts, which improved competitiveness. While some resellers were franchises of, or had allegiance to, a particular aggregator, many played the big distributors off each other for better discounts, terms and treatment. Some of this was passed through to the resellers.
The telecom channel was also created by well-funded players who became "master agents" for the large carriers, thus enjoying superior service discounts or sales commissions. To achieve the level of sales they had committed to, these master agents signed on "sub-agents," who sourced services through their master agent to provide their customers with competitive pricing.
The Major Difference
Telecom sub-agents sell carrier circuits to customers, which are implemented by the carriers themselves. Recently, master agents have diversified by aligning with providers of various related services and offering these to their sub-agents for incremental sales to customers.
IT channel partners started out reselling (and were called resellers because, originally, nobody but IBM could sell IBM, so IBM dubbed their PC-selling partners "resellers") all manner of computer-related products to their customers. To compete with other channel partners, they added valuable services to the product sales, leading to them being renamed value-added resellers (VARs). Soon, they started discounting to compete more aggressively. The only thing they accomplished was driving any real profit out of their product sales.
While telecom sub-agents by and large haven't changed much, IT resellers have had to adapt to survive. One by one, they moved away from selling products and toward providing services to their customers. These services were far easier to differentiate from competition and produced much higher margins as a result.
For seven years I wrote a column called "The Changing Channel" here on RCPmag.com, and this was the change I was describing. Today the better, more insightful channel partners have become service providers; most of them call themselves managed service providers (MSPs).
What's Your Biggest Problem?
Ask this question of a large group of MSPs and the answer you'll hear most often is, "Finding great sales talent."
There are many contributing reasons for this. The best sales professionals from the IT channel realized long ago they couldn't make money selling computer products. Those who couldn't shift to selling services shifted to selling other products elsewhere. Most of those who could make the shift seem to have opened their own practices. Many retired to live near here in sunny Arizona!
Bottom line: The IT channel is suffering a drought of sales talent.
Ask the same question of telecom sub-agents and they'll simply tell you that they need more to sell. Carrier services continue to commoditize, limiting their ability to make money. They need other services to sell that their customers will appreciate.
Have You Caught the Clue?
So we have a service channel delivering great services but has difficulty selling, and a sales channel seeking great services to sell to their existing customers. Put them together and watch the magic happen.
Many of those who are aware of this opportunity but have been confronted with great difficulty promoting the obvious convergence of these two great channels allow themselves to be distracted by semantics. It's not what we call it -- it's what we make happen that counts.
What we need to make happen is teaching these telecom sub-agents and MSPs to work well together. MSPs can easily teach telecom sub-agents to sell their services and earn hefty commissions, and telecom sub-agents can help MSPs know how and when to best engage them.
Seems to me that letting telecom sell and IT deliver is a match made in channel heaven. What do you think?
Posted by Howard M. Cohen on September 25, 2020 at 12:55 PM0 comments
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:
- Do my customers have need for this service?
- Do I have a reliable source to deliver and support this service with quality at a reasonable cost that I can make money on?
- Is this source a good partner to work with?
- Is this service consistent with the other services I already offer so it doesn't break my brand?
- 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 at 11:04 AM0 comments
Value. Cutting right to the heart, managed services providers (MSPs) sell and deliver value to their clients. Otherwise they don't have clients for very long.
When you restore a user's workstation to full function, you are enabling them to resume work. They then work to deliver value to their customers, which returns value to their company. You created value.
When you're monitoring your client's network and you spot an anomaly that you then act on by reaching into the network and resolving the root cause, you prevent that problem from becoming a full-fledged outage knocking dozens or hundreds of users off the network. You've prevented a huge loss of value.
When you move your clients from the ad hoc level of the IT maturity model to the top level where IT becomes a true strategic advantage, you've created enormous value.
All too many MSPs make the mistake of emphasizing products they provide and services they perform. When you stop to think about it, that's not what the client is paying for. They're paying for the results they can achieve using those products and services. They call those results "value."
Take pride in that! When you serve your client well, you create more value for them and help them create more value for their customers. You're helping make those lives better. You're improving things for everyone you come in contact with.
Yes, you're contracting services to clients. You're selling products that enable many of those services. What your clients focus on is the value those things create.
Read your most recent marketing messages -- e-mails you've sent out, ads you've published, Web content you've posted. Who are those things about? You? Or them?
Here's a fun challenge that may also help you dramatically improve the way you go to market. Go to your own Web site. Read the beginning of every paragraph on every page, keeping a count of how many paragraphs you have and how many of them begin with "My," "Our," "We," your company name or any other reference to yourself. It's a good bet you'll find that the majority of those paragraphs begin with you.
Prospective clients who haven't met you yet really don't care about you or what you have to say about yourself. When you talk about yourself, you lose their interest!
Try this: Flip all those paragraphs that begin with you so they begin with your client. Instead of, "We make these things work for you," try, "You need these things working for you, and we make that happen."
It sounds like a simple thing, but once you've done it, read your Web site content again. It's almost undeniable that you'll like your content a whole lot better, and so will your prospective clients. The more you lead with the kind of value your clients need, the better they'll like it, and the likelier they'll engage with you.
Especially since cloud put all the technology behind a "layer of abstraction," we really no longer talk with clients about the quality of the hardware we use or the reputation of the software developers. Instead, we talk about what the application does for them, the value they enjoy from using it.
Arm your salespeople to sell this. Gather as much information as possible about the value you've provided to clients. If you can obtain empirical ROI analyses, great! Retrain them to stop talking about how wonderful your solutions are or how talented your team is, and have them focus instead on the tremendous value your team and your solutions deliver.
Talk about value. Evaluate in terms of value. Pitch value. Live and breathe value.
Welcome to 'The Emerging MSP'
One year from now, next August, we'll celebrate the 40th anniversary of the time when the late Philip "Don" Estridge and his skunk works in Boca Raton first introduced the IBM personal computer, the IBM PC.
That moment also marked the very beginning of the "reseller channel" because only IBM could sell IBM. IBM sold these PCs to Sears Business Centers, NYNEX and ComputerLand, which aggregated purchases from all of their affiliates, who, in turn, resold them to end customers. We didn't "sell" them -- we "resold" them. Thus was born the "reseller channel," from manufacturer to aggregator/distributor to reseller to customer.
For several years, I tracked the growth of our channel in my Redmond Channel Partner magazine column "The Changing Channel" until something changed. For more and more "channel partners," it was not so much about products anymore as it was about services. With the manufacturer and the distributor significantly de-emphasized, it just wasn't a channel anymore. It was more a professional services practice.
Here we are at the tail end of the transition from reseller to MSP. Almost all resellers have become MSPs, cloud solution providers (CSPs), or independent software vendors (ISVs), or they've gone off elsewhere to open pizza parlors because "people gotta eat." Suddenly, there is a downright glut of MSPs.
Some of you have realized the MSP space is just too cluttered and have started moving up the market. Many, many others have seen the problem but don't know how to get started moving past it. This blog is for you. We'll be exploring new paths in which MSPs can take their businesses to continue to prosper and grow -- new practices, new client sets and markets, new verticals. Any and every way an enterprising MSP can continue to rise and differentiate themselves, adding more value to their business until the day they're ready to exit and sell.
We chose not to call this blog anything having to do with the popular "transformative experience" mainly because, frankly, every time I hear that over-hyped, word I throw up in my mouth a little. Evolution is more controlled, more gradual, more genuine and ultimately far more resilient than transformation.
Come join me on this new journey. How are you growing your MSP practice?
Posted by Howard M. Cohen on August 25, 2020 at 12:59 PM0 comments