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, 20200 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, 20200 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, 20200 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.
Own It
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.
Market It
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.
Sell It
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, 20200 comments