Not even the great and all knowing Nostradamus could have forecast this mass disruption called cloud computing. The cloud has companies buying less hardware in favor of pouring more money into software and services. This fundamental shift in IT spending is just one of several trends steadily triggering the move from VAR to MSP for a lot of IT providers.
According to data from Statista, the global IT outsourcing market made nearly $89 billion in 2015. Managed service providers have a clear and direct path to this lucrative arena; immediate access to services that offer higher value and higher margins than the traditional break-fix model. But as we discussed in the first post of this series, bigger revenues isn’t the only prize on the line. MSPs also have opportunities to forge a tighter rapport with their customers and deliver added-value VARs can’t match.
The mere thought of shifting gears to a promising new business model is exciting. With recurring revenue at their fingertips, MSPs can improve their financial prowess and give management the flexibility needed to expand IT and support resources. In order to reach the land of managed milk and honey, VARs must take some very important factors into consideration.
Every big business move requires careful planning and the transition from VAR to MSP is no exception. Armed with a great strategy, you’ll be ready for the managed services market sooner than later. This transition plan must address a number of specific points, including:
- Service model: What services will you offer? Which services have the most profit potential? Which can you offer immediately? Which will you plan to introduce at a later date?
- Current contracts: Is it possible to roll any of your existing customers over into recurring contracts? Which customers are most likely to convert?
- Existing infrastructure: What adaptations need to be made to your current IT environment? Will this transition require significant hardware and software upgrades?
- Business Continuity: What strategies will you employ for backup and disaster recovery? How will you ensure business continuity if your services suddenly become unavailable?
- Marketing: How will you generate leads and secure new contracts? How can you optimize your marketing strategy?
Staff and Skills
Differences between MSPs and VARs are crystal clear on the operational side. The job a VAR performs is akin to a plumber in that they come in when something either needs to be fixed or installed. Their customer interactions normally take place on a one-time basis. Flourishing with managed services calls for a much tighter collaborative effort between provider and customer as well as internal business departments. Sales and support teams alike must be properly trained and equipped to deliver the enhanced care customers demand.
VARs on the move should know that recurring revenue doesn’t just automatically start rolling in once adopting the MSP business model. Despite having such compelling benefits in reach, not all vendors are willing to adapt to new standards. For some, it’s a matter of not having the resources. Consistently selling single-point services and locking up long-term contracts requires skills not every IT department possess. What many prospective MSPs discover is that a successful transition not only means adjusting your processes, but augmenting your personnel as well.
Being able to build customer relationships is key to the success of any business. The managed services model aims to build relationships by design. For example, a customer might enter a one-year managed security contract to alleviate the hassle of securing their network. When it comes time to renew their agreement, they may decide to outsource communications, storage, backup and disaster recovery, and other IT functions to the provider. Relationships often become partnerships that run several years when an MSP delivers on their service level promises.
These long-term relationships are built around services. And since no two organizations have the exact same preferences or requirements, service providers must aim to cater to the masses with a diverse palette of options. Service flexibility enables an MSP to appeal to the broadest range of potential customers with IT solutions that illustrate your ability to support both current needs and those that may develop later down the road as well. The enterprise is steadily trending towards a standardized infrastructure. This unified approach to IT bodes well for MSPs stocked with highly sought after services that can be easily integrated into existing offerings.
Manning the Ship
If there is one item an MSP must have in its toolkit, it is a reliable piece of RMM software. After all, this is the technology that enables you to effectively service clients with a broad range of IT needs. The right RMM tool will deliver benefits such as
- Automated IT processes: Application deployment, network monitoring, patch management, and more is made easy when your RMM platform automates everyday IT processes.
- Advanced network monitoring: The ideal RMM software will help IT managers see the bigger picture as it pertains to streamlining management tasks and identifying new trends in monitoring connected devices.
- Device-friendly RMM: An RMM platform should keep the BYOD phenomenon in mind by allowing IT experts to remotely distribute applications, patches, and mission-critical services from any supported device.
- Metrics and reporting: Detailed performance statistics in the RMM dashboard will allow MSPs to measure the real value their services provide to customers.
- Comprehensive security: Be it out of the box or via third-party integrations, an RMM platform must be configured to provide a secure way to deploy, manage, and monitor client systems.
Service Level Optimization
Service level agreements represent your promise of quality and reliability to the client. They are standard for IT service providers. Their importance increases tenfold when managed services are in the discussion. In this scenario, it may be a case of going from promising to sell or fix hardware to guaranteeing that a given service will stay up and running. Making such a promise with confidence requires an MSP to play an active role in not only managing said services, but procuring and possibly even designing them.
Seasoned IT consultants will likely agree that every service level agreement shares a few basic elements. However, SLAs should not be approached with a one-size-fits all mentality. For instance, guarantees don’t have to be limited to server or application uptime. An SLA can be customized to include your response to downtime, support hours and availability, and various other individual factors. Building custom SLAs around aspects that are specifically important to clients is yet another way to go from simply being a provider to becoming a trusted advisor.
Don’t Break Away Completely!
The traditional VAR way has been heavily criticized for its reactive approach to IT. Whereas the break-fix model calls for IT pros to only spring into action when problems occur, the MSP model focuses on proactively monitoring and managing IT systems to prevent issues before they even take place. After weighing all the pros and cons it’s relatively easy to see why one method is considered far superior to the other.
While it may appear that IT providers are rushing to shift gears to MSP mode, VARs shouldn’t be so quick to ditch their old ways. Dollar for dollar, it can be argued that the break-fix model is designed to deliver greater financial rewards than the preemptive method of taming IT challenges. There is a growing number of VARs leveraging managed services as an additional line of business. Vendors on the brink of transition should strongly consider combining conventional MSP initiatives with selling hardware, implementation, and other professional services. In today’s IT climate, adopting a hybrid model may very well be the key to completing a successful transition.
In part three, we’ll talk about how to conquer the five biggest challenges you’ll face during your transition.