Why Education is the First Step in Growing Cloud Revenue

I recently interviewed David Malcom, VP of managed services at Computer Services, Inc. (CSI), a $213 million managed services provider that focuses exclusively on the financial services market and reported record revenues during its most recent quarterly financials announcement. Although this giant service provider has been in business since 1965, it’s foray into IT managed services didn’t happen until 2011, after it acquired HEIT, a 100-employee managed services company.

Despite generating new revenue streams from managed services immediately following its acquisition, CSI did not have the same immediate success selling cloud services. To get a better handle on the issue, the MSP began incorporating cloud-related topics into its compliance discussions. “Our customers regularly seek our advice when they’re preparing for external audits, and they want to ensure they’re taking the necessary preparation steps,” says Malcom. “Financial institutions that are prepared for these exams save themselves a lot of time, headaches, and unwelcome surprises, which makes this a popular topic among our clients.”

A few questions CSI asks its customers during these discussions include these two: “Are you looking at cloud services for your business, and if so which areas are you exploring? What due diligence measures have you performed to ensure you’re handling your data appropriately?” CSI uses this opportunity to educate clients about different kinds of cloud services — such as public, private, and hybrid — and it helps clients think through the pitfalls of making the wrong cloud choices. “If, for instance, a customer is already using another vendor’s cloud service, we’ll ask them where the data is stored,” says Malcom. “If it turns out to be outside the United States, that’s a red flag we want to help them resolve right away. It may lead to a potential violation of federal regulations that could be costly and time-consuming to resolve.”

Throughout the consultation process, CSI contrasts public cloud and overseas cloud services with its U.S.- based private cloud offering, which has been specifically designed to protect sensitive financial data.

“Educating customers about the cloud has gone a long way in getting them to entrust us with their cloud initiatives,” says Malcom.

There are a couple of key takeaways MSPs can learn from CSI’s experience. First, consider the fact that this company has focused exclusively on the financial services market since 1965. It knows banking regulations and processes inside and out and is able to generate an immediate rapport with decision makers in this industry. That said, its rapport alone doesn’t sell cloud services — it has to engage clients on this topic, uncover cloud objections and misconceptions, and overcome them with the truth. If business executives and IT decision makers at banks and credit unions need to be educated about the cloud, how much more do business owners and IT decision makers from other small to midsize companies need to be educated?

For additional insights into CSI’s cloud services success, be sure to check out: Take Financial Services To The Cloud.

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The 2 Questions That Will Make/Break Your Cloud Profitability

Although cloud computing adoption is growing exponentially, the end results aren’t always rosy for MSPs and their clients. A study conducted by the IT Process Institute (ITPI), for example, uncovered that 76% of companies reported a low to medium level of success with their cloud projects — nearly twice the failure rate of general IT projects.

Neal Bradbury, co-founder and vice president of channel development at Intronis, says:

One area where MSPs’ cloud expertise is greatly needed is with backup and disaster recovery. Solution providers often give up BDR sales to consumer cloud offerings because they fail to challenge the thinking that drove the SMB to make their decisions.

Bradbury’s suggestion for MSPs looking to boost their clients’ cloud success rates — as well as their cloud profitability, is by learning to ask probing questions before making a cloud recommendation.  Here are two examples Bradbury shares:

  1. What kind of security does [insert name of “less expensive” cloud backup vendor here] provide your data — locally and while at rest in their data center, and especially during transit? Many of the consumer-grade cloud backup services lack security protection in one or more areas, which can put the end user’s data at risk. If the prospect is part of a regulated industry such as healthcare, finance, legal, or retail failing to properly protect their data can lead to stiff fines.
  2. If your local server were to crash, how quickly could you recover your data [from cheaper vendor’s cloud]? This is a huge oversight end users make when they use a low-cost backup service instead of a business-class cloud service. This question should open up a business continuity discussion that will allow you to investigate the prospect’s RTO (recovery time objective) and RPO (recovery point objective) needs, which will be a long ways away from what a consumer cloud service can provide.

Asking these questions helps turn the conversation from “What’s your cost per gigabyte?” to one where real value-adds such as security and data recovery time are factored into the equation, which are two services few companies expect for free.

To gain additional insights into boosting your cloud profit margins, be sure to check out Bradbury’s article: Is Cloud Profitability An Oxymoron?


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Do You Have What it Takes to Succeed in the Cloud?

by Dan Charnock, Corporate Sales and Partner Development, SherWeb


Parallel’s latest research predicts the SMB cloud market in the U.S. will reach $32 billion by early 2016 — 19% year-over-year growth rate from $18.9 billion early last year.

If that sounds good to you, then here’s even more music for your ears: SMBs are forecasted to triple their spending on managed services in the next five years.

Stop for a moment and think about what that could mean for your business.

We’ve been seeing this shift towards cloud computing for several years, but more recently the pace has really picked up. Cloud computing is well past the early adopter phase, and by the end of 2014, a majority of SMBs will have embraced the concept of hosted remote servers.

There are a number of reasons for this growth. Resource-strapped SMBs have finally realized that deploying business services in a cloud infrastructure can relieve some of the burdens on their IT resources. They’re also seeing that a Cloud platform can offer flexibility and scalability, making managing email and collaboration tools simpler and more cost-effective.

No sane person today would argue that the sales potential is there, but are you ready to harness this opportunity?

There are 3 questions you should ask yourself:

1. What are your overall business objectives and mission? How does the cloud fit into this?

2. Do you have the business and technical knowledge to resell and profit from the services you are currently offering? (Dynamics CRM, SharePoint, etc.)

3. Does it make more sense to focus on products that are easier to sell, but which will incur lower individual return? (Microsoft Exchange, online backup, etc.)

If sustained growth is part of your business objectives, then there’s a strong chance that the cloud will be a part of your future, if it isn’t already.

The best way to succeed in the cloud (or any market for that matter) is to figure out what it is you do best, and then leverage the heck out of it. What products are best suited to your specific business expertise? Are there any value-added services you can tie-in with these products to give your customers a more complete solution—and make yourself more indispensible in their eyes? Positioning your business properly will make it easier for you to become a vital part of your customers’ IT ecosystems.

These are just a few of the best practices for succeeding in the cloud. To learn about the other golden rules of MSPs who have already built a thriving business in the cloud, we recommend the free white paper: Best Practices for Building a Successful Cloud Practice available below.

And if you’re ready to grow your business in the cloud, I recommend you take a look at SherWeb’s Partner program. Its high margins and dedicated partner team will give you the tools you need to start profiting quickly from the growing cloud market. Check out our website and see why 4,000 VARs and MSPs in over 50 countries have already partnered with SherWeb.

Download the FREE white paper: Best Practices for Building a Successful Cloud Practice.


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Simplify BDR Rollouts in 4 Steps

One of the first solutions VARs sell when they want to expand into managed services is BDR (backup and disaster recovery), which is a perfect choice for a couple of reasons. First, every customer should be backing up its data. And secondly, even those that do currently have some kind of backup system in place, there’s a lot of companies that rely on outdated or overly complex systems, which leave them vulnerable to data loss.

In his recent article, Imaged-Based Backup And Disaster Recovery: 4 Keys To Keeping It Simple, Tom Fedro, President of Paragon Software Group Corp. proposes four steps VARs/MSPs should follow to ensure they’re providing an effective yet simple BDR solution:

1. Simplify Storage With Deduplication. Including native data deduplication can substantially decrease the need for storage, which may seem counterintuitive for the reseller who marks up the cost of the cloud storage. But, consider the benefits deduplication providers to your customer and you: Daily, weekly, and monthly backups can be retained longer and restored in a more granular fashion to a particular point in time. You may end up selling the same or more overall storage than if you didn’t dedupe it first, but the point is that you’re providing a more valuable service.

2. Simplify Administration with a Unified Management Console. Having a unified management console application makes restoring a machine just as intuitive as setting up a backup policy or pushing an agent to a desktop. This saves time and effort when focusing on recovery or creating backup policies.

3. Point And Click To Physical And Virtual Machines. Whether your customer is running strictly physical servers and workstations, operating in any of the popular virtualization environments, or taking a hybrid approach, creating backup policies for every machine on a network should be as simple as pointing and clicking from the console, including the process of setting up agentless backups for virtual hosts, or agent-based backups for physical systems.

4. Provide a Quick Recovery. One of the biggest mistakes resellers make with BDR is neglecting the time required to recover from data loss or interruption of an application. Ensuring business continuity is critical. Some traditional BDR systems can take days. At the other end of the spectrum, an image-based system can restore in minutes to virtual environments or in under an hour for physical systems. When backups are image-based, recovery tools (also managed from the console) can also be used to ease the deployment of virtual servers and desktops by replicating and restoring virtual machine images in minutes.

Keep these points in mind before selecting a BDR vendor partner to ensure your transition to selling this technology can be as efficient — and profitable — as possible.

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Priced To Sell: Resolving MSPs’ Biggest Dilemma

If there’s one topic that still plagues many  managed services providers it’s the issue of pricing. What makes this issue so difficult for some MSPs is the thought that they’re trying to convince a company that formerly paid for IT services only when something broke to pay every month — even when everything seems to be running smoothly.

Rob Merklinger, VP of sales at Intronis, addressed this topic recently in his article, Pricing MSP Services for Maximum Business Value. The article is full of useful tips and good advice, but it was this point in particular that caught my attention:

Don’t allow customers to nickel and dime services by offering a single-service menu to choose from. The most successful MSPs bundle their solutions and support into a managed service offering that commands a higher perceived value and leads to greater profitability.

The key phrase in that quote is “perceived value.” This is so important — especially in when it comes to selling managed services, which includes intangibles such as “better IT uptime,” “peace of mind,” and “trusted business advisor.” These are especially hard to grasp when you’re talking to a brand new prospect that hasn’t had the opportunity yet to experience the services you’re proposing.

It’s tempting to try to overcome objections by offering a discount or throwing in one or two “freebies,” but don’t do it, advises Merklinger. The key is for the MSP to firmly grasp the business value it has to offer, whether it’s reduced downtime, a projected savings, or an improvement in productivity. Then — and here’s the clincher — those tangible benefits need to be articulated to the prospect and presented as a baseline bundle that cannot be pulled apart. There’s no question that it requires more planning and sales training to do this correctly, but the payoff potential is too great to ignore this best practice.


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Stop The Break-Fix Backslide

When it comes to selling subscription-based IT and professional services, there are multiple approaches used by service providers. Here’s a quick summary of three popular approaches, followed by some thoughts from a successful MSP that helps put these options into perspective and offers a smart way to keep managed services clients from reverting back to their former break-fix statuses.

1. The “Per Device” Pricing Model
The upside of this managed services model is that it’s easy to set up and understand. There’s typically a specific price category associated with laptops and PCs (e.g. $50/month), servers (e.g. $300 per month), network printers (e.g. $30 per month) and/or mobile devices (e.g. $10 per month). The downside with this model is that it can sometimes focus too much on price instead of value.

2. The “Tiered” Managed Services Model
This model presents four options — typically designated Bronze, Silver, Gold, and Platinum with each level up comprising more services and faster response times. For example, a Bronze plan may include basic remote monitoring of a client’s servers along with limited help desk support whereas a Platinum plan may include remote monitoring and management of all servers, computers, and networking appliances plus patch management, backup and disaster recovery, and 24/7 support.

3. Á La Carte Managed Services
Unlike the previous option, this one entails giving clients a large menu of individually priced services and letting them choose what they want. This plan is preferred for service providers with “the customer is always right” mindsets, but its ineffective for prospects that aren’t IT savvy and may not understand all the services they really need. It can also slow down the sale by putting the burden on the prospective customer to evaluate each item and make the right selection.

One of the big flaws I see with the three options listed above is that they put too much emphasis on price and the burden is primarily on the customer to figure out what it needs. A better approach is more consultative plan that’s more value based. A case in point that illustrates what I mean is seen in MSP BlueWave Computing’s approach, which entails being transparent with customers and embracing the fact that a customer’s IT needs are going to change dramatically within the first six months of signing a managed services contract.

“After our initial assessment of the customer’s IT environment [e.g. computers, servers, firewalls], we present them with a recommended monthly budget they should be spending to achieve their IT goals,”
says Sean Vojtasko, executive VP at BlueWave.

“What we usually see is that they go over budget the first three months, they hit the budget the next three months after that, and from the sixth month on they start going under budget.” During quarterly business review meetings with clients, BlueWave account managers tell customers who are consistently running under budget about additional services they could allocate to their surplus budget. BlueWave allows budget surpluses to accumulate for up to three months, similar to how a telco may allow unused minutes to roll over to the next month. “Some customers choose to apply their unused budget toward special projects such as a server replacement, a new phone system, or cloud services,” says Vojtasko. “If a customer is consistently under budget, we have a frank discussion and tell them we need to either figure out an extra service we can provide them, or we’re going to need to cut back their monthly payment.”

How successful is this MSP’s value-based service model? BlueWave boasts a 98% customer retention rate, and it consistently has 35%+ year-over-year revenue growth with 40%+ profit margins on its managed services sales.


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Real-World Advice on Launching a Successful Managed Services Practice

There’s no shortage of advice in the channel telling you what you must do to be more successful. A lot of that advice points to selling managed services and building recurring revenue streams. What’s not so prevalent, however, is specific step-by-step details about how to price your managed services.

I was pleasantly surprised recently to come across an article written by an IT consultant and managed services provider that includes this valuable information. Here’s a highlight of the insights shared by author David Streit, principal at Stephill Associates:

As a solo practitioner, I offer two MSP plans, Remote Care and Remote Care Plus. Remote Care includes monitoring of PCs, laptops, and servers, with included anti-virus/anti-malware protection, scheduled scans and real-time protection, automated tasks (mostly defrags and temp file deletion), and a discounted hourly labor rate. I use per device pricing because my RMM platform also uses per device pricing. I can easily match my pricing to my costs. I generally price no less than $15/PC and $100/server, but my target is $20/PC and $150/server. The discounted hourly labor pricing is an inducement to get prospects to sign up. I’ll discount my $125/hour rate to $115/hr. Remote Care excludes labor. ALL of my closed deals to date are Remote Care.

Many IT service providers are reluctant to share this information for fear of providing information that a competitor could use against them (e.g. $10/PC and $50/server). Kudos to Streit for sharing this valuable information — especially for solution providers looking to get started selling managed services.

He even goes a step further to contrast his business model with the AYCE (all you can eat) business model some MSPs offer and to share insights on what it takes to make this model work (e.g. factoring computer upgrades into the monthly cost of the service). Whether you’re new to managed services, or perhaps you’re already selling managed services and want to see where your plan lines up, be sure to check out Streit’s latest article: “How To Bundle And Price Managed Services.”


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