An MSP’s U-turn From Failure to Double-Digit Profits

A lot of IT service provider business success stories  can be summarized like this: “We were good, now we’re great, let me tell you why.” A conversation with VanGuard Technologies‘ President Matthew Adkins definitely does not follow that format — thankfully. Adkins shared with me recently that when the U.S. recession hit seven years ago, his company got painfully close to shutting its doors. In fact, Adkins was just four months away from closing down his business when he acted upon an email invite to attend an ASCII event focused on managed services. In the middle of the night, he drove from his home in Toledo, Ohio to the event, which was in Chicago.

Matthew Adkins, President, VanGuard Technologies

Matthew Adkins, President, VanGuard Technologies

One of the most important training sessions Adkins attended at the event was on the topic of PSA (professional services automation) and the value of automating his business processes.

“Up to that point, we used sticky notes and email to track IT projects and customer service requests. We were struggling to follow-up with customer requests in a timely fashion, and our billing procedures were haphazard.”

Shortly after the training session, Adkins investigated various PSA offerings and selected Autotask. Realizing he didn’t have the luxury of easing into the new solution, Adkins recalls his strategy for ensuring the PSA tool would be a top priority. “I told my engineers that every project gets entered into the PSA portal or we die,” he says.

VanGuard’s dramatic turnaround began just two months after it started using a PSA. You can find out which other changes it made that helped it get out of the red and into double-digit growth and profitability by reading, “Saved By Managed Services.”

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3 Traits The Most Successful IT Service Providers Possess

During his keynote presentation at the fall LogicNow (GFI Software’s newly restructured name, which combines GFI MAX, IASO cloud backup, and other cloud-based products) partner conference, Dave Sobel shared some great insights with attendees.

Sobel is the former CEO of Evolve Technologies, an IT service provider that earned several industry awards during his 15 years at the helm before becoming the director of partner community at Level Platforms and more recently fulfilling the same role at LogicNow.

Among the many insights Sobel shared at the event, the following three traits of successful MSPs stood out the most:

1. Develop operating process discipline. “The best MSPs are built on a foundation of repeatable processes,” says Sobel. That statement resonates with my experience talking with hundreds of service providers, too. I’ve observed that the best service providers don’t allow their bundled solutions to be sold in piecemeal fashion. Maintaining too many dissimilar products requires a larger investment in product training, and it makes troubleshooting problems more complex and time-consuming, which translates to lower profit margins.

2. Understand customers’ business requirements. “This isn’t just about technology,” Sobel pointed out at the event. “It’s about knowing how customers can use technology to achieve meaningful business outcomes.” I’ve seen this point illustrated numerous times in the healthcare arena where doctors are using the latest electronic health record software to be HIPAA-HITECH compliant, but they’re actually less productive than they were when they used pen and paper. Some IT service provider sold them the right IT stuff, but failed to help the practice understand how the new program could actually improve productivity and enable better patient care.

3.  Maintain market awareness. There was a time when the most successful service providers made their biggest margins selling hardware. That, of course, is not the case today and those providers who are still enjoying healthy margins are the ones who kept in touch with the changes happening in their markets and adapted accordingly. “Leading MSPs keep in touch with developing trends and confirm that products do what they say they will,” says Sobel.

One other hot topic Sobel talked about at the event and Business Solutions Chief Editor Mike Monocello talks about in his latest blog is agility. Be sure to check out, “Why Agility Equates to Longevity in Managed Services.”

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The Smart Way to Sell Against Consumer-Grade Technologies

There are two types of companies that use consumer-grade technologies to run their businesses: those who don’t know there’s a more viable option and those who don’t care whether a more viable option exists or not. For the latter, you’re probably better off referring them to the nearest “trunk slammer” and wishing them good luck. But, if they’re merely uneducated about the matter, Intronis VP of Sales Rob Merklinger offers the following four talking points in his latest blog, “How To Sell Against Consumer-Grade Technologies.” Following are the topics (bolded) of each of the talking points presented in the article along with my comments:

1. Lack of Security. Sure, many freemium collaboration services have some security, but business grade solutions have a greater quantity of security features as well as more granular security, such as enabling file and folder password protection and defining more specific access controls for collaborators.

2. Reliability and Regulations. If you’re talking to a customer in healthcare, banking and finance, or legal, start with this point. Consumer offerings don’t brag about compliance with HIPAA, Sarbanes-Oxley, or PCI DSS for a reason — they’re not designed to comply with such standards. Also, reliability (which is arguably a separate point) is an important differentiator, especially when you’re talking about freemium cloud backup solutions and data recoverability. A discussion with your customer about their RTO (recovery time objective) and RPO (recovery point objective) requirements should help clarify the differences between consumer-grade and business-grade offerings.

3. Anytime, Anywhere Access. It’s not that consumer-grade collaboration solutions don’t allow you to access documents from lots of devices and from multiple computing platforms. The big differentiator is that business-grade solutions allow you edit documents from any device without requiring the user to first download the document to the desktop.

4. Manageability Matters. Merklinger says it best with this one:

“With consumer-grade your options are few when it comes to customization of the service and manageability. With a business-grade solution you can set device policies that can, for example, wipe the data in the event of a breach and pinpoint who accessed what and when.”

For additional tips on this subject, be sure to check out my previous blog: Overcome “Freemium” Cloud Competitors Once and for All.

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Cloud Continues to Transform the Channel, IDC Study Finds

Recent research from IDC offers insights on how the cloud market is exploding as well as what this means for IT service providers. For example, by 2017, IDC projects public IT cloud services to drive 17% of the IT product spending and nearly half of all growth across five technology categories: applications, system infrastructure software, platform as a service (PaaS), servers, and basic services.

Also promising is IDC’s finding that the average IT service provider now earns 27% of its revenue from cloud-related activities and that number is projected to increase to 41% by 2016.

Another interesting finding s that what IT service providers value in their vendor partnerships has made a big shift. Years ago, financial incentives such as rebates, spiffs, and market development funds would have topped the list. Moving forward, however, the top needs channel partners have are enablement-related: technical support, sales/technical training, and sales support.

Be sure to check out IDC’s “The Rise of Cloud in the Channel” infographic, which includes additional insights on important cloud trends.

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Save the Date: IMOne Fall Invitational

IMOne Fall, September 21-24, 2014 at Aria Resort & Casino Las Vegas

Twice a year Ingram Micro hosts a partnership event like no other, connecting members of its five elite communities for an unparalleled networking and technology education event. At the inaugural event in spring, Ingram Micro welcomed more than 800 solution providers. The fall event will build on the momentum started at the spring event, providing a prime opportunity for you to connect and drive new business with Ingram Micro’s most success-minded partners.

At IMOne Fall, you’ll have the chance to engage with solution providers from several communities: VTN, SMB and SMB Canada, System ArchiTECHS, Healthcare and Public Sector SLED. IMOne brings Ingram Micro’s key audiences together in one centralized location to hear the industry’s best business coaches, technology experts and more – with a focus on:

  • Verticals (Public Sector, retail and finance)
  • Data Capture/POS and Physical Security
  • BYOD and Collaboration
  • Unified Communications and Pro AV/Digital Signage
  • Consumer Electronics
  • Advanced Computing and Technology Divisions

Have questions? Email imone@ingrammicro.com

Review highlights from IMOne Spring

Planning to attend? Mark Your Calendar Now

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Which Cloud Service Should You Sell First?

IT service providers that want to start selling cloud services often struggle with knowing where to begin. Logic Speak CEO Jason Etheridge has some insights on this topic that are worth considering — especially when you take into account  that this eight-employee MSP has been experiencing healthy double-digit growth over the past few years, and a big part of that growth is from selling cloud services. “Cloud backup is the most logical starting point for selling cloud services,” says Etheridge. “Every customer needs it and IT service providers can not only recommend the right solution, but they can add value by bundling monitoring and data recovery services with their cloud backup solution.”

Jason Etheridge Logic Speak

Jason Etheridge, president and CEO, Logic Speak

One other tip Etheridge offers aspiring cloud service providers is to try it before you sell it. “Almost all vendors have a ‘freemium’ version of their services along with a mobile app that will allow you to get your feet wet,” he says. “Only after you’re familiar with the major players and technologies can you start to make decisions around which services you want to offer.” And don’t think that choosing a particular cloud service means you’re locked into a permanent contract. “Don’t be afraid to change vendors if it benefits your bottom line significantly, or if there is a significant leap in features and functionality,” he says. “One of the best decisions we made was changing to our current BDR vendor, which enabled us to double our profit margins on cloud backups.” On the flip side, there is a downside to switching vendors too often, and Etheridge says that the more research, testing, and evaluating you do up front, the longer and more successful your vendor relationships will be. “Once we select a vendor, we won’t even consider changing for at least a year, and even then, we need a very compelling reason to do so,” he says.

This MSP has additional cloud advice to share, which you can read about in my latest article: Find Your Cloud Services Niche.

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The #1 Lie Break-Fix VARs Tell Themselves About Managed Services

Those who figure out the secret to selling managed services not only realize healthy double-digit profit margins over a long period, but something equally desirable to many business owners — the ability to spend some time away from the business without worrying about the next “all hands on deck” IT catastrophe.

So, why exactly are so many IT service providers (60% according to CompTIA’s Third Annual Trends In Managed Services Report) reluctant to sell managed services? I
recently spoke with three industry experts on this topic, including Alex Rogers, founder and president of master MSP and HaaS (Hardware-as-a-Service) provider CharTec.
Rogers shared some great insights on what many experts agree is the most pervasive obstacle break-fix VARs are facing: The belief that there’s more
money in break-fix
. Here’s why Rogers believes this lie still persists:

Alex Rogers, Founder and President, CharTec

Alex Rogers, Founder and President, CharTec

“This misconception is often held because the VAR is thinking in terms of the hourly rate charged for project work rather than the longer term benefits of a recurring revenue stream. It’s also important to remember that project work is not guaranteed; however, a managed service deal includes guaranteed monthly revenue for a long duration.”

If you or a business associate are stuck in a break-fix rut, I’d recommend checking out Retail VARs: How Did It Come To This? written by Business Solutions Chief Editor Mike Monocello, which compares a $10,000 traditional software sale to a $10,000 SaaS (Software-as-a-Service) sale. He then highlights the fact that while the traditional sale has the early on edge over the SaaS option, during the third year after the initial sale, the SaaS sale overtakes the traditional sales model, and the gap between the two models widens from there.

Perhaps the above-mentioned myth isn’t what’s holding you back from making the move to managed services. If it’s either of these two beliefs:

My Customers Don’t Want Managed Services” or
It Will Be Too Hard/Expensive To Change My Business Model”

be sure to check out “3 Lies Break-Fix VARs Tell Themselves About Managed Services.”

 

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