Channel Strategies for the CIOResellers hoping to expand their solutions-provider business to include selling managed services should avoid the term altogether, according to a best practices report presented at last week's CompTIA Breakaway conference in Las Vegas.
Instead of calling themselves managed service providers (MSPs), they should focus on developing an independent brand and a reputation for being a service provider that functions as part of a client's IT department.
Key to that brand is the role of being a "trusted advisor" to the client, according to Sid Saleh, editor and publisher of Services Revenue Publishing, the Golden, Colo.-based company that produced the report for the CompTIA conference.
Instead of just selling products
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and monitoring services, successful managed service providers often work in a more consultative role – helping clients figure out what they do and don't need to invest in, he said.
"As the trusted advisor, the customer is going to look to you like technologists, not sales [representatives]," said Rob Murray, a Services Revenue contributing editor, who worked on the report.
Service providers should find their niche within their client's organizations. Instead of replacing IT departments – which could feel threatening to IT staff – service providers should make it clear that their role is to help maintain infrastructure.
That frees the clients' IT staff to focus on high-priority tasks or long-term projects, according to MJ Shoer, president of Jenaly Technology Group Inc., a Portsmouth, N.H.-based managed service provider.
"What we market to our customers is, 'we'll be your virtual IT department,'" Shoer said. "The perfect model is [that] you really are an extension of that client's staff."
Although there is no one definition of an MSP on which all interested players can agree, most discussions about selling "managed services" involve remote monitoring or management of a client's network, data center or other assets, and billing for that service at regular intervals, rather than getting paid on by the project or by the hour.
The Services Revenue survey included only managed service providers who have derived at least half of their revenue from selling managed services for three years; the results indicate not only that MSPs develop a different relationship with clients than other solutions providers, but also that a successful migration from solutions to service providing is usually a gradual one.
Resellers should develop a plan to migrate to an MSP model that starts in a small but focused way, picking a specific service and rolling only that out initially, Saleh said. Once that plan is established, he said, it is crucial to stick to it even through the snags that inevitably come with the shift.
The "number one [piece of advice] that stood out was the idea of persistence and staying the course," Saleh said.
Companies should expect to come up against some resistance as they start selling managed services – both from customers who are unsure what the new model means for them and even from employees who may fear what the change means for their jobs, Saleh said.
Saleh compared the perception gap to the ones that initially held up acceptance of automatic teller machines, which bank tellers feared would put them out of a job and customers first considered to be complex, unnecessary and impersonal.
Shoer said Jenaly's marketing focuses so specifically on providing a "virtual IT department" for its customers that his alternate business title is "virtual CTO." He said that title underscores his commitment to make sure the client's business runs as smoothly as his own.
The transition to managed service provider requires internal changes as well, Shoer said.
Rather than coming in lump sums that arrive as a sale goes through, revenue from selling managed services comes in smaller, more regular payments. That changes a company's cash-flow significantly and means that sales representatives, and sometimes IT engineers, have to be compensated differently.
Leading a company through these changes can be a challenge, though Shoer said he was lucky in working with a staff and clients who didn't take much convincing. Still, he said, he knew from the outset that Jenaly would stumble every so often, and was upfront about that to both his employees and clients – which he said was important in maintaining their trust.
As companies work through the transition, it's often helpful to talk to other MSPs and share pointers, he said. While managed service providers within the same geographic area often compete with one another, groups like CompTIA help bring MSPs together in a cooperative environment, he said. Shoer was elected this year as secretary on CompTIA's board of directors.
"You can't be afraid to trip and fall," Shoer said. "We knew we were going to make mistakes."