Every major contract between a customer and a solution provider is, to some extent, a leap of faith for both sides....
Managed IT services deals -- which can last for years and enrich or exhaust both sides -- are more like marriages.
So closing a managed IT services deal requires a more sophisticated approach and a more sophisticated organization than the average value-added reseller (VAR), according to executives with experience providing managed IT services.
Successful providers are those whose sales teams are both personable and technologically savvy, whose financial stability is demonstrable, and whose clients can vouch for a successful history of managed IT services implementations.
They also offer a variety of managed IT services and additional options in order to meet the needs of clients, according to Dennis Drogseth, vice president at Enterprise Management Associates, a Boulder, Colo.-based IT research and consulting firm.
After all, a build-to-order approach to managed IT services is often a major reason organizations opt to partner with an managed service provider (MSP).
"People like to be able to make changes," Drogseth said. "They like ordering a la carte and they like having a lot of options to choose from. All or nothing is generally not popular. I hear a lot of complaints about managed services being too rigid, too cookie-cutter."
Choosing the right target
Since companies generally hire MSPs to augment or replace their internal IT departments, it makes sense -- and hastens the deal -- to talk to a high-level executive from the beginning of a sale, according to Tony Williams, vice president and chief technology officer at Riata Technologies of Austin, Texas, which offers only managed services.
For the past three or four years, Riata has trained its internal sales organization to keep in touch with prospects each quarter, and to check in on potential clients' status, either internally or with another provider, Williams said.
"It's not a boiler room, with a college student doing cold calls," he said. "We're always in touch with [prospects]."
When a telephone sales call results in a meeting, Riata will speak only to upper-level management, Williams said.
"If we talk to a CFO and they try to refer us down to a network administrator, we decline the invitation respectfully," he said. "We have to get past the gatekeepers. Our staff is very, very elite. They're pretty well-paid and highly commissioned. No sales calls are done without a C-level executive being involved. We don't speak to network administrators."
While this may be possible at midsized customers, larger corporations have, of course, more tiers to work through, said Corey Merchant, vice president of product management at SecureWorks, an Atlanta-based managed security service provider that targets midsized and enterprise companies.
In the midmarket, the contact often is the bank manager, chief financial officer or CEO with, occasionally, a risk-management executive, Merchant said. In larger firms, however, SecureWorks' highly trained security sales engineers usually speak to someone lower than C-level who is in charge of security.
"Generally if we're engaged with a prospect they are probably already mentally over the outsourcing hurdle," he said. "The primary value proposition we bring is -- no matter what business they are in -- they cannot manage and monitor their security infrastructure as well as we can at the price point we can. We can just do it better for cheaper."
Emphasize the positive
Leading with the savings is often an effective way to gain access to a potential client, but not just the savings a managed IT services provider can deliver by spreading the cost of up-to-date equipment and overhead across many clients.
Many customers are as eager to offload the cost of hiring, training and other costs of maintaining an IT department or infrastructure, especially in areas such as security, where experienced potential employees are in short supply.
"The largest clients tend to want us to monitor, [but] retain control of their security infrastructure themselves," Merchant said. "The smaller the company, the more they don't have the staff to manage it themselves."
SecureWorks processes 2.5 billion alerts per day -- a number Merchant expects will double within 10 months. "If you're not processing that, you're not monitoring as well as we are," Merchant said. "Folks want to be a user of a system, not a manager of a system."
As in most sales, MSPs rely extensively on relationships -- with clients, with engineers, with sales people and with vendors -- to make their business thrive.
But ironically, an MSP set up to do its work most efficiently risks losing an important part of that relationship, according to Roy Barrow, president of The Memory Bank in Salisbury, N.C., a 27-year-old firm that entered the MSP arena about 18 months ago.
On-site visits are expensive, so an MSP that can keep a client's network in peak shape without sending people outside its own network operations center delivers good service and keeps its cost low. But customers may not realize the level of service they get without seeing any unfamiliar faces around the network or data center.
"When you start selling tangible services, they understand," Barrow said of his customers. "When you start selling intangible services, like managed services or insurance, it's harder. We've trained our customers that 'You're going to pay us for what we do.' That's also been a key to our continued success."
To succeed, of course, an MSP must continually invest in new tools, solutions and training to keep abreast of technological advances, new security threats and regulatory issues, MSP executives agreed.
"The evolution is a tough one," Williams said of buyers' expectations and traditional system integrator per-hour pricing. "You have to get rid of old habits."
But the lure of improved profitability encourages MSPs to continue educating their clients and their staffs. Some Riata contracts have delivered margins of between 20 and 30 points, due to the company's sales approach and emphasis on customer support, Williams said.
"A realistic number is 10% for somebody who's getting into it, but I know some companies that are pushing 30 points," he said. "We don't trade dollars for hours. We trade dollars for results."
And results like that are something no MSP would want to swap.
Alison Diana is a freelance writer based in Merritt Island, Fla.