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Since the early 2000s, I've talked about the challenges traditional value-added resellers (VARs) and IT services companies face when attempting to become managed service providers (MSPs). By that time, the firm I work for, Alvaka Networks, had already been profitably providing managed services for a number of years. The IT MSP model was new to traditional VARs and break/fix companies. Managed services was "the great unknown." It threatened the paradigm of fee-for-service models, and many IT services companies were resistant to the idea.
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Here we are a decade later. While a lot of IT services companies have adopted MSP practices, they are by no measure ubiquitous. In fact, there are many IT services companies that are doing a disservice to clients and to genuine MSPs by calling themselves MSPs, but that actually derive most of their revenue from things other than managed services.
For years, I have wondered what's been driving the continued reliance on break/fix work. I finally found, in the medical field, an answer that makes sense to me.
Let's step back for a moment and consider a term that you may already know: Munchausen Syndrome by Proxy (MSP, or MSbP). The term refers to a mental disorder. According to Healthline.com, an adult who suffers from MSbP "acts as though someone in his or her care -- usually a child -- is injured or ill." While a healthy parent or guardian will take preventive measures to keep their child or other charge healthy, "a person with MSP may directly cause or lie about an illness in order to get attention," according to Healthline.com. "Some people with MSP will even have a child undergo painful or risky tests and procedures in an effort to gain sympathy from family or community."
In trying to understand why any IT services company still acts in a primarily reactive and fee-for-service model, I have often thought of Munchausen Syndrome by Proxy. Are those companies suffering from a business version of Munchausen Syndrome by Proxy? It's not such a stretch.
In Munchausen Syndrome by Proxy, parents create scenarios in which their children constantly need medical care because the parents are addicted to the rewards, such as attention, they receive by doing so. In the tech version of this syndrome, IT services companies create situations in which their customers constantly need help because the services companies are addicted to the rewards (money and ego lift) they receive by doing so.
I am not suggesting those IT services companies are run by dishonest or mentally ill people. I do, however, find Munchausen by Proxy behavior to be reminiscent of the behavior of IT services companies that call themselves MSPs but still get a big share of their revenue from break/fix services.
True managed services has characteristics that are in many ways the opposite of the medical condition Munchausen Syndrome by Proxy. It is classically synonymous with proactive and preventive management and support that helps clients (technology patients) avoid IT problems or, in a sense, illness. IT services companies that call themselves MSPs but still operate on the break/fix model, on the other hand, make their money after problems have surfaced. Instead of preventing problems and avoiding service calls, they benefit from repeated visits to IT's equivalent of the emergency room. They might appear to be excessively worried about their clients but in many cases they are in fact the very cause of their clients' tech woes. I believe these folks are afflicted with what I call Munchausen Syndrome by Proxy for Networks.
True IT MSPs generally offer more secure, stable and efficient results and more predictable costs than traditional VARs and IT support service providers. In many instances, an MSP will not earn a significant amount of its revenue from software and hardware or restorative and repair services (such is the case at Alvaka Networks). On the contrary, they profit by doing more real problem remediation up front and then utilizing tools, people and processes to prevent future problems. A good MSP makes the bulk of its profit by keeping systems healthy rather than causing problems or allowing them to exist and then fixing the failures. In fact, a well-run MSP with a broad set of services deployed at a client will see a preventable system or network outage and/or malware infection, for example, as a failure of IT management and not a profit event to be celebrated. Of course, no MSP can prevent every problem, but the good ones genuinely strive to never have a negative client event lead to additional income.
There are a variety of studies, analyst reports and articles available that discuss both the opportunity provided by the IT MSP model and the impediments to that model. The primary opportunity is the potential to have happier, more successful customers, providing more stable and predictable revenue streams from recurring services supported by term contracts. But, many traditional service providers cannot make the move and are left behind by those that can. Those who suffer from Munchausen Syndrome by Proxy for Networks are too deeply dependent on having customers with chronic problems to change, both from a financial perspective and from an ego perspective. Shifting to a recurring revenue model requires a lot of upfront cash, because recurring revenue means smaller amounts paid out on a monthly basis, rather than revenue that comes in more sporadic but substantially larger chunks. These providers experience a "hero syndrome" phenomenon from resolving a problem that should not have happened. They may make conscious or unconscious decisions to, for example, perform high-risk work in the middle of the day, omit properly laid-out roll-back plans and a good DR solution, and may even fail to maintain up-to-date patches and antivirus software. Why? Well, because this behavior can lead to more business and more hero moments.
In the true IT MSP model, providers need to work hard to change current clients' mindsets and buying habits. It can often mean finding an entirely new client base. (I say "often" rather than "always" because, sometimes, the client has just never before had the opportunity to choose a good MSP model and once presented with the concept, buys in right away.)
The term MSP in the technology world has been significantly damaged, in my opinion, by those organizations that unfortunately suffer from Munchausen Syndrome by Proxy for Networks. I have had disturbing conversations with Munchausen-suffering IT service providers about making money and looking good based on failure. They are very open about the money they make from cleaning up after themselves. They get excited by a serious worm or virus infection that means big billing. A while back, a provider bragged to me about how he had made six figures investigating and cleaning up a preventable malware infection at one of his "best clients."
Customers are indeed paying the price for companies that use the MSP name but do more reactive than proactive work. When I recently reviewed with a new client the prior provider's tickets and invoices, I learned that the client had been paying for "managed antivirus services," as well as significant money to clean up almost-daily infections of persistent malware. Upon further inspection, we discovered that several of the client's systems were actively infected and that those machines either had no antivirus protection or the signatures were months behind. The review revealed that some of the machines had been infected multiple times because the previous provider had let the antivirus protection lapse, left local administrative rights in place, didn't patch against vulnerabilities and failed to isolate infected machines from the network until they were remediated. Had the above issues been proactively addressed, it's highly likely that the infections would not have occurred in the first place. The client experienced substantial negative impact on worker productivity and paid thousands of dollars in clean-up costs.
Contrary to the beliefs of MSP-for-Networks sufferers, providing true managed services doesn't reduce profitability; in fact, it should greatly improve it. Customers with stable, proactively managed networks are far more likely to maintain, or even dramatically increase, their engagement with you. It is only under the healthy MSP model that service provider and client objectives are properly aligned. A decade ago, I wrote, "If you run a traditional IT services firm, failures sustain your organization. If your clients are too healthy, you lose service revenue. In the MSP model, if your client is happy, so are you. You get paid for preventing the issues in the first place." Amazingly enough, so many have still not figured this out.
If your organization is suffering from Munchausen Syndrome by Proxy for Networks, the good news is that with discipline and a deliberate shift in business model, you can triumph over your illness. The bad news is that the malady seems to have a relatively high relapse rate.