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MSPs: VCIOs fill tech leadership gap among SMB customers

IT services companies said providing vCIOs helps their small and midsize customers acquire business and technology guidance without having to hire a full-time employee.

Many IT solution providers are offering virtual CIOs as part of a services portfolio designed to help customers align their IT investments with their business goals.

While large enterprises usually have a CIO, many small to medium-sized businesses (SMBs) lack a dedicated CIO on staff. To fill the gap, these companies are turning to managed service providers (MSPs), IT consulting firms and other IT services companies that offer vCIO services. The vCIOs may help clients pursue a variety of IT initiatives such as implementing security software, planning for cloud migration and preparing a digital transformation strategy.

Brian Pickell, CEO at KPInterfaceBrian Pickell

"It's a growing role and from our perspective the vCIO is really the glue that holds everything together," said Brian Pickell, CEO at KPInterface, a managed service provider (MSP) based in Limerick, Pa. "Our clients appreciate the angle that the vCIOs are taking, which combines business skills with IT acumen to deliver a more holistic consultation."

As customers acquire more technology and map how the technology can accelerate productivity and profitability, companies like KPInterface have seen more demand for vCIO services among their clients.

The role of vCIOs

Pickell said he used to perform vCIO services for clients, but the demands of keeping up with technology and the need to design systems that take advantage of new innovations required his company to hire three vCIOs over the past two years. Pickell said clients hire vCIOs either exclusively in which case KPInterface will bill separately for the service, or the vCIO is bundled into a larger IT project engagement and is billed as part of an IT management services and support agreement.

Myles Olson, member success mentor at ReframeYourClientsMyles Olson

Offering a vCIO as part of an IT provider's services is one way to tap into a lucrative revenue stream with companies charging between $1,000 to $5,000 a month depending on the services they offer, explained Myles Olson, member success mentor at ReframeYourClients, a Canadian company based in Calgary, Alta., that provides tools that help MSPs develop their client advisory and vCIO skills.

Based on his experience working with MSPs, Olson said many of them haven't done enough to clearly define the role of vCIO. The role, Olson said, is to provide IT leadership by giving guidance to businesses on how to gain a competitive advantage with technology, understanding the goals and dreams of the business, and finding out where the technology is going to help clients achieve those goals and dreams. Many MSPs, however, provide vCIOs that fail to perform these tasks.

"A lot of times MSPs think they are offering vCIO services because they do a couple of reports, complete an annual budget and throw a couple of consultative tech services into the mix," Olson said. "When the role is not clearly defined and the customer doesn't know what they are getting there can be misalignment."

The reality is many companies don't need a full-time dedicated CIO.
Keith BartholdCEO, DKBInnovative

He said because many IT services companies have failed to design and drive the value of the role to the client, they are unable to drive value to the position. 

"Most MSPs are giving the vCIO services away for free: IT providers are not monetizing the vCIO offering because they see it as a value-add to their managed services," Olson said. "Typically most MSPs today are saying they offer vCIO services and they are going to add this to the handful of services they provide and they just include vCIOs to the managed services cost as a value-add."

Skepticism regarding vCIOs

Anurag Agrawal, CEO of Techaisle LLC, a market research and consulting company based in San Jose, Calif., said he has his doubts about whether IT service providers can turn the vCIO model into a successful part of their business. 

"The vCIO concept within the MSPs, consulting firms and IT solution providers cannot succeed," he said. "It is similar to virtual CFOs for small businesses. They do not have any productive role to play within businesses. To be a successful vCIO, they have to be very intimate with the business pain points that are being faced daily by the end-customers and if these vCIOs are dealing with more than one customer then it is almost guaranteed to be a failure. They should be adept at guiding the business and developing a technology adoption roadmap, but they cannot be because the MSPs and other partners do not have the capacity to hire such IT skill sets. And then they are faced with how to bill their time."

Anurag Agrawal, CEO of Techaisle LLCAnurag Agrawal

Even with these challenges companies like DKBInnovative, an MSP in Dallas is still betting that offering vCIO services gives the company a competitive advantage.

"Our vCIO service is a major part of our offering," said Keith Barthold, CEO at DKBInnovative.

Keith Barthold, CEO at DKBInnovativeKeith Barthold

Barthold said his company has one dedicated vCIO and two additional employees that give vCIO services depending on a project's requirements. DKBInnovative's clients are SMBs with approximately 350 employees. These companies typically have an IT director or an IT manager but don't have a full-time CIO. The company also offers vCIO services to companies where the CIO needs assistance, in which case DKBInnovative's vCIO co-manages the job.

"The reality is many companies don't need a full-time dedicated CIO," Barthold said. "Small to midsize companies do need to perform the tasks of a CIO, but they don't need it on a full-time basis because of their size and because of the cloud computing model," Barthold said.

Qualities of a vCIO

Executives at IT services companies summarized a few key characteristics of a vCIO.

KPInterface's Pickell said vCIOs take the approach of listening to their customers to better understand how their business operations work. He also observed that the job requires vCIOs to take into consideration what's critical to the business and assess what the priorities of the business are as they recommend the technology needed to support those priorities.

Aside from keeping up to date with technology and understanding a customer's business, Barthold said a good vCIO must be disciplined, able to interface well with business leadership and should provide strong project management capabilities, which they can do by using tools such as Trello, MyITProcess and Clarizen.

"Not all vCIOs are equal and not every company emphasizes the role the way we do," Barthold said. "One of the key things I try to verify when I meet with prospects and clients is defining the role of the vCIO and showing how the role can be valuable to their business. Offering vCIO services is critical to our success with our clients and so for us it's not an optional offering."

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