HOLLYWOOD, FLA. -- In a breakout session titled "Managed Service Provider Programs & Best Practices" at Ingram Micro Cloud Summit 2014 here on Tuesday, about 80 attendees, the majority of whom derive some of their revenue from managed services, were hungry for MSP best practices that could help drive their businesses to the next level. In an interactive session that went well beyond the 50-minute mark, they got what they came for.
Erick Simpson, co-founder, senior vice president and CIO of SPC International, an IT business improvement consultancy that works with IT solution, cloud service providers (CSPs) and managed service providers (MSPs), outlined some essential skills and qualities MSPs must have and touched on business topics such as business and marketing plans, deliverables, pricing models, tools and technologies, service delivery strategy, and vendor relationships.
The session kicked off with a question from an attendee about what it takes for an MSP to sell cloud services and how it is different from typical managed services.
It's not much different at all, according to Simpson, who added that a lot of what MSPs are already doing stays the same with cloud services. For example, it's a subscription service model, services are primarily delivered remotely and there's no need to change staff.
Diving a little deeper, he discussed the different types of cloud services – Software as a Service (SaaS), Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) -- as well as the various methods to deliver those services (via private cloud, public cloud or hybrid cloud). Simpson touched upon one aspect of cloud services that is different from traditional managed services: service-level agreements (SLAs).
"With the cloud, it's not your SLA anymore. You're subject to the SLAs of an upstream cloud provider," Simpson said. MSPs have to consider this when writing agreements with clients, he said.
In addition, Simpson said selling cloud services should always be about meeting a customer's business need, addressing a business pain point or business outcome, and every proposal should be couched in those terms. "You'll be much more effective and increase your margins making the point from a business outcome perspective and how it adds more dollars to the bottom line for the customer," he said.
Another MSP best practice related to pricing. A pricing pyramid looks at factors that affect a partner's pricing and profitability, including marketing and sales acumen, cost of service delivery, the offering, and a partner's business model. The pyramid is the same for managed services and cloud services, Simpson said.
"In both cases what you're selling is a business relationship or the strategic value that you bring to help a customer achieve his business goals," he said. Every partner should be a strategic business partner and not a trusted business advisor. "It's letting the client know that your relationship is about more than just closing tickets; it's about addressing a problem and the strategic meetings that you're going to have to roadmap their technology and getting them to budget for it," he said.
For companies with a hybrid model of managed services and traditional transactional sales, if more than 50% of top-line revenue comes from selling point products and break/fix or project-based services, the sales team will need to be trained to sell services and to sell on value and strategic relationship, according to Simpson.
For both managed services and cloud services, MSPs have to consider what they offer or what they're bundling that makes their services attractive, he said. And, MSPs should sell tiered services – a high-price service, a midprice service and entry-level service, Simpson said.
"Add as much value as you can and don't line item anything," Simpson advised.
In order to establish and maintain margins, it's crucial that partners know their true cost of service delivery, Simson said.
Determining a pricing method is also critical to success. Simpson laid out four potential pricing methods: per device, per user, tiered and value. The per-device pricing method seems to be going away, he said. More popular are the per-user and tiered pricing methods. He said that with tiered pricing, clients tend to choose the midpoint entry and it provides a good lead-in to value pricing. Value pricing requires the most sales and marketing acumen to price and sell but can be the most profitable. It also requires customers that understand the value of strategic partnerships.
Successful MSPs also understand the importance of adding value to customers and adding more annuity based solutions, such as mobility, document imaging, remote storage and disaster recovery, cloud services, VoIP, and so on. MSPs sell three solutions to a customer, on average, he said.
"There's a lot more low-hanging fruit. Figure out what's strategic to your clients. There's more revenue in your existing client base than in all those prospects you're chasing," Simpson said.
David Luft, owner of LDD Consulting Inc. of Albuquerque, N.M., an Ingram Micro partner that provides both managed services and project-based services, attended the session looking for MSP best practices to help him build out his MSP practice. "We have some customers whose businesses would be a good fit for the cloud and that's what I came to hear more about," he said.
Today, Luft offers some backup and disaster recovery cloud services, as well as hosted email. He's excited about the next generation of Ingram Micro's Cloud Marketplace for his customers and his business.