building the business case for a service...
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Building the business case for a service deskBy Eric Anthony, with additional input from Richard Tubb
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When I started my IT Managed Service Provider (MSP)
business almost eight years ago, ‘MSP’ wasn’t even a
buzzword, and the idea of fixed-price IT services was
in its infancy. Even so, I knew that I needed to run my
business on processes, not just my own abilities. My
own abilities are limited and if I wanted to grow and
scale the business then I would have to have systems
in place to make that happen. For the MSP, the tool
to manage those systems is the PSA – or ‘Professional
Services Automation’ tool.
Small MSPs gain advantage by doing more with less
and by having the right service desk application in
place; and larger MSPs simply cannot maintain proper
control of their business processes without this tool.
The hard part is finding a tool that has the features
and flexibility to manage your business while still
being simple enough for all of your employees to
use without complaint or error. Simplicity is a key
ingredient because if your MSP is one of those larger
ones I mentioned, then getting your employees to
use the system is the primary key to your service desk
success. The old adage “Garbage In, Garbage Out” is
exactly what you’ll get if your service desk application
isn’t simple to use.
In this white paper we’ll cover a number of key
components or processes that your service desk
must perform efficiently in order to ensure that the
processes you, the business owner or manager, have
put in place achieve your definition of success with
your MSP business.
It doesn’t matter if you operate under a break/fix
or a managed services model, your service desk
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application is the center point of your business. It
will help you manage time, people and money by
optimizing the following processes:
� Customer input – tickets, service requests, requests for quotes, and feedback.
� Service delivery – ticket workflow, SLA warnings and breaches, ticket scheduling and recurrence.
� Billing – accurate time capture, export details to accounting package, contracts, and recurring invoices.
� Analysis – reporting, anstatistical dashboards.
Customer inputAs I’m sure you’ve heard, responding quickly and
professionally to your customers is of vital importance
regardless of whether you are a Managed Services
Provider or still doing mostly break/fix work. Failure
to do so leads to customer frustration and can result
in you losing business. Of course, responding quickly
to every issue is an easy thing to say, and it was
easy to implement 15 years ago when the primary
avenues of communication were still telephone and
fax. Communication has evolved rapidly since then.
Now there are more ways to communicate and
they’re exponentially faster.
This creates additional complexity for the MSP, who
now has to monitor more lines of communication
and respond faster than ever. With all that complexity
and the need for greater speed, it’s crucial to have a
system in place to keep track of incidents.
Introducing the service deskThis is where your service desk comes in. Your service
desk takes those inputs – such as telephone calls,
emails, or in-person requests – either automatically
or manually entered, and tracks them from “cradle
to grave”. The first step is getting as many of your
inputs entered automatically. Emails, a customer
web portal and monitoring alerts are common
sources of automated input. Some service desk
offerings have options for linking to social media,
chat, and voice-to-text. If necessary, incidents can
be entered into your service desk system manually
for those situations not covered by automation.
In addition to workflow, customer communication
is key. Making sure that your service desk notifies
clients when a ticket is created by them or on their
behalf is critical. Then the application should allow
you and your staff to communicate quickly and easily
with clients and record those communications.
Most importantly you must complete all open
tickets and “close the loop” on all your work. If tickets
aren’t closed, you won’t have confirmation that work
was completed. As an MSP, this type of workflow
control allows you to scale your business, ensure
your technicians are conforming to your working
standards, and manage customer requests so that
nothing falls between the cracks.
Once the inputs, now tickets, enter the system
they’re prioritized, assigned to staff and divided up
into work queues. Some of these actions can be
done automatically by the service desk through
workflow rules, such as automatically placing tickets
into queues, setting priorities, and assigning to staff
based on the source, type, or keywords related to
the tickets. Now that they’re properly categorized
and prioritized they can be worked in the proper
order. A proper service desk should also track due
dates and Service Level Agreement (SLA) events to
make sure that tickets are being worked efficiently.
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Service DeliveryIf you think you can succeed without providing
excellent customer service, think about this quote
from a 2011 American Express Survey: “Three out
of five Americans (59%) would try a new brand or
company for a better service experience.”
Your service delivery is of primary importance to
retaining customers. You might have awesome
sales people, but if you can’t deliver what you are
selling in an organized and efficient manner then
you will lose customers.
Customer service will always be a contributing
element to any successful business. Even using
the exact same tools and processes, one MSP can
excel over another by providing better service. So
if technical ability and value-added features are
equal, what are customers looking for in terms of
customer service when choosing an MSP?
They want to feel heard. The first thing a service
provider can do is respond to the customer quickly.
More importantly, the technician should reiterate
back to the customer what the issue is to make sure
the customer knows that they’re understood.
IN short, ensure you follow these three simple rules:
� Make the customer part of the process � Give the customer access to view the status
of their tickets, who’s working on them and
what the resolution is when the problem is
resolved.
� Do everything quickly � Respond to, assign people to, and resolve
problems efficiently. Don’t sacrifice speed
for quality but don’t make them wait
unnecessarily either.
� Do it right the first time
The only thing worse than doing it too slow is
doing it wrong.
So the question now becomes how to deliver a
better experience in terms of the points listed
above? The answer is PROCESSES. Processes
allow you to measure the things that matter and
position yourself to scale the business. The key to
good processes is to automate them as much as
possible. A service desk application can automate
many of the tasks necessary to maintain excellent
customer service regardless of the amount of work
thrown your way.
Nothing makes people feel “warm and fuzzy” more
than knowing that they’ve been heard and that
someone understands their problem. The service
desk tool accomplishes this in two ways. Firstly, upon
receipt, it automatically confirms a new ticket or
incident from a user. Even though customers know
and understand the acknowledgement they’ve
received is an automated email, it’s still reassuring
knowing that the ticket was received. Secondly, it
provides an avenue for technicians to be notified of
a new ticket and to quickly respond via email or the
service desk interface reiterating the original request
and asking for clarification or additional information
when needed. It also maintains a complete history of
both sides of the email conversation ensuring that it
can be reviewed at any point by any technician with
access to that queue.
Increasing speed without sacrificing quality is called
efficiency. Your technicians can be more efficient
when they have information at their fingertips.
Knowledge base articles, asset/configuration
information, and ticket histories eliminate
redundant work and save time all by residing
within one application.
Through the effective use of ticket queues,
technicians can collaborate on jobs to create even
more efficiencies. To make sure that you and your
organization are up to speed, use the SLA functions
within your service desk to maintain proper timing
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and to generate alerts when tickets are about to
breach acceptable limits.
BillingCan a piece of software increase your cashflow and
profits? To be blunt, it isn’t the software that increases
your cashflow and profits; it’s the automation of
processes that the software facilitates. Regardless of
your business you must have processes in place and
make them workable in order to succeed and scale.
Unfortunately, humans are prone to distraction and
must sometimes be given a framework for getting
mundane tasks done.
It’s those mundane tasks, however, that often
ensure that ideas, time, and talent are translated
into revenue. For the MSP or break/fix business
these tasks usually revolve around their service desk
software.
When I finally got my processes to the point where
we could invoice customers once a week, I saw
a dramatic decrease in the turn-around time for
receivables. Without this change in velocity of cash
flow I would not have sustained weekly payroll at
times. I found some interesting things when I sent
more invoices more often.
� My invoices received less scrutiny because of
the lower dollar amount.
� Smaller invoices were paid faster because they
could be approved at lower levels.
Another part of invoicing that my service desk
helped with dramatically was invoicing questions.
By capturing detailed information and putting that
information on my invoices, there were significantly
less questions that caused less “friction” in getting
paid. Also, on a psychological level, invoices with
more detail get paid faster because they’re typically
approved faster.
Businesses are like any organism in that they need
food to grow. Positive cash flow is that food to your
business. Without consistent, positive cashflow
your business won’t evolve and grow. As a business
owner who has made the mistake of wanting to
serve the customer above all else (a noble concept),
I realizated that just like the oxygen mask on an
airplane, you can’t help anyone else until you make
sure you’re going to be around to do so.
AnalysisAny business that delivers a product or service must
keep track of its inventory in order to be profitable.
For the managed service provider this can be difficult
because their primary inventory resource is technician
time. One of the problems is that MSPs frequently
have two types of customers. They have managed
services customers who are billed a flat monthly
rate using technician resources in such a way that
the less tech time used, the more profitable the MSP
becomes. They also have break/fix customers who
are charged on a per hour basis. As you can imagine
already, this makes it harder to manage “inventory”
than just a company that sells widgets.
The break/fix model is closest to the widget company
because it’s a one-for-one relationship. With break/
fix, your widgets are time. For each widget (time)
sold, the company makes $X in revenue, which
translates to $Y in profit. In this scenario it’s the same
with technician time. The most common problem
here is that widgets are sometimes lost or stolen.
The same thing can be said for technician time.
Therefore it’s critical to have a system for tracking
technician time against their jobs or tickets to make
sure that billable time is not lost or, worse, stolen.
Examples of data to be tracked includes:
� Average time spent per ticket (more is better)
� Average time per ticket for each technician
(identify more profitable technicians)
� Technician availability (how much “inventory” is
available/wasted)
� Profit by client (Revenue minus COGS)
The managed services model is different because
profitability is based on using the least amount of
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resources to deliver a fixed price service. In this case
the MSP must be able to track how much time or
resources are used to deliver each service or they won’t
know what their profitability is. As an MSP you must
be able to identify the following key performance
indicators (KPI) in terms of “time” inventory:
� Average time spent per ticket (less is better)
� Average time per ticket for each technician
(identify less profitable technicians)
� Time spent per month on each client and device
(identify less profitable customers/devices)
� Profit by client or device (Revenue minus COGS)
� Technician availability (how much “inventory” is
available/wasted)
As you can see, the data collected is almost the same,
but they have an inverse relationship to profitability
based on which model the client falls into.
So how can you effectively measure the difference
between the services you deliver under the
break/fix model and those you deliver under the
managed service model? The key is to measure the
gross margin.
Understanding your gross marginGross margin is the difference between revenue and
direct cost in the products or services you supply,
before accounting for fixed costs. Typically this means
calculating the selli ng price of an item – either your
technician’s time, when sold in the break/fix model, or
the contract cost, when sold in the managed service
model – less the direct cost of delivering that service,
such as the hourly pay of your technician.
As a business, you should be looking to increase
your gross margin across the board – reducing
the costs of providing a service, and increasing the
profits you receive from that service. So in our two
examples of break/fix and managed service above,
gross margin can be calculated by understanding
the cost of a technician’s time spent vs the cost of a
technician’s time charged.
Making fact-based decisionsWhy is it important to understand your gross
margins for both types of service delivery, break/fix
and managed services? This is so that you can make
fact-based decisions. The old phrase “What can be
measured, can be managed” is hugely important
here. For instance, while you may know that your
MSP business is profitable – a quick glance at
your profit/loss or bank statement shows that you
generate more income than you spend in costs
each month – how would you react if the figures
showed you that one managed service contract
was wildly profitable, but those profits were being
eaten away by six unprofitable break/fix contracts.
By understanding the gross margin for each
contract, you can shift your focus from measuring
profit overall in your business, to measuring profit
on each individual contract (or technician) and
make adjustments accordingly. That’s the profit
you’re making as a business now. Think how much
more profit you would make if those six unprofitable
break/fix contracts became profitable in addition to
that one very profitable managed service contract.
Resolution cost per issueWe’ve explored the benefits of understanding gross
margin – and accordingly your profits – at a client
level. It’s worth understanding that measuring
metrics in this way allows you to go even deeper with
your analysis and pinpoint individual costs per issue.
For instance, let’s say that you have a managed
service customer who has an aging backup system.
By tracking the time spent managing that customer
against the contract profits, you notice that the
gross margin for that customer is dropping rapidly.
This is the first red flag.
On closer inspection, you can see that typically,
issues for this customer are resolved in a timely
fashion. The gross margin for support tickets,
however, plummets when your technicians are
dealing with backup issues at that customer.
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How do you improve the gross margin across the
board for this customer? The metrics tell you that
your clients are spending too much time dealing
with the aging backup system, and it’s reducing
your gross margin and costing you profits.
The solution? Speak to the client about replacing
their backup system with something that needs
less maintenance. If the client replaces the backup
system then your gross margin will jump up again as
your technicians are spending less time managing
the backups.
It’s worth noting that even if the client doesn’t replace
their system, you can make a fact-based decision to
raise the price of the customers managed service
contract to compensate for this problem.
Remember that gross margin can be increased by
reducing the cost of support (replacing the aging
backup system with something that needs less
maintenance), or by increasing the price of the
service provided (your managed service contract).
Increasing profits through trainingTwo further examples of increasing gross margin
might be through highlighting where your support
could be delivered more efficiently.
The first example could be where you identify that
a particular technician seems slow to resolve issues
around a particular technology. Comparison of
the technician’s time spent resolving this issue is
considerably higher than the time other technicians
within your business spend resolving similar issues.
In this scenario, you’ve highlighted the issue that is
affecting your gross margin and can make a fact-
based decision on how to address this issue. The
solution may be to provide the technician with
training on the specific technology to increase his
knowledge and skills and to reduce his time to
resolution for this type of issue. Once the technician
is trained up, your gross margin on that particular
type of issue should also improve.
The second example would be where you identify
that a particular member of staff at one of your
customers is taking up an inordinate amount of
time from your managed service contract. Upon
further investigation you see that this particular
customer employee seems to be requesting
frequent assistance from your technicians in
resolving Microsoft Excel issues.
How can you manage this issue so that the problem
is reduced or even eliminated, thus reducing the
amount of time you spend dealing with the issue
and increasing your gross margin?
The answer might be to offer Excel training to the
customer employee. This training could be charged
for (offering a new profit stream) or, if you make
a fact-based decision based on your gross margin
before and the predicted gross margin after the
training. Training might be given free with a view to
lowering your cost of support over the long-term.
Lowering cost of supportIn each of these scenarios, we have been able to
highlight issues where gross margin is affected not
only at a company level, but also at a customer level,
and even more granularly, at a customer employee
and an MSP technician level.
This level of granularity affords you a great deal of
power when focusing on how to grow your MSP
business. You can make fact-based decisions rather
than work on gut feeling alone.
Conclusion“Best in Class” service builds customer loyalty,
spreads by word of mouth and makes your managed
services business more efficient. Utilizing a service
desk application brings together the functions of
communication, knowledge, and efficiency. It also
allows you to make fact-based decisions based
on key metrics to help you provide a high level of
service, grow your business and maintain success
throughout the life of your business.
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Eric AnthonyEric’s IT experience began in
1985 at the age of 15 when he
was making money setting up
home computers for friends
and neighbours. He went on
to receive a degree in computer
engineering from the University
of Central Florida. Within a year of graduating he
started his first break/fix IT company supporting the
SMB marketplace in Orlando, Florida.
In 2004 he became COO for one of his largest clients,
a fashion jewelry manufacturer and in 2006 became
CIO of a group of specialty furniture manufacturing
companies.
After five years of management experience, he
decided to start his second IT company focusing
on a managed services model. Providing different
levels of service to a variety of micro-SMB customers
allowed his company to provide standardized
services across a variety of market verticals without
having to be specialized in any single vertical.
In 2013 Eric sold his IT company to long-time
business associate and went to work for LogicNow as
a sales engineer. Combining his years of experience
with the MAXfocus Remote Management product
and business ownership he now works to help
other MSP’s achieve their goals through using the
LogicNow family of products.
Richard TubbRichard Tubb is probably the
most well-known face within
the British IT Managed Service
Provider (MSP) community. His
track record speaks for itself, as
he launched and sold his own
MSP business before creating a
leading MSP blog and consultancy practice.
As the former owner of an IT Managed Service
Provider (MSP) business, Richard understand the
challenges IT business owners face every day and
can help you to overcome them while retaining
what’s left of your precious sanity.
The author of the book “The IT Business Owners
Survival Guide” and writer of the award winning blog
www.tubblog.co.uk aimed at putting IT Consultants
back in control, you can find Richard on Twitter @
tubblog.
About the authors
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