seven steps to next-gen managed it services...

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Seven Steps to Next-Gen Managed IT Services SuccessA prActicAl guide for solution providers

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Seven Steps to Next-Gen Managed IT Services Success

for dave cava, chief operating officer at proactive technologies, an it services

provider based in new York, basic managed services are old news. no doubt, proactive

technologies offers traditional managed services—such as server monitoring—to its

growing base of hedge fund customers.

But Proactive Technologies has also blended managed services with cloud services, which leverage a major data center provider in Pittsburgh, Pa. The net result: Despite the difficult U.S. economy, Proactive Technologies expects to grow its managed services business roughly 30 percent in 2011.

In many ways, Proactive Technologies is now a virtual CIO to its customers, offering business guidance and advice on how the hedge fund operators can align IT to meet emerging business needs.

Proactive Technologies isn’t alone. A growing number of MSPs are pushing beyond IT monitoring to offer business consulting—while pushing deeper into data management, application management, and other services that strengthen customer engagements and profitability.

Indeed, customers are demanding CIO-type guidance. At the same time, they want assurances that applications will remain highly dependable whether they reside on-premise, in an MSP data center, or hosted by a third-party.

For many resellers pushing into the managed services market, the new challenge involves blending business guidance with managed services and cloud services. The challenge grows even taller as some big technology cloud computing companies attempt to service small businesses directly over the web.

Anton Ruighaver, president and chief operating officer at Techlinq, a computer and networking solution provider based in Oakland, N.J., emphasized the importance of “owning the last mile” beyond its core service offerings.

“You don’t want to give away business that is directly linked to what you do,” he said. “If you are not offering the ancillary service, somebody else will.”

Other MSPs have come to the same conclusion: to remain competitive they need to continually evolve their services. Firms that began life with staples such as remote monitoring, managed security, and managed storage now seek to differentiate. The new services take many forms, including:

• managed and hosted VoIP;

• managed database services;

• mobile device management (MDM) for tablets, smartphones and more;

• video surveillance;

• and a range of cloud services—everything from SaaS-based CRM to cloud-based backup and disaster recovery.

“The best in class are branching out,” said Jim Hamilton, vice president of member relations at CompTIA. “Services that are well established tend to have restricted margins and tend not to be as profitable,” he explained. “But


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quick start guide Seven StepS to next-Gen ManaGed It ServIceS SucceSS

people who go out and develop new technology solutions tend to be more profitable.”

The CompTIA MSP Partners community conducted research on MSPs and found the best-in-class companies invested twice as much in new services compared with the average MSP.

Moreover, top MSPs continue to charge between $100 to $150 per user per month for all-in managed services, according to TruMethods, a consulting firm that works closely with MSPs.

Want to achieve best-in-class status? Read on for seven tips on how to expand beyond the MSP norm.

step 1: Ask Your customers

Your customers may prove your best source of inspiration when mulling what new services to offer. “The old Henry Ford approach of ‘If I asked my customers what they want, they would say faster horses,’ is not an attitude of success today,” says Lisa Jenkins, Business Development Manager at Cisco.

Two practical pieces of advice: First, use your IT help desk to spot trends. More than fixing customer problems, your IT help desk can be your direct connection into your customers’ long-term business planning—revealing their wants and needs through casual conversations with your support personnel. Next, leverage your NOC (network operations center) to track performance, reliability, and scalability trends within your customer settings.

Your NOC, for instance, can reveal customers’ peak network and server usage hours; perhaps it’s time to recommend a cloud service that can help customers to improve application performance during those peak hours of demand.

For MSPs that don’t have effective help desks and NOC services, there are numerous paths forward. Options include:

• Using off-the-shelf software to build an in-house NOC or help desk.

• Evaluating SaaS options, which include numerous IT service management and help desk tools available in the cloud.

• Working with a third-party NOC and help desk provider, many of which will provide white label customer support.

In addition to tapping into NOC and help desk services to gain customer intelligence, top MSPs simply meet regularly with their customers to gather new service ideas.

“Our options were simple: We could dream up their needs or

ask what their needs are,” said Rene Theberge, national sales manager at EnabledSuccess Inc., an Ottawa MSP that provides SaaS products from such vendors as NetSuite. “The origin of our offering is not from a product manager, it really comes from the customers themselves.”

To strengthen the dialog, EnabledSuccess launched a user group that meets several times a year via conference calls. Through those meetings, additional offerings can be identified and incorporated into the company’s services, he said.

The key, says Theberge, is to include strategy sessions as part of the package of support services a customer is already paying for.

Other companies use periodic customer satisfaction surveys as a feedback mechanism. In addition to gauging how well the company is doing, surveys provide a forum for discovering things customer are looking for the company to do.

Another source to tap: Your peers. Gerry Skipwith, a managed services industry veteran, says he learns from talking to other service providers through CompTIA forums and at the Breakaway conference. “It’s a great way to learn about what kinds of things are being offered by other providers,”’ he said. “It’s a reflection of what the market is looking for.”

step 2: invest in people, process

A broader service portfolio is typically a good thing, but not if the MSP lacks the resources to deliver. An expanding MSP needs to make sure it has the requisite expertise to support a new service. In addition, bench strength, or having more than one person with expertise in each service offering, is also a key to success because each managed service represents a 24/7 commitment.

A culture of continuous learning is critical for both new and expanding service providers, adds Frank Picarello, COO of CMIT Solutions, Inc., a managed services provider that utilizes locally owned and operated locations to meet the IT needs of small and mid-size companies nationwide. CMIT’s extensive training programs cover business strategies for owners and managers as well as technical training for service delivery personnel.

To best leverage their workforce, CMIT maintains a skills database to track the training and experience of each staffer. The database is shared by all CMIT business owners and searched when specific talents are needed by an office location that doesn’t currently have available someone with those skills.



1. Managed Services Usage By Company Revenue •78percentofcompanieswith$100millionormoreinannual

revenuesusemanagedservices •75percentofcompanieswith$10millionto$99millionin

annualrevenuesusemanagedservices •58percentofcompanieswithlessthan$10millioninannual

revenuesusemanagedservices

2. What are the major customer drivers for managed services? •Costsavings:61percent •Freeupstafftofocusmoreoncorecompetencies:52percent •Gainaccesstothemostcurrenttechnologies:51percent •Improvedsecuritybenefits:51percent •Fillagapinvolvinglackofin-houseexpertise:44percent •Lackthetimeandresourcestohandlecertaintasksin-house:

44percent •Remoteofficemanagement:34percent

3. What are the most important channel drivers for managed services?

•Protectingcustomerbase:61percent •Increasedsalesrevenues:52percent •Buildingrecurringrevenues:51percent •Penetratingnewaccounts:51percent •Minimizingfinancialrisk:44percent • Improveserviceutilizationrates:44percent •Expandshareofwalletwithcustomers:34percent

4. Channel reasons for not offering managed services: • WaitingtoseehowcloudcomputingimpactsMSPmodel:35

percent •Focusingonothercorecompetencies:32percent •Lackofin-houseexpertise:17percent •UnsureofROI:17percent

•Don’tseedemandforit:12percent •Unsureofhowtoentermarket:12percent •Vendorpartnersdon’tsupportthemodel:9percent •Unsureofwhatthemodelentails:8percent

5. Top 10 managed services offered: •Applicationmonitoring73% • ITconsulting72% •Networkmanagement71% •Softwaredeployment/support71% •Desktopmanagement70% •Servermanagement68% •Databasemanagement67% •Security66% •Hardwaredeployment/support63% •Helpdeskfunctions62$

6. Main customer objections that MSPs face when selling managed services

•Understandingthecostbenefits58% •Securityconcerns55% •Customerswantto“own”theirIT47% •Overcomingfamiliarityissues/sellingvalueprop44% •Uptime/Internetreliabilityconcerns38% •SLAwariness38% •Cost/pricing35% •ResistancebyexistingITstaff29%

Source:CompTIATrendsinManagedServicesStudy,June2011

Managed it services By the numbers

In introducing new offerings, CMIT employs a rigorous roll-out strategy to ensure consistent quality across their network of companies. They offer extensive technical and sales training on the specific offering; marketing collateral that can be customized to the needs of the local market; and “locked-in” agreements with vendor and distributor partners.

In addition to the specific preparation CMIT offers to its business owners and their staff, CMIT also encourages participation in credentialing programs such as the CompTIA MSP Partners Trustmark. “Anyone can call themselves an MSP, what I like about the Trustmark is that it ensures an MSP has the foundational requirements for supporting service offerings,” says Picarello.


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step 3: partner to extend services

MSPs don’t necessarily need to build their own services to stretch beyond their core offerings. Partnering lets companies expand without incurring hiring and training expenses.

Still, MSPs need to carefully consider their partnering options—especially when it comes to leveraging third-party cloud services and managed services. Among the key questions to ask:

• Can the third-party service be rebranded (or “white labeled”) as the MSP’s own service?

• Can the MSP set pricing and margins for the third-party service?

• Who handles end-customer billing?

• What type of service level agreement (SLA) does the cloud provider offer to MSPs and end-customers?

No doubt, plenty of MSPs are partnering up. Telco resellers and VARs, for instance, are cross-selling services to help customers link their on-premise VoIP systems to mobile networks, and global voice and data networks.

There are opportunities to partner in more traditional markets as well. Techlinq, for one, partners to provide a variety of ancillary services. “If we don’t have the specific proficiency required in house, we take the next step and determine whether or not a partner can suit (the customer’s) needs,” Ruighaver explained.

Techlinq’s core business focuses on such areas as servers, local-area networks, wide-area networks, and virtual private networks. The company works with other companies or contract employees to extend its services. Ruighaver said the company teams with partners to provide customers with Web design and hosting, off-site backup, Apple Mac support, and Linux services, among its other offerings.

Ruighaver said Techlinq acts as the billing agent on behalf of its partners, noting that the goal is to give customers a one-stop-shopping experience. He said the company requires its partners to nominally reduce their regular fees.

That eliminates the possibility that the customer will want to take its business directly to the partner to get a better deal, according to Ruighaver. The partner will make less than its usual fee, but may still find the partnership attractive if the link-up brings in enough work.

ZSL Inc., a solutions and services provider based in Edison, N.J., decided to tap a partner, Net Access, for data center services instead of building its own facility, noted Shiv Kumar, executive vice president at ZSL. “Our core expertise is more about making server applications run 24/7,” Kumar said. “We felt it was better to invest our time and effort in building experience and expertise in services rather than in building the data center.”

step 4: rethink pricing

When managed services first gained momentum, most MSPs charged on a per-device basis. The monthly recurring cost was based on how many PCs, notebooks, and servers the MSP managed.

More recently, a large number of MSPs have shifted to flat fee per user pricing—with the best MSPs generating $100 to $150 per month per user or more, according to TruMethods CEO Gary Pica.

What’s driving some MSPs to shift from per-device to per-user pricing? Factors include:

• Per device desktop pricing can often lead to price wars with rival MSPs.

• Emerging devices like tablets and smartphones require management, but it’s sometimes difficult for MSPs to quantify the value of such services.

• Cloud computing, which has forced MSPs to think less about “physical” devices and more about virtual services and end-user consumption rates.

As cloud services and managed services blend with one another, TruMethods recommends a so-called Cake approach to pricing. Instead of selling customers itemized ingredients (patch management, remote monitoring, storage, etc.), Pica of TruMethods recommends selling customers the entire Cake (total IT management) for a single, higher-margin price.

Still, there are cases where it doesn’t make sense for MSPs to abandon per-device pricing. For instance, many MSPs monitor thousands of devices across multiple data centers, in which case per-user pricing may not make sense.

Some MSPs, meanwhile, offer tiered pricing. ZSL, for instance, offers a foundation stack and advanced monitoring and management.



Q: How have you seen the managed services market evolve over the past year or so?

Hamilton:Whilemanagedservicesisamaturingmarket,solutionproviderscontinuetomoveenmassefromabreak/fixmodeltomanagedservices—chasingnewcustomeropportunitiesandlucrativeprofitopportunities.Theopportunitiesandchallengesarebecomingmorecomplexascustomersweigh:

•hybridon-premises/cloudmodels;

•theproliferationofconsumer-orienteddevices,

•theexplosivegrowthofmobilitypushingtheboundariesofcorporatenetworks;and

•theincreasingdependenceonITforeverydaylife.

Asaresult,themanagedservicesmodelisevenmoreattractiveasaone-stopshopformanagingcustomers’technologyneeds.

Q: On the front-end, tablets and smartphones are proliferating. Are there opportunities ahead for mobile device management?

Hamilton: Absolutely.Mobiledeviceshaveexplodedintothemarket;thisbringsnumerousopportunitiesandthreatsforbusiness:

•HowdoIsupportafulllandscapeofdevicesandapplications?

•HowdoImanagethesecurityofmyinformation?

•HowdoImanageandoptimizecarriercontracts?

•HowdoIconformwithgovernmentregulationconcerningbusinesscommunications?

•HowdoIincreaseproductivityformobileworkers?

AllofthoseissuespresentopportunityfortheMSPasthetrustedbusinessadvisorwhocanhelptheircustomerssuccessfullynavigatethroughthornyissues,andhelpSMBsbetterrealizetheirbusinessobjectives.

Additionally,asaone-stop,cost-effectivesolutionformanagingdistributedITcomplexity,managedservicesisideallysuitedtobeamobileworkforcesolutionthatdeliversstrongROI.

Q: On the back-end, cloud services continue to generate a lot of noise. Are MSPs profiting or confused by all the hype?

Hamilton: SavvyMSPsrecognizethatcloudcomputingisheretodayandwillonlycontinuetogrowinimportanceoverthecomingyears.MSPsareuniquelypositionedtohelptheircustomersmakeinformeddecisionsabouttheirtechnology

needsandstrategies.Throughathoroughunderstandingofyourcustomers’businessneedsandthecurrentservicedeliveryoptionsintheindustry,theMSPisinastrongpositiontoplaytheroleofvirtualCIO.

FarfromdisplacingMSPs,largecloudproviderscanneverdeliverthepersonalandthoughtfulservicesolutionsthatalocalMSPcanoffer.Inadditiontoprovidingthishighpersonaltouch,the

introductionofcloudcomputingtoabusinessputsnewpressuresonabusiness:Broadbandrobustness,servicemonitoring,applicationcustomization,anywhere/anytime/anydevicecomputingareallnewbusinessopportunitiesforthecloudsavvyMSPtocapitalizeon.

Q: Combine those two trends — cloud and mobile — and customers want to access any service from any device. Can MSPs fulfill that need?

Hamilton: Throughagoodunderstandingoftheircustomers’businessneeds,MSPsarewellpositionedtorecommendcost-effectiveoptionsfortheircustomers.Throughthisunderstanding,MSPscancraftSLA’s,serviceoptions,tools,andsecuritysolutionsthatmeettheneedsoftheircustomers.Notallcustomerswillneedorwanttopayforaccessfromanydevicefromanyservice–butanMSPneedstohaveanofferingtomeettheneedsofthosethatdo.

Q: How can MSPs distinguish themselves, especially as more MSPs move into the market and cloud services providers target SMBs?

Hamilton: MSPsknowtheircustomers’business.Theircustomersknowthemandtheircapabilities.MSPscanhelpSMBsnavigatealloftheoptionsinthemarketplacetoputtogetheraone-stopsolutionthatperfectlymeetstheirneeds.Alargecloudprovidercannevermatchthatoffer.Thisisthestrengthofthecloudchannelmodelin2012andbeyond.

Q: What challenges — and opportunities — do you see ahead for MSPs?

Hamilton: Asmoreandmoresolutionprovidersmaketheinevitabletransitiontomanagedservices,goodMSPshaveafirstmoveradvantage.Buttocapitalizeonthatadvantage,theymusteffectivelybrandthemselvesasanexperienced“best-in-class”MSP.

CompTIA’sTrustmarks(theMSPPartnersTrustmarkinparticular,butalsotheITSecurityTrustmarkandoursoontobereleasedCloudTrustmark),differentiatebest-in-classMSPsfromnewerMSPs,allowingthemtostandoutfromthecloud.Inaddition,throughparticipationinourTrustmarks,MSPscanensuretheirbusinesseseitherbecomeorstaybest-in-class.

Q: So what’s the bottom line for MSPs? Hamilton: Ourhyper-networkedworldwillonlycontinue

tobecomemoresooverthenext10years.Adoptionoftechnologicalinnovationwillalsogrowinimportanceasabusinessdifferentiatorandcompetitiveenabler.TheMSPisuniquelypositionedtohelptheircustomersharnessthehyper-networkedworld.However,MSPsmuststaycurrenttoensuretheyremainatrustedbusinessadvisortocustomers.

next Moves for MspsA conversation with Jim Hamilton, vp, member relations, comptiA

Jim Hamilton is no stranger to the managed services market. As VP of member relations at CompTIA, Hamilton works closely with aspiring and established MSPs worldwide. And Hamilton previously was executive director of MSP Partners, a 5,000-member organization that CompTIA acquired in 2009. So where are managed services heading next? Hamilton offers these insights.


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The foundation stack covers the server operating systems, database servers, and application servers. That level of service includes patches and security updates. The advanced level, meanwhile, monitors processes running on Windows and SQL Server instances and provides log monitoring.

Kumar said the two levels helps ZSL clearly define what customers are getting for their money. This pricing approach makes it easier for ZSL to justify the cost of services to a client’s chief financial officer, who might hesitate initially to sign an annual contract. With flat-fee pricing and a single service level, customers “didn’t have any clue on how deep we manage servers and the applications running on top of them,” Kumar said.

ZSL continues to use the per-device model as it rolls out new services, even as some rival MSPs prefer the per-user model.

step 5: Minimize surprises

Unexpected costs upset customers and their budgets. On the flip side, unexpected costs can also trim an MSP’s profit margins.

To minimize the risk of costly surprises, MSPs must have well-defined onboarding processes in place. The onboarding process often includes “minimum configuration requirements” for all PCs and mobile devices attached to the customer network.

During the onboarding stage, MSPs typically refresh outdated customer PCs, perform memory and storage upgrades, apply software patches, update all operating systems, and apply proper security to all systems. Ideally, this onboarding step involves a separate charge from the monthly managed services fee. The onboarding fee covers the MSP’s cost to bring the customer’s network into compliance with modern IT best practices.

The onboarding process also ensures that the customer’s network is in a healthy state the very day managed services are applied to the network.

Still, healthy networks can suffer setbacks as new variables enter the picture. Increasingly popular services such as SaaS can prove problematic in that respect. Without clearly defined service level agreements, customers may be confused about what’s included in

a SaaS deal and what’s considered an extra item that involves an additional fee.

“The problem with SaaS is you are not always sure what you are getting into,” Theberge said. “It’s more difficult to plan expenses.”

EnabledSuccess, however, aims to take the surprise element out of SaaS, Theberge said. The company works with its customers to build a support package that takes into account training and consulting needs. If a customer knows they will hire two new employees, then the cost of training two employees is reflected in the package. Consulting time is also anticipated: a half-day per quarter, for example.

The bundling of ancillary services—and cost—into the SaaS package lets customers budget their expenses ahead of time, Theberge said. “They know they will need strategic consulting, but they don’t have to go through a budget exercise of getting money for it every quarter,” he said. “They are not caught off guard.”

step 6: Make Your services stick

MSPs should cultivate a “stickiness” with clients, especially in a challenging economic environment.

Essentially, service providers should aim to intertwine themselves in the customer’s business as much as possible. And that stickiness factor goes beyond an MSP’s own technology or service.

In some cases, MSPs are offering vendor management services—emerging as the central clearing house for the customer’s entire portfolio of IT relationships. The MSP, working on behalf of the customer, negotiates all IT-related contracts—covering everything from telecom services to mobile broadband services.

Hamilton advised MSPs to develop a relationship with the whole business, not just the IT portion. “You need to go up stream and talk to the C-level and line-of-business folks and establish yourself as a trusted business advisor and be able to sell services from a business perspective, not just an IT perspective,” he said.

Often, discussions will start with a customer’s business challenge—such as complying with emerging government mandates, regulations, and privacy laws.



Those discussions can rapidly shift to specific IT solutions.

In one project, a client approached Techlinq with concerns regarding what sites employees were browsing. The conversation with the customer initially focused on security policy, rather than content filtering or other Internet security technologies.

“It really starts with an appropriate policy that is written and enforced and provided to the employees in a clear language,” Ruighaver said.

Techlinq helped its customer create an acceptable use policy as it has for other clients. In some cases, Techlinq distributes the policy to employees as part of its service provider role, Ruighaver said, noting that regulating Internet access can be a touchy subject for a small business. “This is outside of your traditional technology solution.”

EnabledSuccess’s strategic consulting services also fits the pattern of aiming beyond technology. Theberge cited the example of working with a customer to explore how a potential acquisition might impact its enterprise resource

planning system. That level of consulting, he said, reaches into the strategic goals of an organization.

That approach also reaches to the top of an MSP’s corporate org chart. A service provider’s C-level executives may be called upon to work hands-on with customers, particularly when services reach beyond IT.

“Our own executives found themselves more involved in the delivery model,” Theberge said. “If you are talking about acquisitions, it’s better if the chief financial officer or chief executive officer speaks.” Service providers benefit from that degree of involvement. MSPs who think outside the “tech guy” box are on a path to become an integral part of the client’s operation. That positioning could spell the difference between a lasting customer relationship and a revolving door.

“A lot of these companies don’t get involved enough with the client’s overall operation,” Ruighaver said. “They make themselves replaceable and it becomes a what-have-you-done-for-me-lately scenario. If the client doesn’t perceive the value of the services they are providing, they are out the door and another one gets put in their place.”

step 7: Make the commitment

Overall, MSPs need to step up to the investment necessary to build and maintain new services. Hamilton said losses rather than profits are typically associated with an investment in a new line of business. But the opposite is true in the MSP space.

“The most profitable MSPs are the ones who are targeting growth, the people who are investing to take advantage of that opportunity,” Hamilton said. Hamilton advised MSPs to structure themselves for growth. That involves several dimensions: developing a sales and marketing plan that targets growth, building out infrastructure to boost capacity, and creating an on-boarding process to accommodate new customers.

MSPs should also invest their time when it comes to learning more about the business. Hamilton said that the CompTIA MSP Partners Community offers a suite of managed services best-practice education. It also provides templates that MSPs can modify and apply in their businesses. Those tools include a customer

names to Know

Dave Cava,chiefoperatingofficer,ProactiveTechnologies,www.proactivetech.net

Jim Hamilton,vicepresident,MemberRelations,CompTIA,

www.comptia.org

Lisa Jenkins,BusinessDevelopmentManager,Cisco,

www.cisco.com

Shiv Kumar,executivevicepresident,ZSLInc.,

www.zslinc.com

Gary Pica,president,TruMethods,

www.trumethods.com

Frank Picarello,chiefoperatingofficer,CMITSolutions,Inc.,

www.cmitsolutions.com

Anton Ruighaver,presidentandCEO,Techlinq,

www.techlinq.com

Corey Simpson,director,CompTIAMSPPartnersCommunity,

www.comptia.org


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onboarding template, a pricing worksheet, and a sample service-level agreement.

“We probably have thousands of man years of collective experience building out managed services businesses, so taking the time to benefit from all of that...is critical,” Hamilton said. MSPs hoping to grow face a significant commitment in time and money, industry executives contend. “It’s not for the faint of heart,” Skipwith said. “It’s kind of like we’re renovating a house: It will cost twice as much as you think. But you need to go in and make that necessary investment.”

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