Managed Services Best Practice #2 – Lessons from Homer & Embracing Change

Note: This is the third of eight blog entries in which I examine managed services best practices identified in CompTIA MSP Partners’ 2010 market research.

In a classic Simpsons’ episode Homer exclaims “Oh! I haven't changed since high school and suddenly I am uncool.” Ah yes Homer, things change over time even if we don’t! Our second managed services best practice counters that common mindset; Best-in-Class MSPs develop and deploy new technology solutions to keep pace with the industries their customers work in. Cool technologies that are profitable and beneficial to businesses one year may be mainstream and little value the next – top MSPs understand these trends and actively manage their technology portfolio to maximize profits and their relevance to clients.

Consider the following statistics from our 2009 CompTIA MSP Partners research. The average MSP attributed 10% of their top line revenue to products and technologies that were not in their portfolio the previous year. Compare this statistic with best in class MSPs who attributed 20-25% of their top line revenue to products and technologies introduced in the same timeframe. Developing and deploying new technology solutions as a best practice makes perfect business sense, keeping managed service providers in the game with differentiated products and services that aren’t offered by the typical provider. In addition, newer technologies face less price pressure with less competition, more opportunities for differentiation and additional opportunities to sell your services based on value. Lower price pressure means higher margin potential. Mature technologies demonstrate the opposite behavior, with increasingly higher competition and commoditization, resulting in lower margins for a provider. In addition, new technologies in an MSP’s portfolio give their brand considerable cachet in the eyes of customers.

Given this realization, MSPs must spend time tweaking and optimizing their portfolio of services on a frequent basis. Evaluate your service offerings to discover which ones are turning into dogs and what new technologies could be potential stars. Here are some simple guidelines to make MSPs a little less “Homer-esque”:
•    Look for complementary technologies. Are there new services that would fit well with your existing technologies and address your customers’ needs? Some new technologies may be too big of a stretch for an MSP’s portfolio, while others may be a perfect fit. When Best-in-Class MSPs evaluate new services, they actively evaluate how well each fits into the current mix.
•    Constantly evaluate new vendors or services. While sitting in a vendor sales pitch is not high on most MSPs priority list, savvy MSPs know they need to shop for new solutions and keep an eye open for opportunities with their current and prospective clients.
•    Establish a process for evaluating new vendor solutions. Not all vendors are created equal; nor are all vendors right for all solution providers. An MSP must think strategically about their needs in a vendor partner. The best partnership will complement the provider’s business strengths and weaknesses. MSPs should approach a new vendor the same way they would hire a new employee. Evaluate the skills they bring to the relationship, their references (especially with MSPs you know) and how their technologies work in your business. Most importantly, determine if they can help you make money. MSPs must think strategically about their business and build a custom vendor evaluation process that allows them to score and rank vendors against a common set of criteria.
•    Establish a process for adding new technologies to your portfolio. New technologies typically require new or expanded support processes, staff training, revised marketing and sale collateral and a myriad of other tweaks to an MSP’s business. By developing a new technology onboarding process, MSPs streamline the required steps and decrease the time it takes to maximize profitability.

Yes Homer, you can be cool; but it means changing with the times. Top MSP know and embrace this philosophy. Change means risk, but if done right, it can lead to great rewards.