I firmly believe that any managed IT service provider worthy of the name focuses on five key areas of service delivery: centralized services, reactive support, business consulting, standards compliance, and project services. The manner in which an MSP provides for their clients will in a large way determine their health and longevity as a business, but there is much more to running a company than providing well-rounded service.
Centralized Services means the MSP has a unified platform with which to see real-time updates on client health and provide proactive maintenance. The fewer disparate dashboards and portals an engineer has to log in to in order to identify or resolve a problem, the better. Most of the key players in this space have hooks or connectors that work with the major antivirus and backup companies, meaning almost the whole of the service side of the business can be run from one place. This is key to providing competent, consistent support for the clients. This is where proactive services live, such as automated health checks and issue detection.
Reactive Support is the most customer-facing side of the job; while the salesperson or account manager may interact with the client’s higher-ups, it’s the day in and day out experience of the end users which can make or break an MSP’s reputation. When incidents come in they must be clearly communicated and addressed promptly; overcommunication is far better than the opposite. Ideally the centralized tools above provide the ability to manage a large fleet of clients, whether their issues are proactive or reactive.
Business Consulting is the ability and practice of advising clients on future technological roadmaps. Whether helping them construct long-term hardware refresh cycles, moves from or to cloud services, or address emerging security threats, this service helps companies which may have no other source of IT guidance make firm and educated plans for the future.
Standards Compliance isn’t merely ensuring clients are adhering to industry or governmental regulation, but also that clients are meeting the MSP’s own standards of behavior or expectation. This could range from the implementation of password policies to following proper support request procedures. Without standards, both internal and external, an MSP will have a very difficult time managing its many different clients with a team that can’t clearly communicate. Without standards, things fall through the cracks and eventually cause ruin.
Project Services is a general term for one-off client needs such as the installation of a new server, changing internet service providers, rolling out wireless access points, or implementing a robust backup system. An MSP that cannot leverage vendor contacts and partnerships to obtain better pricing on hardware and software than the client could on their own will quickly find themselves without a job, equally so if they aren’t able to handle the larger projects they themselves recommend with the above services.
For this post I’ll use an example which represents how many, if not most, MSPs start out. Acme IT Pros has one owner that also serves as sales and account management, one experienced engineer, and one entry-level technician. Each person’s role is clearly defined, and they work well within the five service delivery areas above for their few clients. The technician spends 80% of their time addressing issues while the engineer spends 80% of their time handling bigger-ticket items in the field. The owner is always busy.
As the technician and engineer’s schedules start filling up, the owner thinks of expanding the business. They want to increase their overall profit margin from 20% to 30% or more, and figure the only way to do that is to get more clients. With little room in the service schedule for new clients, this means hiring more employees.
Within several months Acme has two senior engineers and two service technicians. Gross revenue is double what it was previously, but profit margins have stayed the same. With schedules filling up, the owner decides it’s time to expand again. Another engineer and technician are added on to handle the increased client load. No matter how large they grow however, profit margins remain stable and scheduling remains tight. The owner spends more and more time on administrative work and less finding new clients or managing existing relationships. With only so many hours in the day, it seems there is no way for the business to grow further or farther.
Here’s where process improvement can make the biggest difference and allow the business to reach heights it couldn’t imagine before. If an MSP’s remote management and monitoring tools aren’t configured properly, it may require one full-time technician for every 50 desktops under the business’ care, let alone the engineering labor which goes along with them. This is a huge amount of overhead for a low number of client computers, which limits the profit margin and ultimately the expansion potential of the company.
By properly automating proactive tasks and reducing the overall ticket noise, one technician can handle multiple times their previous capacity, without feeling additional stress or requiring extra time. If the same employee can go from managing 50 endpoints to managing 200, the MSP has saved on the cost of hiring 3 additional technicians, greatly expanding its margins while it grows the client base.
If 50 endpoints bring in ~$4000 per month and a technician is paid the same $4,000, that leaves very little, if any, to cover business overhead. If that same technician is able to handle 200 endpoints instead, the MSP has effectively gained $144,000 of gross annual revenue without any additional employee expense.
Automated scripting of proactive tasks isn’t the only way to help an MSP gain efficiency and grow its profit margins; another large area of improvement is in standardization of internal policies and procedures, utilizing existing toolkits.
Smaller clients and up-and-coming IT technicians often ask me “when is the right time to get a server?” There isn’t a single hard number I can point to, be it 5 workstations or 10, where that migration makes sense. The truth of the matter is “when the complexity of managing a server is more efficient than managing each individual desktop, it’s time to change.”
Purchasing, installing, configuring, and administrating a network server are non-trivial tasks, but if the return on that investment is reduced overhead for the administration of all individual desktops, it may be a smart business move to invest in their future by going that route, particularly when planning for eventual growth.
I bring up this example because often managers or business owners will look at the complexity of changing their business processes and instantly dismiss the idea, citing that it would needlessly add steps or make more work for them. Rather than moving toward a time- and incident-tracking software—such as the aforementioned centralized services platform—some rely on engineers filling out spreadsheets and time cards, which get manually entered into separate accounting software for billing and HR. Not only is this process, which may have functioned well enough when the company was small, fraught with opportunity for errors, it’s also not scalable. Just like the technician spending all their time handling only 50 computers, the amount of time and effort required to process manual paperwork grows linearly with the number of employees to manage or clients to bill; growth becomes impossible.
For an MSP to thrive procedural standards must not only be created but also enforced. All employees must use the same system to enter their billable time and service notes, not only for the ease of management but also so other employees have ready access to incident comments or resolution steps that could relate to future issues. Standardization may mean more initial work for those going through the change, but doing so becomes far more efficient for all parties involved. Exceptions to the established standards should be well-documented with clear cause, and not be allowed to become the new standard.
Imagine being hired into a company where there are no written procedures and everyone has their own system for performing each task. Not only would it be difficult to kludge together your own way of doing things based on those around you, but also there’s no proper accounting when the (ill-defined) process breaks down—”I don’t know why we do it that way, we just do” is a poor business response when examining failures or trying to determine root causes.
The last point I’ll touch on today is that of knowing your business. We live in an era where data can be collected on almost every facet of providing service, and it’s important for every MSP—particularly those that wish to grow—to collect, analyze, and discuss those metrics. Being profitable as an MSP is all about averages, and seeing how those averages change over time. For a real-world example, just this morning I collected a number of statistics covering the month of September. At a glance I can see if a client’s utilization was abnormal (either high or low), any moving trends when it comes to service delivery, and three additional important metrics: how many tickets are opened per managed endpoint, how long the average ticket takes to resolve, and how much time each endpoint “costs” in labor hours.
Taken across all of our clients, I can present senior management with a proper accounting of how our engineers are utilized and whether we have room to grow with current staffing. I can identify accounts that may benefit from a drop-in visit—either because we haven’t heard from them in a while or their usage has steadily increased—as well as potential areas where we can increase internal productivity, by seeing what can be done to reduce the number of reactive tickets by a more careful attention to the proactive incidents, for example. If a client is submitting ticket after ticket about slow workstations, maybe the sale of new hardware will better serve their needs than constant attention to a recurring problem. With the right application of data and business analytics, it all becomes easy to see.
Growing any business is difficult, particularly when competing in market saturated with competition. I purposely haven’t gone into the sales management side of the equation, because all the sales in the world won’t matter if the MSP’s internal processes aren’t sustainable. When it comes to planning for and implementing future expansion, it’s key to know not only where you are but also what the roadmap looks like to get where you’re going. Trying to work it all out in hindsight is far more difficult than taking a moment for careful planning ahead of time, and though change can be difficult, establishing core business values and procedures is key to successful advancement.
Have questions about what your MSP can do to help prevent or ease growing pains? Feel free to reach out: [email protected]