Q: I keep hearing that the industry is moving toward a managed services model. I’m not convinced I should take the leap. How do I know when I’m ready to make the transition to become a managed services provider? What would I need to do to get ready?
If you’re seriously considering on the making the transition to a managed services model, don’t wait too long before you make the move. Recently, CompTIA CEO Todd Thibodeaux warned solution providers that the skills gap they will need to cross to move to a managed services model is quickly widening, and if they wait too long, it will be too difficult to catch up. Technology is changing at such a rapid pace that solution providers who have not made the transition might soon miss the chance.
However, there’s still time to make the transition. To help you capitalize on the managed services opportunity and start earning monthly recurring revenue (MRR), we spoke to Corey DeGrandchamp, the owner and president of Computing Technologies, Inc. Within the past several years, Corey transformed the VAR into a managed service provider. While only you can decide when you’re ready to take the leap, Corey shared some advice to help you prepare your business for the change.
The best time to make the VAR to MSP transition is now, Corey says. “The market is moving in that direction—if it’s not there completely already,” he explains. “What pushed us to make the transition years ago was that we had a potential client looking for a local MSP. We thought, ‘If potential customers know what an MSP is we need to make that push forward to start offering managed services.’”
If you’re thinking about making the move to MSP or adding a managed services practice, Corey recommends doing the research first and building out your toolset. But don’t procrastinate. The longer you wait, the more clients are going to pass you by and go to someone who is already an MSP and has their goals established.
“First and foremost, you need to build a toolset that meets your clients’ needs,” Corey says. “We jumped the gun on this, and we had to backpedal at times. But, if you take the time, money, and effort to invest in the right toolset, you can easily show the value of a managed service offering to new and existing clients.”
One of the most important things you can do is test your tools. While one tool might work well for one vertical, it might not work as well for others. Corey suggests taking the time to conduct internal testing and work with trusted clients. This way you can see what the internal and external challenges are associated with the tool and where things work well.
“If the tool is not right for your clients and the vertical you’re serving, you’re going to have a very hard time maintaining it and selling it to new customers.”
If the tool is not right for your clients and the vertical you’re serving, you’re going to have a very hard time maintaining it and selling it to new customers. If it’s not working, don’t be afraid to change it up. Test out another tool, evaluate something else, and really build that right toolset before you start to offer it, Corey says.
Corey points to good documentation as one big thing that can help you make a smooth transition to managed services. “Without having proper documentation on environments, networks, internet service providers, security situation—for every client—it would have been difficult to make changes to their environment and push them towards managed services,” Corey says.
Get all the information you can into your documentation tool, so you have a bucket in front of you to pull from. The more you know about your potential or existing customers, the easier it is to move forward as an advisor rather than just trying to make a sale. It will be easier for you to advise them about what their best moves are and what is in their best interest. That way it works out for both of you. You wind up making the sale, and you also earn their trust as a real advisor to their company. Customers value this type of relationship tremendously.
Dangers to avoid
Corey has also learned a few lessons the hard way as he helped his company make the transition to managed services. “One of the largest mistakes we have made is publishing our rates online too soon,” he shares. “When we realized we weren’t getting the margins we should have on one of the bundles, we saw a lot of pushback. They didn’t like that when they went to go sign up six months later that the rates for that service changed.”
“We haven’t landed on the best way to present bundles or services to clients,” Corey explains. “Every client is unique, and they might not fit into that cookie cutter mold of bronze, silver, or gold. They might need something that isn’t included or might not need all the services in the packaged tiers. I know that MSPs that are larger might shy away from that and think ‘If they don’t, they aren’t the right client for us.’ For anyone that is transitioning or building an MSP, don’t shy away from these types of clients. Custom tailor your offering to fit these needs where you can. If they won’t go for one of the existing packages you already have, make sure you price their services right.”
Making the leap to MSP
Once you’re ready to make the transition to managed services, there are a few different ways you can start approaching customers. “Every approach is different, but we started by pushing individual managed services,” Corey says. “We started off with remote monitoring and health checks, anti-virus, and backups, and did a lot of slow implementation for clients. When we had them on the hook, we went back to them and offered to bundle additional services for X-price.”
For a VAR that is transitioning to an MSP, Corey recommends trying a small stage roll-out with a handful clients. “We were able to successfully do this by getting our clients to get onboard for a fairly low cost,” he says. “Afterwards, once they saw the value, we were able to go back and offer more features bundled together at a flat rate.”
When we were transitioning to managed services, we found that new clients are more open to getting into a bundled platform, while our existing customers were a little weary to make a move.
If you’re bringing on new clients, Corey suggests starting them off with your bundled offerings. “We found that new clients are more open to getting into a bundled platform, while our existing customers were a little weary to make a move,” he says. “We did slow phases with our existing clients and steered new ones towards one of those bundles.”
You’re always going to run into resistance to change, so take the time to slowly implement services with your existing customer base and show them the value piece by piece, Corey advises. Customers are much easier to convert in small increments, rather than trying to transition them all at once.
“One of our biggest clients was weary to make any changes to their business whatsoever and when we were transitioning, we decided to offer managed services to them for free for a month,” Corey explains. “It was a small loss for us, but we knew that once they saw the value in the offering, they would stick with it. When they tried it out, they loved it. This strategy might not work for everybody, but we knew this would be a huge source of income for us to switch them over, and it would help them out tremendously.”
The path to managed services can be different for everyone. However, following Corey’s advice and spending the time, effort, and money to invest in the right tools can help pave your path to managed services success.
Photo: PranThira / Shutterstock.