How to structure your MSP alliances with other technology companies

I recently wrote an article for SmarterMSP on why your MSP should build strategic alliances, which received a lot of good feedback.

Managed Service Providers (MSPs) were intrigued at the concept of building strategic alliances (or “buddying up”) with other technology companies to extend their reach with:

• Specialist skills they don’t have in-house
• More geographical coverage
• Additional resource for projects, holidays, and sick coverage

However, you might have questions on how to structure the strategic alliances you build with other tech companies. In this article, I want to explore three ways you might structure your strategic alliances.

Using a subcontractor

The first method of structuring a strategic alliance is by utilising your partner as a subcontractor.

What this means is that they:

• Deliver work to your client as though they were your company
• Invoice you directly for any work delivered

One example might be of utilising a local “one-man-band” IT Consultant to provide on-site work for a client of yours. The consultant has his own business and will bill you directly for any work delivered. When they interact with your client, they do so as one of your engineers.

When you invoice your client for the subcontractors time, you might bill at cost, or you might charge and add a percentage of mark-up to increase your profits.

In my MSP, we utilised subcontractors frequently. We treated them as one of our team, provided them with company uniforms bearing our logo, and offered them training, as we would our full-time staff. Subcontractors worked well for my business, and they can do so for your business as well.

The direct referral

Another method of using a subcontractor is where you refer your partner directly to your client.

This scenario works well when the subcontractor is a specialist and they need to interact with your client often. You acting as the “middle-man” in these conversations would slow down the process of delivering the work.

When it becomes clear that your client needs some specialised skills (for example, to deploy a CRM package), introduce your partner to your client. The partner meets your client, representing their own company, and then delivers the work required. The partner then invoices your client directly and often pays you a referral fee (for example, 20 percent of the bill) as a thank you for the introduction.

Many MSPs are concerned that if they introduce another tech company to their clients, the client will think less of them as a provider. In my experience, nothing could be further from the truth! By introducing other reliable, skilled companies to your client, your client will trust you more!

Can I trust a strategic alliance partner?

The biggest question that always concerns MSPs about using a strategic alliance partner is “Can I trust the partner company?” Many MSPs are concerned that the partner will let them down with poor performance, or even try to poach their client for themselves.

To this I would say, you need to set your expectations of the strategic alliance relationship up-front. With subcontracted resources, start small. Give them small jobs to deliver, with specific instructions on what to do and what not to do.

Some examples might be:

• Wear our company uniform when visiting a client
• Update our ticketing system before leaving a client-site
• Direct any client enquiries regarding further work to us
• Don’t engage in any direct work with our client

As the subcontractor delivers excellent work and follows instructions, you can increase the quantity and importance of the work you give them.

I’d also recommend that you put in place Non-Disclosure Agreements (NDAs) and Contractor Agreements with your strategic alliance partners. The online MSP community The Tech Tribe (which I recently joined) has templates of these type of contracts that you can use.

Similarly, when it comes to working with referral partners, you can put in place a referral agreement that states that this and any future work the partner picks-up from your client will be rewarded with a referral fee.

The bottom-line for strategic alliances is building trust. If you don’t trust your partner, or they don’t trust you, the partnership will fail.

Strategic alliances provide many benefits

Strategic Alliances are a great way for MSPs to add additional resource and geographical reach to their business. You can engage with partners to deliver work for your clients either through a subcontracted arrangement or through a direct referral.

In my experience, most MSPs will use a mixture of subcontractors and direct referrals to meet their client needs.

How could you grow your business and help your clients through building strategic alliances? Leave a comment below and let me know!

Photo: VideoFlow / Shutterstock