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In today’s newsletter from Raintoday (a great newsletter/site on sales and marketing strategy…worth signing up for), they had an article titled The One Service Every Consultant Should Offer.  Intriguing title, so I had to check it out.

The article is about the importance of offering paid assessments as a way of starting a relationship with a client.  I thought it was worth passing along, as I know many managed service providers still don’t offer these, or they do them for free.

I wish everyone in our industry understood that everything you do with a client sets the tone for the relationship and determines how they perceive your value.  If you give these services away for free, the client perceives you as someone who will do work without getting something in return - that’s a bad place to be in a business relationship!

I hope you find it useful.

MRC

Mike and Joe met at the MSP Alliance conference in Boston a few weeks back and sat down to talk about Everon and what we are up to this year.

http://www.mspmentor.net/2008/05/19/mspmentor-podcast-may-19-2008/

Text from the msp mentor site:

• Episode #: 006 (May 19, 2008)
• Featured Guest: Mike Cooch, CEO, Everon Technology Services LLC, a regional solution provider that has transformed itself into a national MSP.
• Topics Covered: Key themes and trends Cooch expects to hear at the MSPAlliance’s Managed Services Summit near Boston; how to transform from a local break-fix VAR into a national MSP that has regional support partners; melding software as a service and hosting services with your MSP solutions; the economy.

Let us know if there is anything from the interview that would be valuable to dig into in more detail and we will do our best in future posts.

JC

This is an interesting question for me.  Everon has grown our managed services business fast since its inception, but we are still a very small company, as are 95% of our competitors.  So how big should we expect to be able to get, and how fast?

Entrepreneurs, including me, aren’t exactly known for being patient.  I would like Everon to be a $100 million company right now, and I’d like to do it without any additional outside funding.  Given our current service mix and the margins they create, that isn’t a possibility.  I’ve figured our self-financable growth rate (SFGR) to be around 30% at this point, and that’s what we are shooting for in terms of growth this year.  At that rate, it will be  a decade before we hit $100 million.

Now, anyone will tell you that 30% sustained growth is amazing and very difficult to achieve.  So maybe I should be satisfied with that; but I’m not.

Which makes me think of the levers we can use to increase our growth rate beyond this current limit:

1. Acquire companies
2. Raise additional cash to fuel faster growth
3. Increase our margins on our current services to increase our SFGR - giving us more internal resources to fuel the fire
4. Sell different products or services that are faster to sell and have higher margins
5. Develop a growth model that has a more variable cost or self-funding model, such as franchising

All of these are viable options, and are being done by one company or another in our industry.  It remains to be seen if one of these models will prove to be “right” or superior to any other.  Will faster-growth models allow them to maintain high levels of service, or will customer churn end up spiking?  Will certain models allow for flexibility and speed to meet the changing demands of customers and changing trends of technology?  Time will tell.

One thing I know for sure: Everon will be putting the pressure on ourselves to find faster ways of growing, as it is a land-grab right now.  The worst-case scenario for someone who builds a decent business in this industry right now is to get bought at a fair price, and the bigger you are, the better the price.

I’d be curious to hear other’s thoughts on their growth rate plans and how they hope to achieve them and even accelerate them.

MRC

It doesn’t take a rocket scientist to figure out that everything is moving towards a hosted model more so than ever in the past. It also is not the first time that industry experts have predicted this shift would happen and in the past it has always stalled out for one reason or another.

The thing that everyone seems to agree on at this point is that this time around it feels real. It feels like it has an unstoppable momentum as Google docs tries to topple MS office and MS office franticly tries to move to a subscription model to keep up with Google docs.

In a recent yahoo news article Microsoft brass made the statement that over the next five years 50% of exchange mailboxes would move to exchange online.

This is a lot of mailboxes considering they claim that MS exchange will run 210 million corporate email accounts in 2008, growing to 319 million by 2012.

So what does all this mean for you and me? Great question!

I am not sure I have all the answers but for those of you who read the blog regularly you know I have an opinion.

The first question everyone asks me is ‘are we going to start hosting exchange for our customers or setup hosted exchange?’ – my answer is no way. What reason would we have to go after running the hosting infrastructure for these applications? I do believe there is technology right around the corner for providers like Everon to be able to immediately compete with the large infrastructure players without needing to make the capital investment. But why they heck would I want to try to keep up with Microsoft and Co as they add “roughly 10,000 powerful computer servers a month to its data centers.”

The answer is I don’t and I would suggest you don’t either. I am still wondering what companies like Group Spark and others that have build their business on this play are thinking – “I hope MS buys me” is all I can figure.

All that said I would direct you back to an article Mike wrote a few months back where he started to use the word aggregator for companies like you and me. We are not nor will we ever be the large utility companies and I sure as heck don’t want to be the low cost onsite guys so we are left in the middle position between the large utility companies and the customer as the aggregator of services.

So I suggest that we all start thinking about how to wrap premium services (ones we can charge a good penny for) around the low cost services that our customers will be choosing from.

The best example I have seen of this to date are the solution providers wrapping services around Google for business – which at the basic level is free by the way in case you have been living in a cave.

At first glance you would think, I will stay away from those services with my customers because I will never be able to make money providing them a free service. But if you take a closer look there are providers that have wrapped some nice packages around the setup and guidance for small businesses using these services. And ultimately your customers will ask for, no they will demand, these services for their business.

This is exactly what we all need to be thinking about and rolling out to the market. Don’t get left behind. Set yourself up in the aggregator position and survive!

Let me know what you all think, am I crazy? Do you have a different take on the strategic position today’s MSP should be taking in the future?

JC

I just read an article in eWeek Channel Insider that discusses Dell’s recent publishing of their managed services pricing to a select group of partners.  It seems to be causing a bit of a buzz in the industry - everyone wants to know what they’ll be competing against.

Charles Weaver at MSP Alliance made some good points on his blog post about the article.  His main point is “Why is everyone being so reactionary to Dell’s move in the market?”.

It’s a great question.

The answer is that people aren’t spending enough time making sure they brainstorm the many ways they can provide better service than Dell can, and using the answers they come up with to train their sales and service team appropriately.

Dell coming into the market should be good for everyone:

1. It will be good for the people who decide to partner directly with them - you’ll now have a great source of business
2. It will be good for the people who compete directly against them - you’ll now have a major company spending hundreds of millions of dollars promoting the concept of managed services.

If you are going to put yourself in the second camp, resolve to do the following:

1. Don’t lower your prices
2. Identify and articulate clear reasons for why you have higher prices, or resolve to create those if you don’t already have them
3. Rally your company by using Dell as a clear enemy that is attacking the future of your livelihood - people love to have a big enemy to fight!

Either way - don’t panic.  Use this as an opportunity to get better!

MRC

Mike Schultz of Wellesley Hills Group, a leading provider of sales and marketing strategy services for professional services firms, provides some good advice on how to handle clients when price haggling occurs. Read his article here.

I’m surprised at how many salespeople don’t have at least 1/2 a dozen good responses ready to go automatically for when these situations occur. This is the difference between selling at high gross margins or selling at margins barely high enough to keep food on the table.

One of the best books on the subject is:

It gives great advice on everything surrounding the psychology of the price/value relationships and how to make sure your business is getting the highest margins for your product or service offerings.

MRC

This was the questions Charles Weaver asked in his recent post on the MSPAlliance blog.

My answer: No.

No industry is totally immune to a recession.  That being said, I think managed service providers are in much better shape in a recession than most businesses are.  Why?  A few reasons:

1. First and foremost, if your technology stops working at your business, you have no choice but to get it fixed if you want to remain competitive.  It’s kind of like running a restaurant with a backed up toilet…no can do.  You have to get that toilet fixed no matter how bad the economy is or people are going to stop coming to your restaurant and your done!
2. When the economoy goes south and people get more cautious, they would much rather outsource to a vendor than hire a full-time person to do a job.  Why?  It’s easier to fire a vendor than it is to let a full-time person go.
3. We have so many potential customers and most of us are still so small, that if we work hard enough we can find new customers in almost any economy.

We’re still not sure we’re even in a recession at this point, so make sure not to let yourself use it as an excuse for lack of growth!

MRC

There are a variety of tools out there that are a requirement of playing the managed services game but tonight I thought I would talk about an easy way to start creating sticky managed services revenue.

SPAM

There are a variety of good SPAM filtering services out there these days and it is easy to setup a reseller agreement and start marketing them to your client. Once a client signs up for the service you drive some project revenue for the setup, most likely take control of their DNS during the cut over, and create a sticky service to keep the client on board with your services. Not to mention you solved one of their biggest problems by doing this.

If you have any question about how easy it is to sell a good SPAM solution to your clients take a look at this article from Slashdot:

Stony Stevenson writes “New figures suggest that 92.3 percent of all email sent globally during the first three months of 2008 was spam. The data from Sophos also indicated that 23,300 new spam-related web pages were created every day during the period, or one about every three seconds.”

Man, I don’t even have to tell my clients these statistics, they tell me about the problem and I give them a solution.

Over the coming weeks we will begin to talk about tools and partners role in building your successful managed service business.

Oh yeah, we currently use www.appriver.com to provide SPAM filtering to our clients. Yes we could have setup our own filtering service but why spend the time when these guys have it nailed.

JC

Well folks, you have heard me say it a hundred times, here comes Dell into the small business managed services market. And what do I always say right after this, don’t fear them… they will spend the money you and I don’t have to educate the market on managed services and they you and I will provide the high touch service that they will not be able to.

Check out their blog when you have a second:

http://direct2dell.com/smallbusiness/default.aspx

I don’t know that any blog launched to date has as shamelessly promoted the writers agenda. Hold on folks, laptops are gaining ground with small businesses – I never would have guessed – and Dell has new cool laptops in their unbiased opinion – shocker there as well.

It is rumored that Dell will also be launching a blog focused on their channel partners as well but I have to say that this blog is just another step in Dell isolating the channel in an effort to sell direct.

Anyway enough of my ranting let me know what you think about Dell’s efforts to speak directly to your customers.

JC

It is intuitive to understand that you will need sales engineers to support your sales team as they bring new prospects through the door – who else is going to answer the technical questions the client asks or give the demo of your cool NOC monitoring software. What is less intuitive is the fact that your support team will play an active role in the sales of services and products to your existing client base over time but they should not be compensated or motivated based on this role.

But wait a minute we are all in this managed service thing to make money! – Well yes, and I would be the first to argue that you should create profitable services and products or you should get into another business. The problem is that I see a lot of organizations that set their client management structures up in such a way that the group directly responsible for making sure the client is getting the most out of their service is also directly compensated and incentivized for selling specific products or solutions. Your reaction to this run on sentence is probably – Well yeah, that is how the industry has been doing it for years! Well, you are right but I would argue that to truly act in the best interest of your clients your team must be compensated on client satisfaction and retention over the long haul rather than the quick hit 30k project or product.

We have empowered our team to gain first position with clients by creating a system that lets them say things like “listen Mr. client, I have no vested interest in which solution, vendor, product, service, etc, you move forward with I am only recommending what I truly feel is best for your business based on the goals and initiatives we have been talking about”.

Now that is powerful thing to be able to say to a client and a sure fire way to earn a seat at their executive table.

JC