4 Threats To A Managed Services Start-Up

By Mike Monocello, Business Solutions magazine.

Like many technology companies, Platte River Networks has seen its hardware sales revenue shrink over the years, while service and support revenue has grown. Recently, the integrator took a greater step toward becoming even more services-oriented by bundling and selling managed IT services (such as remote monitoring of servers, antivirus, workstation management, Web defense, and spam filtering) with its on-site maintenance plans. The result has been a sound uptick in revenue, as the integrator-turned- MSP (managed services provider) is on pace for 38% revenue growth in 2011. With many lessons learned and due diligence behind them, the owners of the company, Brent Allshouse and Treve Suazo, can recall all the decisions and situations that led to what the duo feel is a winning managed services practice and all the potential threats to a company new to managed services.

One important lesson the duo learned early on involves the services bundles the company offered to its customers. Allshouse says that he initially began thinking about bundles by asking, "If I were building the perfect IT environment from scratch, what would it look like?" He then wanted to create a bundle of services that would create that environment. However, he quickly realized that, for SMB customers, such a bundle would be cost-prohibitive. Rather, the MSP sought to determine what services are most needed by SMB customers and at an affordable price. The resulting base package contains only essential services. "When you create a bundle of managed IT services, keep it simple and make sure it addresses the pain points of the majority of your customers," he says. "Additionally, don't create too many bundles, and don't break them into pieces for customers."

Another consideration is determining the details of service level agreements. Consider that most of Platte River's customers are professional services SMBs with typical business hours of 8 a.m. to 5 p.m. on weekdays. Now consider that managed services like remote monitoring are 24/7 services. What happens when an alert occurs on the weekend or after normal business hours? The answer depends on the customer.

If your managed services are adequately addressing the needs of your customers, there's the potential that your customers won't even know you're doing anything for them. "A lot of people who jump into the managed services arena try to run their entire business remotely," says Suazo. "Many MSPs fail because the customer began seeing the service as only a monthly bill and not something of value." For this reason, the MSP says it's important to have good communication with customers so they know what the managed services are doing for them.

Finally, and most importantly, when it comes to providing managed services, one of the most important things you can do is use software that will help you manage your time and customers. In Platte River's case, the MSP uses Autotask software to ensure its billing is accurate and on time, ensure important tasks are on a schedule, identify employees that are underutilized or overloaded, measure the time it takes to perform customer-related tasks, and measure the profitability of each customer. Without such tools, it's difficult to impossible for an MSP to have an accurate gauge of its business.