Addressing Headcount In Managed Services

By The Business Solutions Network

VARs looking to make the transition to managed services need to overcome some hurdles. We’ve been writing about them for a while now. Cash flow, training, a different sales methodology, selecting the right automation tools, etc. Another hurdle is running an efficient business. Many VARs struggle with this one. Managed services is all about operating as efficiently as possible, controlling expenses while maximizing revenue. The end result can be fantastic profit margins.

With that in mind, here’s a tough pill for many to swallow: Many VARs who have historically been project-/break-fix-based probably have a headcount issue. With managed services, you don’t need as many high-level techs because there should be fewer problems (See “Switching To Managed Services? Take A Look At Your Org Chart”). Additionally, if you do less project work and more services, you’ll need fewer techs and truck rolls.

Now, I’m not suggesting you fire your staff, but you might have some hard decisions to make. With a move to managed services, how can existing employees fit new roles that will be created? What will your new organization look like? How many people, and in what roles, are needed to run your business in its new form?

I recently interviewed a retail IT VAR who began selling his solutions as a service. He selected vendors that handle the setup and support for the solutions he sells. In instances where he has legacy customers on support or sells a solution using vendors who don’t handle support, he struck a deal with another VAR to outsource his support. In short, all he does now is close deals. Two years ago, this VAR had seven full-time employees. Today, it’s just him. The crazy thing is, his revenue and profitability have never been higher.

Of course, this example isn’t typical of a VAR-turning-MSP. However, it does illustrate how a change in business philosophy will often require some difficult decisions to be made. It’s because of these hurdles that we see MSPs who don’t 100 percent embrace the model, or VARs who just can’t get over the hump and move into managed services.

Another unique twist to headcount challenges is the rise of services like Field Nation, which allow IT solutions providers to find and hire skilled labor on a contract basis. By leveraging a skilled pool of freelance IT professionals, it makes it easier and safer to right-size as needed. Such a service could be a great intermediate step for VARs-turning-MSP. It might not make sense to hire someone full time when you know your end goal is a leaner operation. Relying on high-quality freelancers could be the more prudent path.

In any case, the move to services is clearly a significant one, requiring strong resolve and a lot of hard work. If the challenges look insurmountable, remember two things: First, many others have made the transition before you, so there are answers out there. Second, people wouldn’t be making the transition if the benefits weren’t great. It’s worth the effort.