From Break/Fix To MSP: 5 Steps To Build Your Retainer Business
By Nick Harshbarger, SentryOne
The fast-paced world of technology is constantly changing, and how channel partners provide technical services to their clients is no exception. The shift from traditional break-fix consulting projects to a managed services model has some companies scrambling to keep up.
Making that transition might be easier than some might think. These five steps are critical to getting there.
- Move From Project-Based Consulting To Recurring Revenue
Imagine a predictable, recurring amount of monthly for services.
It’s not impossible. Traditionally, companies had one of two focuses: selling big, long-term projects or packaging buckets of hours. Both involve a near constant sales hustle and risks for sales and delivery. Creating a service backlog means companies are always selling while identifying their client’s needs. A project-based approach means that companies risk balancing scope creep with customer satisfaction. Moreover, defining scope might take a considerable amount of non-billable time.
Moving to a recurring services model ensures predictable operations for the client and recurring revenue for a provider’s business. It’s a win-win scenario. It means executing work that both provider and client agree on within a service-level agreement (SLA). However, companies risk discounting their services while finding a way to differentiate those services from their competitors.
Strong recurring services means maintaining positive client relationships and executing strong SLAs. SLAs benefit both provider and the client, as they guide the scope of work and pricing. Getting this right will set a provider up to move into a values-based service—or a true Managed Service Provider (MSP) model.
But what about those big, long-term projects that clients still need? Don’t worry, we’ll address that in Step 4.
- Move From A Capital Expense To An Operating Expense For The Client
Many products and services are delivered on a subscription model today. We experience it in our personal lives with music, movies, TV, and food delivery. Corporate budgeting cycles are no different. In the past, organizations created a yearly capital budget for their technical needs and spent it over the course of 12 months. Today, with a boom in managed services and subscriptions, many companies have moved to an operating budget, closely managing subscription services month-to-month.
Many organizations no longer have easy access to the lump sums of money that large IT projects require. The predictable pricing for managed makes sense for them. When companies are selling services to their clients, it’s important to understand how their budgeting cycles work and what services they need. It might seem surprising how many clients would be more comfortable with moving services to an operating expense.
- Price Services As A Commodity
A good MSP bundles both services and software together, thus commoditizing their offerings. This will set up their pricing model to transition to a value-based in the final step of evolution to an MSP. By pricing services as a commodity, providers can focus their internal efforts on people, processes, and technology—essentially using fewer people to deliver more work.
Determine the best unit of measure for core services and create a base price for it. Base the price on the effort to maintain a single unit. Once the prices are established, providers can determine their service levels and craft beneficial SLAs.
Remember: MSPs can monitor and maintain units at scale, and the pricing should reflect this. Charge appropriately for escalated SLAs for emergencies or requested additional work.
- Craft Client Success
To begin a relationship with a new client, consider providing a complimentary assessment or health check. This initial assessment captures baselines to work from, generates roadmaps for the scope of work, and identifies the KPIs to monitor for each client. With the scope of determined, MSPs should put an SLA in place that is beneficial to both the provider and the client.
The client might still require a project. Leverage the roadmap to present non-maintenance projects as the relationship with the client grows.
It is essential to report back to the client regularly. With a break-fix business model, clients received a bill and when something went wrong. In an MSP model, out of sight means out of mind. Some clients might not see the continued value the MSP is providing without regular communication. Regular reporting reminds clients of the benefit they receive from their partnership.
- Build A Bench
Continue to build a portfolio of products and services as the organization grows. Providers should consider offering add-on services such as consulting hours, project planning, and hardware/software analysis to provide additional value to clients. They should keep training up-to-date, develop best practices, and strive to put the long-term success of the clients first.
Conclusion
An effective MSP model is often a win-win for both the provider and its clients. Clients receive peace of mind and predictable monthly expenses; MSPs experience happy clients and predictable monthly revenue.
About The Author
Nick Harshbarger (@nicharsh) is the Senior Vice President of Business Development for SentryOne and is responsible for leading the SentryOne Global Partner Network.