THE THREE ROAD BLOCKS IMPEDING MANAGED SERVICES SUCCESS
Steve Sykes, 8 December 2017
Making the leap from being a traditional managed print provider to a managed services provider is something we have discussed at length, through our Managed Services Series a couple of years ago, and our regular blog posts.
Making the transition is hard, but something well-worth investing in from our perspective.
Of course the journey is never easy, and there may be a few things that are putting road blocks in your way towards Managed Services success. Techaisle’s Anurag Aguwal outlines these below.
Three indicators of MSP success
According to Anurag Aguwal of Techaisle, who has researched MSPs since 2008, a MSP that is travelling along nicely should be able to do the following three things:
- The ability to sell services independently from product sales, while maintaining product resale capabilities
MSPs encounter demand for both products and services, and as entrepreneurial businesses, they respond to both.
What distinguishes MSPs that are successful from those that struggle is the extent to which they lead with services, and the resulting ratio of services to product revenues.
There is a clear distinction: successful MSPs lead with services, while channel businesses that are not successful at selling managed services lead with and derive the greatest proportion of their revenue from product resale.
- The ability to package and efficiently deliver standardised services to multiple customers
A focus on refining and delivering tightly-defined, standardised services is one of the attributes that differentiates MSPs from other channel businesses.
Many channel firms tend to deliver a flexible range of services to meet the overall needs of a client, rather than focusing on services that address only a single requirement.
The difficulty in adjusting to a service-centric rather than customer-centric approach is evident in data which finds that an inability to change internal support processes is the most onerous constraint to developing managed services businesses.
- Align internal processes and costs/cash flow with a recurring revenue (rather than transactional) approach to the business.
Most channel firms are not set up to recognize revenue in small monthly payments over a relatively long period of time.
Both channel firms that are primarily engaged in product sales and project-based services firms recognize revenue at the end of a transaction or on a milestone basis.
This poses a tremendous barrier to entry into a recurring-revenue model like managed services. Recurring revenue business models require that management change the metrics it uses to understand the business; it requires that finance operate (very) differently; it demands that sales change its compensation model…in short, it requires new operational norms throughout the channel business.
Lured by the prospect of improved margins, most existing channel firms want to increase managed services income. However, many struggle to adopt new operating norms if/as managed services becomes a bigger part of the overall income stream.
Are these three things impeding your success? Or do you find that you are struggling with one or two in particular?
I’d love your feedback on how your transition is going and which of the three items is your number one concern. Please get in touch via LinkedIn or email.
S.E. Rentals prides itself of developing close relationships with clients and is always here to help you on your journey.
Managing Director, S.E. Rentals
S.E. Rentals are the finance as a service specialists that will help you grow your business by providing finance solutions in an 'all things technology' future. We provide you with the flexibility, scalability and agility to help you achieve your Managed Service objectives, and our unique in-house software platform, Finance Oxygen, automates the process for you