The Managed Services Transition

Managed Services or more to the point “Managed Service Providers” are companies that provide tactical services to business clients around network monitoring and proactive maintenance as necessary and appropriate to keep networks and devices on networks operating efficiently at all time keeping downtime and faults to a minimum. Put simply, managed services are a proven way for you to dramatically improve your productivity and substantially improve the services you can offer to your clients. It also happens to build substantial recurring revenue streams for your business. It also provides substantial leverage to lock in customers.

The Traditional Approach

The traditional approach to the IT Services market is based around providing a break fix reactive service to clients on an hourly billable or prepaid maintenance contract basis. This business model has been around for a long time and for a long time it has served both the provider and the client well. Times have changed though and there are now fantastic alternatives to this model. It is our position that there are two main problems with the traditional break fix business model. The first is that your interaction with your clients is based entirely on failure and the second is that there is a physical limit to the amount of hours you can charge for reactive services. Of course you can multiply as much as you like by adding engineers, but the bottom line is that you have a limit to how many hours you can work and therefore a limit to the revenues you can generate for your business.
When the focus of your business is based around hours then your clients have nothing else to evaluate you on so they evaluate you purely on price and there will always be some other IT service company out there who will out quote you. If you sell them a block of time and discount your rates for say 20 hours of service. You can bet the client is watching everything you do. With a purely reactive hourly rate business you are limited to your callout ratio. What happens if the phone is quiet one week or month? Your fixed costs are the same. No matter how good you are or how slick your marketing is or how fast you can work there is a limit to what you can
charge per hour and a physical limit to how may hours you can work in a day, week or month. And when you don’t work you don’t get paid. Another problem with this business model is you are not rewarded for being good at what you do. Let’s say an average fix time for a client’s problem is 2 hours but because you are so good you get it done in less than 1 hour. You charge for 1 hour on site. You should be charging for 2 hours work but you can’t. Garages do this. They will charge you based on how long the manual says it takes to change your oil or spark plugs, not how long it actually takes. So why can’t you.

The Way Forward

There is another way and this is why selling Managed services if so powerful. Not only does it enable you to service more clients, with fewer technicians and time but it also enables you to build recurring revenue streams for your business and it gives you fantastic leverage with your clients. Managed Services is the way ahead. Build Value into your business and your client’s satisfaction with you. If there is a problem your client will discuss it with you rather than just hire another firm. The next revolution in IT services is already here. And in the future more and more companies will be following the outsourcing model for their IT services. You have an opportunity to either be part of the steam roller or part of the pavement.

The Challenges

The single biggest issue with most IT services companies making the transition to managed services is their own mindset. Making this transition between business models is not an easy one for some companies and you need to be sold on this concept before you can sell it to your clients. Some IT Services companies find it difficult to visualise a packaged services business model not based on hours as opposed to charging for services and results.
Prepare your business to deliver these services tomorrow. All most clients want is solutions to their problems and not all products and services are sold by the hour. You are probably quite happy to pay your accountant a flat monthly fee to do your books and tax returns for you. If he or she said they were going to charge you on an hourly basis you would think, how am I supposed to know what is involved in doing this and how do I know if I am getting value for money? Why should this be any different for your business? Your client really doesn’t care how things get done, they just want you to take care of their IT investment, prevent problems from happening and fix any problems quickly to prevent business risk. Managed Services are the combination of your skills processes and the automation of key tasks and services. They are the future of IT services. They are a way for you to build value into your business. Delivering Managed Services improves your relationships with the customers with them seeing you as trusted advisor for the long term.