Becoming you Client's IT - Selling Managed Services
If you are attending trade shows or reading technology news, you know that managed services in the SMB market is a hot topic right now. There are a number of solutions out there that offer a platform for building managed and monitoring services; with an emphasis on the SMB market. This is important because many are asking "How do I improve my financial stability, maintain market share, and increase the company's valuation"?
If you have already started selling managed services of some type, you know that there is more to it than buying a monitoring tool, installing it in your office, and getting a junior sales person to make thousands of phone calls. There has to be a value proposition that is compelling to what has been called, "The post chasm buyer". It has to actually meet a business need, provide a return on investment, or move a customer closer to some federal security requirement. Before you move forward, there are four key questions you need to ask:
1. What will you offer?
You know how most SMB companies don't have time to keep up with their IT environment? Patches are often out of date, security is very weak, main business systems are not highly-available, backups have never been checked, and there is either one or just a part time person dedicated to keeping everything going (a major security risk in itself). Now you need a program that solves the problem. Its not monitoring, its much more.
You need a program. Your program consists of the everything you can do to help a manager or business owner forget about IT. Systems have to be assessed for areas of risk (security holes, points of failure, inadequate procedures and personnel, etc.). Then, your client's infrastructure needs to be repaired, optimized, stabilized, and cleaned up from spyware, RATs (remote access trojans), and other security/availability problems. Finally, a program to keep things going must be put into place. This might include periodic planning meetings, reports that forecast disk space and bandwidth constraints, quarterly or monthly onsite proactive maintenance (some of this might be done remotely or through automated systems), and of course, 7 by 24 monitoring. The bottom line is, post chasm buyers are not going to buy monitoring; they are going to buy uptime.
2. How will you build it?
You might have something in place right now - perhaps you do it all yourself. But as Mack Hanan pointed out in his book "Consultative Selling", a book written in 1972 on selling profit improvement, selling hours for dollars is always a commodity and will not build a long term profitable business. You need leverage.
Start by listing everything you could do for a company on a periodic basis and categorize it by system. You might have servers, workstations, network components, etc. Then you have administrative tasks that parallel these devices; Helpdesk services, planning and strategy, user awareness training, etc. I recommend that you add security as a separate section where we will list higher level security options in addition to items that will fall under each component. Now figure out what you can automate through tools that are out on the market today.
Once you have the offerings list, you will want to begin building on a platform that has many of these functions built right into it. Your core offering should include the monitoring functions, while also addressing security. In a recent workshop I conducted at the Level Platforms Headquarters in Ottawa, Peter Sandiford, CEO of Level Platforms made the comment that, “Solution providers need to stay on top of not only performance issues but also the exploding number of critical threats that can cripple their entire operations. The distinction between an MSP (Managed Service Provider) and an MSSP (Managed Security Services Provider) has disappeared." In response, Peter's organization has put together one complete integrated solution using a monthly subscription price; a pricing model that should help all of us begin the process without a large cash outlay.
3. Who will sell it?
This might be the number one question being asked right now. Selling technology to "post chasm buyers" is not an easy thing to do. In my seminars I always ask the group to help me measure the percentage of successful sales people. In addition, I am looking for the average time it takes a new sales person to get up to speed. In some cases I have found companies who have gone through dozens of sales people over the last three years, trying to find someone who can bring in enough gross profit to pay for themselves and offer a sound return on investment for the company. Bringing in a cold caller to find new customers that want their systems monitored may not be the best approach.
Michael Bosworth, in his book, Customer Centric Selling calls for Marketing to get involved here (or perhaps the person doing the marketing function - that might be you). The message needs to be built; He calls this "Sales ready messaging". Michael Gerber, in his book eMyth Revisited, urges his readers to prototype the message - don't leave it to each person's interpretation and style. Once we have a proven message, there is a process to systematize it. In other words, create the message, get it right, and then use it as long as it works.
Once we have a message, we need to find every channel that can be used to sell the solution. At this point I recommend finding teachable people within your organization that will go out with you to learn the message. If there is a value to the service, and we are convinced the customers we deal with need it, then our task is to show them the need in a way that is so compelling that it will lead to a sale. Bosworth says, 3% of the people know they need something, 97% don't but can be shown. Your engineers may be your best candidates at this point.
4. Will it be profitable?
It will be profitable if we price it right. Managed services is a different kind of solution because, depending on how it is built, we may not know the cost of goods sold (COGS) before we sell it. One way to approach this is by having a system in place to measure engineering time (others may involve pricing out certain types of reactive services outside of the contract until the cost model is developed). Some companies offer unlimited helpdesk support to the end-user customer, others offer a certain number of incidents. Some offer patches in the contract, troubleshooting onsite, etc. If you don't track your costs you won't know what the profit looks like. At the end of the day, you are looking for high margins on managed services. If you are not seeing three times your burden rate over the year, your margins are too thin on this offering.
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ABOUT THE AUTHOR
David Stelzl is the owner and founder of Stelzl Visionary Learning Concepts, Inc. working with manufacturers and resellers to create stronger partners through the adoption of emerging market business strategies. David specializes in professional coaching, workshops, and speaking engagements that help techology providers grow their business. Contact us at firstname.lastname@example.org or visit www.stelzl.us to find out how to make your managed services offering successful.