Guest Column | September 11, 2013

Managed Service Myths Break-Fix VARs Believe

By Douglas R. Grabowski, Jr., managing partner of Grabowski Group Inc., ASCII Group member since 2010

In the last few years, technology has matured to the point where its utilization has become truly ubiquitous; smartphones, tablets, laptops, and other computing devices have effectively transformed us into an “always-on” mentality. With this change in thinking, so too must our technology management solutions. Gone are the days where a client can endure days or even hours of downtime; the expectation, especially with the consumerization of technology, is that everything will work, all of the time. Clients are smarter, too, they don’t want to pay anything more than they have to. Hard to have it both ways; however, transitioning your business from a break-fix model to a managed services one is easier than you might think. Let’s look at some common misconceptions, and how to affect change with your business and your clients.

Myth One: Managed Services Cost More Than Break-Fix For The Client

The most common myth is that clients will pay more than they currently do for break-fix services. Sure, a break-fix invoice is only given when there’s an issue, but that’s inherently aligning your interests away from the best interests of the client. “Emergency” rates that are double or triple the normal hourly rate tend to off-put the client, and penalize them even further for their outage: they can’t perform their business, and they pay extra. Not a good idea!

Surprisingly, managed services costs are always less costly than break-fix, especially when you factor in the true cost of downtime and outages. Remote tools (monitoring, administration) and proactive prevention of major issues actually makes the client more productive. The perceived (and real) value to the client is that you’ll fix their issues once, the first time, before they become issues to the client.

TIP: add up the number of hours of downtime a client has had in the last year. Determine roughly what their revenue is and the lost revenue/cost of those hours.  That’s a key metric to always know and helps put a monetary amount on the value you can provide.

Myth Two: Managed Services Cost More Than Break-Fix For The VAR

Many VARs believe that there is a substantial investment to gear up for providing managed services to clients. Purchases such as licenses for remote management and monitoring (RMM) tools (Kaseya, Continuum, Level Platforms, etc.), professional service automation (PSA) utilities (Autotask, Connectwise, others), and knowledge sites and associations (TechRepublic, ASCII Group, etc.) can be procured by-seat versus in quantity. This way, your costs are directly aligned with your client workload. You don’t need to go out and buy 1,000 licenses of your RMM tool and/or buy terabytes of online disk if you’re only managing 50 desktops and servers and backing up 100GB of data. Work out your purchases to scale with utilization (manage 50, pay for 50), or delay the purchase until you get larger. The key to providing managed services is that you can contain your internal costs as you provide services to clients; controlling costs in this manner means you scale directly with workload. It’s a win/win.

TIP: be open and honest with your partners. Explain you’re starting out. Many offer free trials, “starter packs,” or visibility to what they can provide. Most are extremely willing to assist you in the transition.

Myth Three: It’s Hard To Change From VAR to MSP

Many break-fix client environments are inherently unstable, and are usually so as you are taking over someone else’s poorly configured network and workstations. Paramount to the success of an MSP-to-VAR transition is that you have a level of standardization across environments; or, at the least, documented issues and their fixes. Typically, when onboarding a new client, there can be some sort of project to upgrade from a consumer router or to update an 8-year-old server, and/or there can be time set aside to fully document the environment. Here, tools like Network Detective from RapidFire Tools are imperative to run; they do most of the work for you. Run it once at the beginning of the engagement, make your fixes, then run it again to prove they’re all fixed. Establish this baseline, and the transition from VAR to MSP is a lot easier.

TIP: if you’re not providing a write-up after each issue billed for, start doing it right now. Communication is key, and most, if not all, clients, highly value knowing what went wrong, what the fix(es) was(were), and what’s being done to ensure it doesn’t happen again.

Myth Four: VARs Need To Fire All Customers That Don’t Migrate To Managed Services

A lot of people in the VAR space believe that you can only be a break-fix shop, or managed services shop; you can’t be both. Wrong! Some clients just want a little help every so often; that’s okay. The benefits of proactive care and maintenance provided by a MSP should outweigh the cost of break-fix, but revenue is revenue. You can transition those clients later, and migrate into it as you grow your MSP practice. You’ll find that done correctly, it’s a very easy sell to transition clients over.

TIP: Take that impact-to-revenue number you generated before, and make a list of the top 10 issues encountered. You’ll most likely find the same issues bubbling to the top of the list, and you’ll be able to resolve them once and for all. The client wins, and you can effectively price your services (break-fix or managed services).

Myth Five: Managed Services Brings More Revenue

Sadly, this belief is the holy grail of the entire break-fix and managed services debate. While it may seem that you make more per client as an up-front revenue receipt and is better than billing after-the-fact, you will see that MSP revenue will replace the break-fix revenue you used to have. You’ll be more profitable, however. You’ll spend less time (and endure substantially less client aggravation) on a client site, but you’ll have more profit. Isn’t profit what it’s all about?  You’ll also be fully aligned with the client (when they have an issue, you have an issue), and client satisfaction will definitely improve.

TIP: Ensure you have a client profitability list (divide revenue per client by your costs per client (be sure to include services you currently use per client too (hosted email, AV, etc.). You’ll be amazed how much room for improvement there will be per client.

About the author

Douglas R. Grabowski, Jr. is Managing Partner of Grabowski Group, Inc., a strategic technology advisory firm, with offices in NYC, Connecticut, and Florida, that develops and delivers services to improve the way businesses use technology to achieve strategic, operational, and financial goals. He can be reached at