MSPs: Move Beyond Intuition To Data-Driven Decisions For 2015
By Christine Kern, contributing writer
As 2015 unfolds, here are some helpful tips for managed services providers (MSPs) and other IT solutions providers that will help you keep your New Year’s resolution to use data to make decisions rather than relying on intuition.
Business Solutions articles quoting experts David Wilkeson and Tom Bouwer provide information on using key performance indicators (KPIs) to improve your business.
Profitability for managed services operations is determined by the effectiveness and efficiency of their offered processes. CEO of MSP Advisor David Wilkeson asserts that the best way to assess the success of your processes is by utilizing KPIs to measure outcomes. Wilkeson points out there are some universal indicators that should be of central concern to MSPs:
Mean Time To Resolution (MTTR). MTTR is the average length of time necessary to resolve a particular managed issue, and these numbers should be broken down by type of offering and the severity of the issue. The goal should be to keep these numbers flat, as increases in the MTTR trends will surely reflect a dip in client satisfaction.
Open Ticket Count. The number of open tickets is a reflection of the health of your MSP support operations, and can easily be tracked by PSA software. Higher numbers of open tickets can reveal issues with support services and can also drive customer satisfaction numbers down.
Open-to-Closed Ticket Ratio. MSPs should measure not only the number of open tickets at a given moment, but also the ratio of open-to-closed tickets on a rolling weekly basis. A weekly ratio of greater than 1 suggests that you need to add staff or have significant issues within the support team or support process.
Labor Loaded Gross Margins (LLGM). LLGM is calculated by subtracting the direct costs from the MSP recurring revenue levels and dividing by MSP recurring revenue. Target goals should be higher than 70 percent. If LLGMs levels are lower, it could reveal issues with the managed services processes, labor costs, incorrect pricing grids, or a combination of all three factors.
Effective Hourly Rate (EHR). The EHR is calculated by dividing the MSP recurring revenue for a client by the MSP hours required to support that client during the specified timeframe. A good target for EHR is more than $126 per client. Consistently lower figures for a particular client might suggest a poor fit with their contracted managed services. If the overall EHR for a managed services operation is low, it could indicate that the pricing structure is not high enough or that there are managed service process concerns.
At his presentations at RSPA INSPIRE 2013, Tom Bouwer suggested following a six-step rapid improvement plan (RIP) to focus your efforts and to maximize the chances of achieving KPIs:
- Selecting one key performance indicator.
- Determining objective and duration.
- Quantifying financial benefits of winning.
- Identifying participants and action steps.
- Creating a theme and constructing a scoreboard.
- Identifying a celebration.
BSM’s editor-in-chief Mike Monocello adds, “You can bring KPIs to life by engaging your entire team in improving your business. You’ll not only achieve and surpass your KPIs, but you can have a blast while getting there.