Own The Network, Own The Revenue

Gino Manna was tired of being the low man on the business services totem pole. As a break-fix network IT VAR, he often diagnosed problems with devices and services riding on his customers’ networks, such as digital video recorders (DVRs) and voice over Internet Protocol (VoIP), but didn’t get the revenue that comes from resolving those issues. So, a few years ago, Manna, president and founder of Maryland Computer, made the choice to implement a complete managed services practice. Now, his IT company handles everything that touches the IT network, and overseeing that convergence of technology has helped Maryland Computer enjoy explosive revenue growth the past two years.

“It used to be, you had a supplier for each aspect of your business network — the phone guy, the copier guy, the network IT guy,” says Manna. “We spent a lot of time diagnosing problems as the network guys, but when we’d find that, for instance, their DVR cameras were interfering with something, the customer would say thanks, call that service provider, and we didn’t get any revenue,” says Manna. Finally fed up with that cycle, he decided it was time to evolve into a full network services provider. “We do it all. If you want phones, we do it; if you want security in, we do it.”

Evolution To Managed Services Costs Time, Money
As simple as the decision was, the evolution from an IT company to a converged technology MSP took almost a year. The evolution cost Maryland Computer millions in lost revenues as it completely restructured its business model, purchased a remote monitoring and management (RMM) tool, and resized its staff to about 15 employees, down from more than 100. The biggest hurdle was the expense and time of building out the managed services infrastructure (including the RMM tool, a help desk, retrained technicians, and a new sales model) that this former break/fix company needed to transition to managed services. “It’s a large investment no matter what managed services monitoring and management platform you choose, and then there is the time invested in training before you can roll it out to clients,” says Manna, who uses the Zenith Infotech managed services remote monitoring and management (RMM) platform today. In all, he estimates it cost about $250,000 to equip his company with the RMM platform.

Training then entailed flying engineers to vendor headquarters around the country, not only to learn how to use the managed services platform but also to secure certification with a new stable of vendors. “It was an investment; we had to fly them out and put them up in hotels. In doing so, we lost their time in the field,” says Manna, who calls that process “a necessary evil” that, over 18 months, cost Maryland Computer about $45,000. But for a new MSP dedicated to handling its clients’ IT infrastructure from the voice and data lines coming through the wall through to the end user, training on new products and the RMM tool was essential.

Nearly a year later, Maryland Computer was ready to start moving existing customers into a managed services model. “We gave clients an 18-month window to evolve with us. We explained our new value proposition and how we felt the new cost to them would bring in a much greater benefit than what they enjoyed before with reactionary service,” says Manna. That meant reviewing the value proposition of managed services with clients that used to pay an average of $15,000 to $20,000 per year for reactionary service calls and now were being asked to pay $2,000 a month for proactive service. He then gave clients the option to stay with Maryland Computer or offered his help in finding another break/fix IT provider. While Maryland Computer lost between 5% and 10% of its customer base during the transition, Manna says the recurring revenue model his company now enjoys was worth taking that initial loss. In fact, since deploying managed services in 2006, Maryland Computer has enjoyed nearly 100% growth each year.

Converging Technology Sales Continue To Grow
After Maryland Computer evolved so it could construct and service the infrastructures that support the complicated mixture of technology found in the workplace, it developed a process for determining the exact needs of each customer. The first step is a discovery visit to the site of a customer. An engineer and a consultant (who is a combination of experienced IT provider and sales representative) evaluate the current network environment, harvest more information on the needs of the client, and determine the client’s desired outcomes. Those discovery visits can take from a few hours to several days, and often the next step is another meeting with stakeholders ranging from the CIO to the IT staff. “The whole process ensures we understand their entire network,” says Manna. “We could go in and say, ‘Here is your phone stuff; here is your price.’ But then, when our engineer discovers issues during installation, it is a nightmare.” As part of the discovery process, engineers and other staff walk through a checklist and preinstallation survey to ensure the MSP has all the information it considers critical to a successful solution. “We need that information to understand the environment, create a proposed solution, and foresee future requirements,” says Manna. The questions Maryland Computer uses are mostly derived from the staff’s experiences. “We try to learn when we’ve been bitten and then avoid making those mistakes again by correcting our process and documenting the issue.”

Some examples of those lessons learned serve as good advice to VARs new to the converging technologies side of managed services. On the voice side, problems often revolved around porting the numbers — not identifying all phone, direct inward dialing (DID), fax, and other numbers at the start of the process can lead to cutover nightmares. Another common mistake relates to capacity planning. “Capacity planning involves making sure there is the appropriate amount of bandwidth, lines, or hardware. However, it can also be identifying the waste of resources [such as servers or bandwidth] within the existing environment or reallocation of similar resources that can allow for expansion without increasing monthly costs.”

Once all the relevant customer information has been gathered, the Maryland Computer team meets to review the customer’s needs and the project proposal process begins. Typically, while working through their solution proposal, the VP of managed services for Maryland Computer touches base with the potential customer. “He reaches out to those companies where we feel there is an opportunity after the current project is complete in terms of services. He lets them know our guys are working on the project proposal and then takes that opportunity to start a conversation about our managed services offerings and the potential benefits to their company,” says Manna. “If they are interested, great; if not, OK. Not every customer is a match, and we want to make sure it is a good fit before we try to sign them.”

Identifying New Customers Now Focus For MSP
With the complexities of converging technologies under control, Maryland Computer is now focused on growing its client base. So far, achieving its goal of four to five new customers each month has been easy, but it doesn’t just happen without any effort. Manna explains that because Maryland Computer works with many professional services clients, such as banks, CPAs, etc., it works closely with those customers to access new clients. “We take care of them, and they provide us access to their clients,” says Manna. “For example, CPAs are trusted advisors, so when a customer of theirs asks who handles their IT, the CPA recommends us, and it carries a lot of weight.” Maryland Computer also uses technology-specific leads from vendors to get its foot in the door for a full managed services offering. Manna uses Digium as an example. As a premium partner, Maryland Computer receives qualified leads from its VoIP vendor partner. Once the MSP has followed up on the VoIP deployment, it starts the conversation about the customer’s entire network and its service needs.

For more about evolving your IT business into a managed services model, go to BSMinfo.com/jp/3964.

The MSP’s growth efforts have been so successful that Manna just hired a business development director to help organize the pipeline and to guarantee strong customer relationships won’t be eclipsed by too-fast growth. “I won’t grow at the risk of losing our quality,” stresses Manna. “I’ve owned a company where we blew up and got so big so fast that at the end of the day, we weren’t taking the time to develop the personal relationships you need to succeed long term.” Manna’s advice to an IT company that hasn’t started to add services is to do it today. But, he does caution, the key to enjoying success that matches Maryland Computer’s is planning for the impact managed services will have on your company and then partnering with reliable product vendors so you can concentrate on your customer relationships.