Guest Column | May 22, 2014

Savvy MSPs Take Role Of Outsourced CIOs

MSPs Outsourced CIOs

By Dave Sobel, senior director of partner community for MAXfocus

As solution providers have evolved along the services spectrum, their method of engagement has also changed. Many IT providers started life as resellers. In the early days of the channel, manufacturers would provide a product that IT providers would resell, making a healthy margin. As equipment became more and more commoditized, their vendor partners pushed these IT resellers to embrace services as their main revenue generator. Thus, resellers became solution providers, embracing their role of delivering services. With time, it became apparent that there were other models in building a services offering, and managed services became a focus, moving from transactional engagements (often called “break/fix”) to ongoing engagements, delivering a set of services defined in a contract and delivered on an ongoing basis. This shift brought solution providers into even closer alignment with their customers, with the motivation to deliver reliable uptime becoming the goal for both.

The emergence of cloud technologies introduced another shift for solution providers. Cloud services put considerable pressure on solution provider revenue, as cloud services typically offer lesser top-line revenue opportunities, lower margins, or both. In order to keep a solution provider’s business healthy, they need to add higher-value services to their product portfolio. Adding an additional challenge is the fact that the delivery of IT from the cloud has begun to move the decision making process out of the hands of the IT department and into the hands of the business units themselves.

Solution providers have long tried to position themselves as their customers’ trusted advisor — some even going so far as to declare that designation in a slogan or business card. This phrasing, however, is both awkward and imprecise. Advisor implies consultant, which can often be seen as a “dirty word” in business. More importantly, no engagement should ever be without trust, making the self-imposed title redundant.

Instead, savvy solution providers are positioning themselves as their customers’ chief information officer. An “outsourced CIO” is a better defined and understood role, which includes not only IT systems management but also the responsibility to effectively adopt IT services in alignment with business needs. CIOs are responsible for business results on the IT platforms they deliver and manage, and thus need to speak the language of business in addition to that of technology.

CIOs control the budget for IT expense and make decisions around business needs. They work closely with the other business units to adopt the technologies required to deliver on their specific goals, and they ensure proper technology usage. In some cases, this can also include oversight of compliance and security, a critical risk management function.

Most important, however, is the focus on business value and management. Rather than approaching each situation as a technology advisor, CIOs think in business terms and execute accordingly. This changes the entire tone of a solution provider’s engagement and relationship with their customer, moving them further along the services spectrum than ever before.

This transition also requires new skills within the services organization. Rather than simply focusing on raw technical skills, business skills become a critical piece of the equation, requiring sophisticated engagement strategies. Sales and marketing techniques focus on business value rather than on technical prowess. Consultants become analysts.

While this is certainly a more complex engagement strategy, it also commands higher value, resulting in larger revenue and higher margins. As the adage goes, in mystery there is margin, and by focusing on the business value and solving more complex business problems with technology, solution providers are further able to protect and enhance their revenues and profit building deeper relationships with their clients. This is the natural progression coming to its logical conclusion: from product to services to recurring services to recurring business solutions, providers continue to evolve along the spectrum and drive their own success.