By Jay McCall, Business Solutions Magazine
This MSP implemented a radical new business strategy, which led to a doubling of its profits three years in a row.
Choice Solutions was a $21 million general practice networking VAR when we first spoke with their president and CEO, Jim Steinlage, back in April 2009. The company was projecting 17% growth at a time when the economy was tanking. Three years later I caught up with Jim Steinlage to see how things turned out and was surprised to hear what he had to say. Not only had he made radical changes to his business that were unprecedented in my seven+ years interviewing VAR and MSP (managed services provider) business owners (e.g. he eliminated five business practices, which initially cut his number of employees and revenue in half), but the results were equally surprising. Before I share the three most important decisions Choice Solutions made three years ago, which are contributing the most to its growth and profitability, let me share the one word Steinlage believes sums it all up. Focus. That one simple word is what this MSP president believes turned his average channel business into a world-class organization. “I think too many companies are too diversified, just like we were three years ago,” he says. “This business works just like a healthcare practice. Which doctors have the longest waiting lists and charge the most money? It’s the specialists, not the generalists.”
Step 1: Determine Which IT Practice Is Most Important, Sell Off The Rest
In the 2009 time frame, Choice Solutions was a 60-employee IT solutions provider and MSP that had a lot of bragging rights. They were early adopters of VoIP and unified communications and had a successful Avaya practice. They were one of the first to become a SharePoint reseller and had even won a project with a Fortune 50 company. They had a successful Microsoft Dynamics practice, an ECM (enterprise content management) division, a Web development practice, and an infrastructure division that was skilled in desktop and server virtualization, and they even hosted some of their customers’ applications in their data center. To make matters worse, 2009 was not exactly a booming economy. In fact, if there was ever a time to adopt a “take what you can get” attitude in business, this was the time to do it. But, not Choice Solutions; this was the time when it took a firm stance and decided to make some radical moves, eliminating all their business practices except virtualization over the next year and a half. “The reality was we were losing our market edge,” recalls Steinlage. “We were only winning about 4 out of every 10 deals we were in, and our competitors were cherry-picking our best team members within our business practices. All our research pointed to virtualization as being the best bet, so that’s where we put all our focus.”
Choice Solutions had long-term customers within each of its business practices that it still had obligations to service, and it had good people within those business practices that it didn’t want to let go. “In some cases, we found other VARs that we felt had been viable competitors within a technology practice, and we approached them and turned over certain customers to them,” says Steinlage. “In some instances where we had a good team member who wasn’t able to make the transition to a virtualization engineer or technician, the competitor hired that person.” The harsh reality, however, was that very few of the SharePoint, Microsoft Dynamics, or Avaya technical skill sets translated to virtualization skill sets, and by the end of 2010, Choice Solutions’ employee numbers had dwindled to 30.
Step #2: Hire And Train The Best Virtualization Workforce Possible
After stripping its business down to its core virtualization talent, Choice Solutions’ next focus was building up its expertise. The first part of this goal was hiring the best talent it could find. “We identified all the certifications held by the very best virtualization engineers and then set out to hire the top performers within this group,” recalls Steinlage. “This group represents the top 10% to 15% of IT skill sets available in the marketplace, so we knew we had our work cut out for ourselves.” The solutions provider achieved this task by setting up a thorough interview process that included, as one of the steps, having a candidate cross-examined by a team of his top engineers, sales reps, and internal support staff. This helped the company in a couple of ways. First, it made his team feel empowered that they were part of this important process and helped boost the corporate culture. And second, it helped Steinlage and his team more quickly identify the right fit for Choice Solutions. One of the most important litmus tests he used during the interview process was to gauge a candidate’s willingness to earn advanced certifications. “Not only does this speak to their work ethic, but with some of these advanced certifications, like CCIA [Citrix Certified Integration Architect], they can’t fake their way through. They really need to know the technology.”
According to Steinlage, there are a few companies that have one or two CCIA-certified engineers on staff. At press time, Steinlage has 13, and 2 more engineers are close to completing their certification. “The CCIA for virtualization is the highest Citrix certification and focuses on best practices for analysis and design of comprehensive, end-to-end virtualized environments,” says Steinlage. “The architect-level CCIA certifies the skills required for successful deployments, helping organizations improve implementations through lower costs, increased performance, and reduced time.” Additionally, the certification demonstrates the certificate holder has extensive architect-level field experience with virtualization solutions like Citrix XenApp, Citrix XenDesktop, and Citrix XenServer. Choice Solutions is so emphatic about training that it has invested in an on-site lab and offers some kind of hands-on training on a daily basis with senior engineers training junior engineers. All engineers average two weeks of off-site training, plus twice a year he brings engineers to headquarters — he has five locations throughout the U.S. — for corporate training. “This exercise is more about getting the team members together and giving them a general overview of all the different solutions we have, so they can determine where they can best contribute to the company,” says Steinlage. “It’s also a great team-building experience, giving engineers and technicians from different offices a chance to put a face with a name of someone whom they may have only interacted with over the phone previously.” He emphasizes this last point, stating that team-building exercises help build positive relationships and at the same time prevent work atmospheres filled with egotism and possessiveness.
Step #3: Partner With Other Specialists
The final part of Choice Solutions strategy is every bit as important as the other two. The fact is that your customers do prefer to work with fewer (ideally just one) solutions providers. And, the reality is that even a specialist has to be able to address its customers’ other IT pain points. The difference with Choice Solutions, however, is that it has learned to form strategic partnerships to fulfill its customers’ nonvirtualization needs, and it uses a professional organization called Avitas Partners (www.avitaspartners. com), which serves as both a peer group and a national network of IT service providers. The group is designed to help IT solutions providers share engineering talent, best practices documents and processes, vendor partner relationships, and training. “Within our group there are eight other companies similar in size to ours, located throughout the country,” says Steinlage. “Using Microsoft Lync, we’re able to collaborate with this group. We have a conference call once a month, and we meet face-to-face quarterly.” Not only does the group represent complementary skill sets to Choice Solutions’ skills (e.g. it also helps the solutions provider leverage relationships with some of its tier-one vendors such as Microsoft). “It gives us a much stronger voice if we need their help with a problem, and it makes it easier for them to reach 10 companies at once by sending a rep to one of our quarterly meetings,” says Steinlage. Not only does Choice Solutions leverage the group for idea sharing, it sometimes hands off leads to partners in geographic locations where Choice Solutions doesn’t have as strong a presence.
Virtualization Experts In High Demand
With all the benefits to be realized from virtualization, such as improved security, lower energy and IT management costs, and faster data recovery times, Steinlage’s predictions about virtualization’s growth were right on the mark. And his decision to build his business on this burgeoning trend has proven to be a wise one as well. “Our expertise is leading us into deals with larger companies than ever before,” he says. “We even have Fortune 500 companies seeking our consulting and implementation expertise with their server and desktop virtualization deployments.” Not only is Choice Solutions being pulled into larger deals, it’s win rate has nearly doubled from what it was three years ago (now at 85%). And as it is with a healthcare specialist, Steinlage is able to charge more than he did previously because of the level of expertise he has on staff. “We increased our hourly rates 30% over three years, during a tough economy,” he says. “And we receive less push back on price than we did previously.” What’s more is that since 2009, the company has doubled its profits year-over-year, and it’s on track to repeat that trend in 2012.
Even though Choice Solutions’ business strategy is vastly different from what many other VARs and MSPs are doing to grow their business, there’s a clear lesson to be had by all channel companies. The lesson is that if you find yourself winning less than half the deals you’re competing for and you’re losing top employees to your competitors, it’s probably a sign that you need to get refocused on the things that matter most.