EBOOK
FROM BREAK-FIX TO MSP
Tips from MSPs Who’ve (Successfully) Made the Jump
Introduction Moving your business model from break-fix to managed services can feel daunting. It can be a tough sell to your current clients, who are used to paying for services on an hourly basis, rather than by subscription. It also requires a cultural shift within your organization, which could be a struggle for engineers who are comfortable in the break-fix world. If you’ve built a career in the trenches or “turning the screwdriver” as described by one Datto partner, then the proactive, remote monitoring of client environments may not come naturally. However, for many IT professionals, the benefits of the managed service model long outweigh the difficulties faced getting there. Recurring revenue, improved time management and the ability to plan for growth dramatically reduces the uncertainty from delivering reactive services. But don’t just take our word for it. For those of you thinking about making a break from the break-fix life, we’ve pulled together a caboodle of field-proven tips and best practices from a panel of experienced MSPs who’ve been through the change themselves.
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Choose the right tools First, you’ll want to determine the specific services you want to provide. If you already have a variety of break-fix clients, you’ve likely developed expertise in a number of IT disciplines. This may shape your decision-making process. Or, if you’ve already developed a vertical niche from which you work within, the needs of that specific vertical might dictate the services you offer. “It’s about recommending the right tools upfront rather than reacting to issues [related to inferior products] later,” said Jordi Tejero, owner of CRS Technology Consultants, a FL-based MSP. “Give your clients tools that will empower their end users.” Some common IT managed services include: • Monitoring • Help Desk • Network/System Management • Security • Storage
“It’s about recommending the right tools upfront rather than reacting to issues later. Give your clients tools that will empower their end users.”
Delivering these technologies as managed services requires a major shift in your day-to-day operations. As an MSP, you will be responsible for proactively monitoring the health of the technologies behind the services you offer. When evaluating products for your clients, make sure to consider the strength of the technology vendor. It is essential that the product is going to be supported now and for the foreseeable future. Jumping onboard with an unproven vendor is unlikely to end well.
Jordi Tejero, Owner of CRS Technology Consultants
Next, be certain that the vendor understands the managed service concept. You need to determine whether they have a legit partner program. “Are they truly a channel partner?” Tejero said. “Or, can anyone buy the same products direct?”
• Backup and Disaster Recovery
Finally, when delivering IT services to clients, you need to be sure that you’ll have adequate vendor tech support. “Good technology is obviously essential,” said Jeff Cohn, President of SAGE Computer Associates. “But it doesn’t matter how good the product is if the support isn’t there.”
RMM and PSA software Remote monitoring and management (RMM) tools are designed to monitor your clients’ IT systems and report on performance. RMM software also allows you to remotely trigger management tasks—such as patching or other software updates. Professional services automation (PSA) software is designed to automate management of client projects. Most managed service providers agree that these tools are essential for delivering IT as a service. Tejero said, “You can’t even call yourself an MSP without them.” Cohn echoed this sentiment. “A framework for delivering
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services is essential,” he said. “You can’t run this kind of business without RMM and PSA tools.” RMM and PSA software integrate with a variety of IT tools, including SaaS products, desktop and server management software, backup and disaster recovery products, storage management tools and security software. As with any technology, it is important to be certain that the tools you choose are compatible. Tejero said that you should look for RMM and PSA solutions that are tightly integrated. He recommends that integration goes beyond just the RMM and PSA software. “End-to-end integration and automation are essential for delivering managed services,” he said. “If you are going to deploy a product that is not integrated [with your other tools] it has to be so game-changing that it’s worth managing separately.”
Popular RMM Tools • Kaseya • LabTech • N-able Popular PSA Software • Autotask • ConnectWise • Tigerpaw .
Look for integration with products that you currently have deployed (both inhouse and in client environments). “All of the [RMM and PSA] tools out there are pretty much fine, but have different options and functions that you should evaluate,” said Cohn.
Work out a pricing strategy Developing a pricing strategy can be tricky for MSPs. Monthly pricing is typically determined on a per-device, per-GB or per-user basis. Additional one-off projects outside of the agreement are billed separately. This is really just the starting point for developing a pricing strategy. There are a variety of other factors that are important to consider when it comes to pricing your services. New MSPs often price services based on their competitors’ rates. However, rates vary widely, as this data from Kaseya’s 2016 Global Pricing Survey shows:
Average size of monthly managed services contract (% of respondents - USD) Year
Up to $1,000
$1,001 - $2,500
$2,501 - $5,000
$5,001 - $7,500
$7,501 - $10K
2014
21%
19%
13%
6%
6%
2015
34%
35%
19%
7%
7%
Tejero said it’s better to just look at your business’ costs and determine the margin you want to hit. Your fees should be based on those numbers. “Understanding your own costs is essential,” said Tejero. “Start with technology costs. From there, look at costs associated with particular clients—number of users, amount of data, number of servers. Then, factor in hourly costs for supporting each client.” That last part is more complex than it sounds. Support costs can vary widely from client to client depending on their specific needs. Tejero said this is one of the factors he considers when determining mark up over hard costs. In other words, customers that require the most support are charged at a higher rate than less challenging clients.
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Another factor to consider is the technology the client already has in place. If a customer has dated technology, it will take more effort to support them. “Performing a network assessment when evaluating a client can help you determine costs associated with older technology,” said Cohn. “It also presents an opportunity to recommend more appropriate technology.” Tejero takes a similar approach. “I’ll perform a network audit and come back to them and say ‘here are five things you need to update before we can take you on as a client.’” Finally, it’s important to take straightforward approach. “If you have a lot of clients, simpler is better,” Cohn said.
Develop an MSP culture
“Performing a network assessment when evaluating a client can help you determine costs associated with older technology. It also presents an opportunity to recommend more appropriate technology.” Jeff Cohn, President of SAGE Computer Associates
One of the biggest challenges shops face when starting to deliver managed services is related to staffing. Many engineers who cut their teeth in the break-fix world struggle to adapt to the MSP model. As noted above, delivering managed services is all about being proactive. When you’ve spent years driving to customer sites fixing problems as they emerge, sitting in your office monitoring clients IT remotely can feel completely foreign. This is a significant challenge. Tejero said that of the 16 engineers he had on staff in the break-fix days, only four remain—illustrating just how difficult this transition can be. You need to make a strong effort to prepare your employees, and even then it doesn’t always work out. Sitima Fowler, CEO of NY-based Capstone IT said customer service training is essential. “Customer service can be taught,” she said, “but it’s harder once bad habits are in place.” This is why many MSPs hire young people straight out of school. Tejero said that he’s had very good success with voc-tech students. “Hiring entry-level staffers allows us to train employees from within,” he said. “We have also had success hiring older people that are looking to a make a career change.” He said one of CRS’s best employees came to the company with limited technology experience but is great with customers. Fowler said that Capstone has an extensive on-boarding process for new hires lasting 6 months to a year. Beyond that, they offer ongoing training opportunities to grow and engage staff. Still, training only goes so far and certain personalities just can’t cut it in the MSP world. It’s not for introverts, to be certain. Forget about it if you’ve got a chip on your shoulder, like Nick Burns, Jimmy Fallon’s infamous IT guy send-up. “People skills are the most important thing,” said Tejero. “Your engineers must be client-facing. They need to develop relationships with clients and collaborate. Having the right attitude is everything—you need to humanize the technology.”
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Find the right customers This, of course, means converting existing break-fix customers or generating new business. In either case, there are a variety of things to consider. As noted above, converting break-fix customers to managed services can be challenging. A recent conversation in Datto’s new partner forum illustrated two different, but successful approaches for transitioning to managed services. “We actually split out MSP from our break-fix (Decatur Computers) by creating a whole new company,” wrote Brendon Traxler, COO of Illinois-based Network Solutions Unlimited. “Except for C-level executives, there are no shared employees between the two companies. We have tried to brand the businesses separately—each reaching a different market share.” “In my experience, the slow transition from break-fix to MSP worked well, and it gives your staff time to adjust,” wrote Steve Weeks, president of Vancouverbased Netcetera Consulting. “We started to make the transition to managed services by adding MSP components like e-mail filtering, backup and disaster recovery, monitoring, etc. Then, we converted a couple of existing clients over to managed services.”
“We looked at what [our break-fix customers] were currently spending and showed them how much they’d save by moving to the managed service model.”
Fowler took a similar approach. When her company started the process of converting break-fix customers to managed services, they started by reaching out to the customers that were using their services the most. “We looked at what they were currently spending and showed them how much they’d save by moving to the managed service model,” she said.
Sitima Fowler, CEO of Capstone IT
“When converting current customers, look for companies that are maturing from a technology standpoint or are growing and need additional support and start with them,” said Cohn.
Tejero suggested offering a 90-day trial period for managed services to current break-fix customers. “Prove to them that it works and they tend to buy-in,” he said.
Generating new business When it comes to generating new clients, there are many options to consider. Tejero said that CRS is a strictly referral-based business. “All of the prospective clients are coming to us. We don’t advertise; we do not even have sales people,” he said. That works for CRS, but it is a well-established business with a strong client base. When you are just beginning to build your business, you need to show prospective clients that you exist. Fowler said that marketing is one of her primary responsibilities at Capstone. “It’s all about education,” she said about reaching out to prospective clients. “In smaller cities like Rochester, many small businesses don’t know about or understand the value of managed services, so you have to show them.” Capstone gets the word out using direct mail, email, Google ads and social media. Fowler said that she blogs regularly and website traffic has generated a lot of leads. She stressed the importance of ranking highly in Google search,
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offering useful/educational content and cross-linking with other websites. This multi-faceted outreach allows her to reach a variety of different clients. “You need different types of media to reach different types of people,” she said. Seminars are another effective way to get in front of clients and educate them on the value of managed services. Fowler said speaking engagements have generated a lot of new business for Capstone. When you are first getting started with managed services, you probably won’t have the option to be choosy about clients. But, over time, it pays to be more selective. Think of it this way, if you are spending 80% of your time on two clients that’s fine—as long as they make up 80% of your revenue. However, if they only make up 20% percent of your revenue, you might need to rethink your relationship with them.
”In smaller cities like Rochester, many small businesses don’t know about or understand the value of managed services, so you have to show them.”
Tejero said that it is important to add an “out clause” to your contract or agreement with clients. His states that either party can end the relationship at any time, but must give 30 days notice. “If I have to end an agreement, I meet with the client personally, and recommend another IT service provider that is a better fit,” he said. “There’s nothing worse than having a client that doesn’t want you,” said Cohn. “When ending a client relationship, it’s important to meet and come to a mutual agreement to part ways. Good communication is essential.”
Sitima Fowler, CEO of Capstone IT
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Conclusion Taking the leap from break-fix to MSP is not a simple process. There are many challenges along the way, but the good news is you aren’t alone. Cohn, Fowler and Tejero all said that networking with fellow MSPs was extremely helpful when they were building their businesses. There are many opportunities to network with peers. Industry conferences, held by vendors of RMM and PSA software, are great opportunities for meeting and picking the brains of those who have already been there and done that. Even better, join the 700+ MSPs attending DattoCon each year, where you will connect with industy-leading vendors, network in casual enviroments and learn successful go-to-market strategies, pricing structures, and best practices. There are also a number of industry groups dedicated to spreading knowledge among MSPs. For example, the ASCII Group offers a variety of educational and networking opportunities. “It really started to come together when I got involved with HTG Peer Groups,” said Cohn. Take whatever opportunity to learn from peers that have already found success with managed services and avoid making the same mistakes they did, such as reading this eBook. Look at you, you’re already on your way!
