The managed services market is growing rapidly and has strong, long-term potential for many who are pursuing it. It is changing the way IT services are consumed and delivered. It is helping many of us diversify and strengthen our value propositions and balance sheets. We are all bullish about the future and the opportunity in front of us. There is one significant hurdle, however, that nobody seems to want to acknowledge — the proverbial elephant in the room. Here’s the problem.
For those of us who target the reseller, solution provider, or managed service provider market as our customer base, this issue is top of mind. Selling managed services is hard, but not because of the technology involved.
The Real Challenge
Not enough end users are consuming their IT services in a “managed service” form factor yet. There is a very real, and very problematic growth bottleneck at the point of sale with end users of these services. We, as an industry, are simply not getting the penetration into the end user base that is required to grow and scale this market quickly. And for many of us, that growth is not happening fast enough.
In fact, the technology sale is not the problem. The bigger issue here is the selling itself — how do we take our offerings to the next end user? And the next? And the next? If you ask several solution providers how many customers they have and then ask them how many managed services customer they have, you will find that the managed services penetration into their overall customer base is low.
Why?
We, as an industry and a channel are still not investing enough in the sales and marketing capabilities of our respective organizations. Everyone is to blame – vendors, distributors, solution providers. Nobody invests enough in developing their sales and marketing capabilities.
When I hear a VAR ask a vendor how much margin is available for him to sell a managed service, I know we are not evolving. The margin in any managed service is how much you can get, not a number determined by a vendor or application provider. Yet we continue to ask those around us, or blame each other, for margins we can or cannot get out of any particular offering. The reason that this concept is so hard for us to grasp is that we simply don’t understand how to sell value and differentiate ourselves from one another. And until we recognize that and take steps to resolve it, we will always struggle to provide the value proposition that customers demand from us.
If you find yourself fortunate enough to have some dollars to re-invest in your business, where are you going to focus those dollars?
Justin Crotty is Vice President Services North America at Ingram Micro, Inc. He oversees Ingram Micro Seismic. Monthly guest blog entries such as this one are part of MSPmentor.net’s 2009 Platinum sponsorship. Find all of Crotty’s blog entries here.
Read More About This Topic
Share This Post
Posted In: Guest Bloggers | Marketing | Sales
Tags: managed services marketing | Managed Services Provider Marketing | Managed Services Provider Sales | Managed services sales | MSP marketing | MSP sales
Interact: Add a Comment | Trackback Link | Permalink
Subscribe: RSS Feed
Take a look at our 
Justin,
I couldn’t agree with more.
I came from to the IT sector from another industry. In the world I am from, sales and marketing drive the business. It seems to be quite the opposite with VARs and MSPs. It is secondary. In fact, I have run into many VARs and MSPs who have no formal sales or marketing approach. This state of mind shocked me. Any other business would be doomed with this approach.
Sales and marketing should be the central focus for any business – period.
Paul Barnett
Marketing Director
Virtual Administrator
Justin,
You are absolutely spot on. It seems to be especially difficult to grasp the concept of investing in sales and marketing in these challenging economic times. Instead of actively cutting new sales and marketing programs, organizations should be looking at redistributing funds into sales areas that will produce greater profitability for their organization. Those who are investing now into selling managed services will reap HUGE rewards especially when the economy turns to the upside.
Shayne Skaff
Executive Vice President
MaintenanceNet
Paul, I agree. I see a lot of cookie cutter marketing being done by MSPs. While I do understand it’s very hard to create a brand and unique value proposition too many in our industry are doing “plug in your logo” marketing.
Marketing, Sales, and Delivery must all be integrated around not only the same goals but also the same brand. If you don’t know who you are it’s extremely difficult to sell it and even harder to deliver it consistently.
Rebecca Everding, Mother Network Guardians
Cookie cutter marketing in the channel? Say it ain’t so
Kidding aside, I think the best MSPs are pulling away from the pack with their viral videos, sharp logos, well-defined mission statements, branded services and well-crafted news releases. The top 15 to 20 percent of MSPs have nailed most of these sales and marketing components. The other 80 to 85 percent have not…
And this has nothing to do with the fact that Nine Lives is a marketing company right?
But seriously, I think that the sad fact is that this industry is not being approached systematically at the highest levels. There are little to no case studies at Harvard Business on the sector and this means that the people that have invested the most in business as a studied discipline are not that familiar with the sector and end up at yet another bank or chemical company.
This might be a reflection of the size of the sector, it is not yet moving the needle when put next to other sectors like lumber, auto, BPO, Financial Services, etc. Maybe once the narrowly defined MSP space becomes a billion dollar space, then top talent will spend time in it. The bad part of this is that a new company with heavy guns in the form of business brains might mop the floor with many of today’s players. They would start by forming an experienced sales and marketing team and funding them at the multi-million dollar level.
I’m sure that early in the corn industry there were many small players, now it is dominated by well oiled business machines.
Joe, videos and logos don’t do the job. What I think is missing is speaking the language of business instead of the language of technology.
When a great new technology comes out, the reaction should not be wow or how cool or how can I incorporate this into my business? It should be “Who Cares? and why?”. How does this product or service offering benefit a business owner who needs technology to do what they do but just needs it to work?
Thats what I see as someone not in tech but works with lots of ppl that are.
Stu
Hi Larry: To further your point, it’s interesting that Justin linked out to business publications (example: Entrepreneur.com) rather than IT publications. It hints at the fact that we all (including MSPmentor) need to continue pushing beyond our IT comfort zones toward business discussions.
Stu: Fair points. Sometimes I offer super-simplified thoughts, and readers like you remind me of the bigger-picture issues — such as speaking the language of biz.
Stu hit it on the head. It’s translating what we do to what they need. So many MSPs say, “but I know their technology service is bad! They need me!” Yes, but do you know how to 1) get their attention 2) speak in terms of technology being a business driver and 3) maintain a relationship with a non-technical audience.
Videos and logos are part of step 1, but they are most effective when they represent something deeper.
For the average guy with enough technical knowledge, starting an MSP is not hard. Making it last and be a profitable, growing business takes a different skill set that the average geek doesn’t have. Those skills are the salesmanship and marketing abilities that are rare to find all in one person. Many MSP’s get handcuffed when word of mouth isn’t enough to grow the business. As you point out, Justin, many back into “managed services” but really it should be the lead in the services offerings.
All: Some follow-up questions/thoughts:
1. What is it that MSPmentor can do for readers to address the elephant in the room? How can we help to ensure our readers actually do move forward on the business front?
2. What type of help do you want from vendors and peer MSPs and associations?
3. On the flip side: Do MSPs need to step up their game on their own? Seems like the IT channel (resellers, VARs and now MSPs) have complained about branding, marketing and sales challenges since the birth of the IT channel… Am I being too harsh?
@StuFinancesTech Spot on. I handle tech purchasing for our small office and I also work in the industry so I understand what partners are TRYING to sell me. There is definitely a problem translating tech speak to business speak; it starts with marketing, continues with the sale, but cannot be forgotten once a contract is in place.
We HAD a managed service contract (because we believed in the value message we were helping partners put out there) but after multiple incidents of:
- receiving overly-technical monthly reports – how can I make decisions from a report I can’t understand?
- lack of ownership for errors in the log – it shouldn’t be my job to notice if there is an issue.
- not using the information to help us be proactive – even after multiple requests we couldn’t get a budget or growth plan!
…we simply couldn’t justify the cost per month even though we still believed in the idea.
This gives the whole initiative (managed services) a bad wrap (@Larry) and leads to erosion of the value that does exist. It’s imperative that partners win, tell the good story, and follow through on the pitch.
I fully support Justin’s comment “The margin in any managed service is how much you can get, not a number determined by a vendor or application provider.” Stop looking to vendors for big margin on resale(that would be cookie cutter). Don’t look to managed services for the injection of revenue you need; rather look to what you can do with the information and long term, deeper customer relationships you gain when you sign a new managed services customer (that would be providing unique value).
We work with thousands of partners and rarely do any of them have a communications plan in place to talk to their customers on a regular basis about business issues that technology can help solve. As the person in charge of buying technology, I’m eager for that guidance, but it needs to be clear and easy to understand.
All of the above comments are bang on. However.. when the rubber truly hit’s the road is during the sales process and one of the main obstacles here is based on the fact that MSP’s have to wrap their minds around the solution based sales process. The difference between selling a solution over an actual tangible product is huge. When selling a product, generally the prospect has an understanding of what the product is. They have a mental picture of what the product looks like or what its functions are. It’s a tangible item.
When selling a service or solution … the prospect often doesn’t fully understand the entire scope of the service or what’s involved with its delivery. The reason for this gap is simple. A product performs or allows the prospect themselves to perform a task that may or may not generate revenue like a server, firewall a copier or even a paper shredder. A Managed Service solution is bunch of IT service deliverables that when combined offers the prospect;
- ROI
- Cost savings
- Peace of Mind
- Higher Employee Productivity
- Access to a IT expertise and experience
- Higher call priority & faster response rate
- Reduction in the number of emergency incidents
In order to sell a service or a solution, MSP’s must make intangible service offerings tangible for customers by matching those services to the prospects core business functions & needs.
The simplest way to achieve this is to develop a sales process that illustrates your prospects current IT costs as well as any inefficiency in how their network is currently being supported.
Mike Byrne
Joe, as a non-techie that works with techies, I really appreciate how you present here. To be able to summarize and report is not a bad thing, its a good thing. I think its easy to forget when we get deep in a topic of what the big picture is or how this affects those not in our industry. Tech more than most businesses has its own language but all businesses do. I have to catch myself about throwing terms like operating leases, tax leases, SBLCs and other things out there that usually elicit strange looks from non-financial people.
When I forget, I use the 8 yr old rule. That rule is can I explain the benefits of this to an 8 yr old so they understand it. After all, we all have slow clients and those so busy that they just want the summary of how it helps them do what they do best, which usually isn’t Tech related at all.
What Rebecca says is also true. You knowing my tech service is lousy doesn’t mean I know I need you yet or know why I should switch to something that might be less lousy. Things like storage, protection, access, speed, uptime and the like are things I and other business owners can relate to as they directly affect our ability to do business. It’s a shame when an essential service like Tech is relegated to being non-essential cause its about adopting the new technology or the new gadget.
Stu
StuFinancesTech on Twitter
A few comments:
1. Love the forum and I applaud and agree with much of what has been written. Our industry continues to evolve and managed services is the latest incarnation.
2. Joe, to your questions on “what can MSP Mentor” and the other associations/support groups do? A key element is the continued dialogue (which you promote/market so well) — so please keep those thoughtful questions coming. Organizations such as CompTIA, MSP Partners, Peer groups, and vendors can and should offer meaningful forums for the IT community to dialogue. As a result of the interaction on multiple levels, some of us will morph and enjoy success.
3. For those that have been in the technology space for any length of time, it appears to me that we seemingly default into a “speeds and feeds” discussion. To Justin’s earlier point, maybe the questions posed on managed services are now are on “margin”, but essentially the discussion is the same. Value based / solution selling is a difficult conversion for many people. Being human beings, we end up defaulting back to that which is most comfortable.
Note to Joe: It would be interesting to survey how many peoplerunning today’s Reseller/Solution provider/MSP come from a tech background (I could hazard a guess…).
3. In my personal opinion, many organizations undervalue or don’t understand, the “elephant in the room”. If you are running a business, that business should have all the key “business” functions in place (as in Marketing, sales, admin, etc). For many providers, sales and marketing functions are an afterthought. Maybe this relates to point #2 and the technologist bent exhibited by many of our brethren?
Lastly, I will throw out this thought: Since we are evolving yet again, the critical component for success will be in the ability of the MSP business leadership to communicate the desired direction and change to their employees — thereby facilitating the “Social Adoption” of the MSP model. Maybe those social aspects will be the topic of the next MSP Mentor article…
Good luck!
Gerard
Gerard: Thanks for the note and your closing comment about “Social Adoption.” I will give that some thought for a potential blog entry. You know me… always (overly…) social.
Joe,
Sales and marketing leadership is what is missing in most small VARs and MSPs. We often forget that MSPs are mostly owned by former techs. Techs generally have very little, if any marketing and sales background. I wouldn’t expect a Marketing guy to have any more success building an exchange server or configuring a firewall than a tech attempting to do marketing and sales. They are two different beasts. People devote their entire lives to becoming great at both. It is a different skillset.
This is just my two cents, so take it for what it is worth. To all MSPs and VARs; bring on a business partner with a sales and marketing background. If you are larger and can afford it, hire a person with a strong sales and marketing background. If you feel like tackling it yourself, hire a coach or consultant to guide you through it. Bottom line is this, surround yourself with people that are good at the things your aren’t. That is what smart business owners do.
Paul Barnett
Marketing Director
Virtual Administrator
Speaking from someone in sales who doesn’t have a technical background, of all the great comments here, I’d have to agree with Mike Byrne’s comments the most. Technology by itself does not generate revenue for a business, people do. We can’t forget that. We need to remind ourselves every minute of every day that teaching and educating our customers on how to use technology to make our lives easier will ultimately lead to increased revenue, referals and a strong business model. Sales and Marketing needs to be in harmony with engineering and development and this isn’t always the case.
We also need to remind ourselves to listen to our customers, hear what their pains are and work dilegently to present, solve and follow through on our promises. I honestly believe that we have the tools to do this but don’t rely on them nearly enough. As many of the others pointed out, we must not let fancy logos and sharp tongued sales pitches affect our judgement. Do your homework and be extremely critical of where you spend your hard earned dollars. It’s a brave new world, let’s enjoy it.
Funny observation: Justin has turned into the elephant in the room. He wrote the blog, and is surely watching (and reading) silently as the comments roll in.
I will do my best to organize many of the thoughts above into future blog posts.
In the meantime, thanks to all for keeping the healthy dialog going.
Paul – You nailed it.
Would you hire a marketing expert to configure and install exhange servers? Of course not. So why do you expect your technical people to execute your marketing strategies (if any)? And why would you expect them to do that well on a part-time basis?
Look – if marketing and selling are important, and I think we all agree they are, you need dedicated resources focused on doing those things well.
Technical capabilities are important but are table stakes in an industry full of technical expertise. Marketing and selling are the differentiators – those skills are more rare in our industry and, therefore, those who do them well are easily differentiated from those who do not.
I couldn’t agree more! We need to keep the space engaged in topics like this.
Mike Byrne
Group Manager of Channel Services
GFI Software
After reading all these great comments I have some as well. As a network engineer just finishing his MBA I have to say that sometimes we get bogged down and focused on “Sales and Marketing” without ever really understanding what those terms mean. And to be honest, the best sales tactic is to not sell at all. Who likes to be sold something? I don’t and neither do potential clients. They are human just like us. If your business is at the point where you “need” sales to survive, then it’s probably time to look at your core business and shore that up so you don’t need sales to make ends meet.
I’m not suggesting in any way that sales is not important. It is. But I will suggest as I have before that the best way to make a sale is to stop selling! Start forming relationships with current clients, start getting involved with sources outside of IT and educate potential clients on the changes in the IT services industry. Educated them and form a strong trust relationship. Innovate and become an expert in an area that is important to potential clients. By the way, all these things will help you and your staff become more savvy as well.
As an IT professional and a client to an MSP, the worst thing VARS and MSP’s or Master MSP’s can do is try to sell my management something. What we seek are people that truly care about what we are doing and our needs……we know how to ask when we need a service….and guess what? we do. We ask because they have not tried to sell us anything.
Just something to think about in the toolbox of sales and marketing.
The perennial elephant in the room is question how to match our services with the customers who will pay for them. That’s more strategic then a sales tactic; it’s a core business question that needs to be reviewed periodically, not just when sales are in a slump. When the market is on a crazy upswing we overlook such questions for a while, but reality sets in.
As readers of this blog, I suspect all of us see the potential for MSP services. The need for them will continue but like most markets, real success will go not just to the good sellers but to the businesses that are smart enough to know their customers and keep them for the long term. Angie Robar’s comments (former MSP customer) give us some clear clues on what long term success requires, beyond the initial sell.
Mike Garland
DataPreserve
I am stepping in way over my head here and asking a question.
how do you sell when no one in the company has any sales/marketing experience? I work for a very small company who has become interested in providing managed services to my existing customer and then branching out to new ones. I have no formal training (nor does anyone at the company) in any type of sales/marketing. We don’t have the capital to hire someone who is versed in this area and honestly we have all tried to develop some sales experience with very limited success(most of us are just too technical to grasp it properly and then put it into practice). We are stuck where we are at because we cannot get the new customers because we have no way to reach them and without the new customer we have no money to advertise/market or grow the business, so instead we just exist where we are at.
Hi Guys,
Some intresting views. I agree that the majority of CEO of Managed Service Providers are more likely techs rather than Sales & Marketing Gurus.
Are thee outsourced marketing companies out there who specialise in MSPs ?
Mit
Netstar