First, the basic facts. For its Q2 ended January 28, Cisco reported:

• Net sales of $11.5 billion, up 11 percent
• Net income of $2.2 billion, up 48 percent

The figures essentially beat Wall Street’s expectations. In an earnings call, Cisco CEO John Chambers focused on a range of markets — including the service provider sector, where sales grew 12 percent year over year. Without mentioning Juniper by name, Chambers drew a clear line between Cisco’s progress and Juniper’s alleged challenges.

Chambers said:

“Our performance in the service provider market this quarter is proof of the power of our integrated architectural approach, and the benefits of our intelligent network in helping our customers to transform their business and capitalize on new revenue opportunities.

This architectural approach makes us a strategic partner to our top service provider customers globally, and it’s what differentiates us from our competitors. So while others talk about the decline in service provider CapEx, we are pleased with our performance and the alignment of our portfolio with our service provider customer’s spending priorities.”

He added: “Our Q2 revenue growth and guidance for Q3 appears to be proof points in how we’ve been breaking away from many of our competitors.”

Chambers’ words are an indirect attack on Juniper, which issued a financial warning in January 2012 — though Juniper did host a successful global partner conference that month as well.

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Admittedly, I’m a little late to the game on this one. The survey results are about a year old. But they’re available for registered download on Kaseya’s website. Among the stats worth noting:

• More than 435 MSPs participated in Kaseya’s global survey.
• Break-fix resellers that sold block-hour support charge about $90 per hour, on average. The figure was significantly higher in the U.S. ($119) and Australia ($122), among other areas.
• MSPs charge $52 per desktop, on average, for ongoing desktop support and maintenance per month. The figure was considerably higher in Canada ($90, though only 17 MSPs were represented) and the United States ($65 on average from 234 MSP responses).
• MSPs charge $156 per server, on average, for ongoing server support and maintenance per month. MSPs in New Zealand ($278, based on 11 MSP responses), the United States ($216) and Australia ($211, based on 55 MSP responses) charged the highest feed.

I realize some pricing trends may have changed significantly since the survey results were published in Q1 2011. In recent months, I’ve increasingly heard about all-in per-user pricing (rather than per-desktop pricing) that helps MSPs to generate as much as $100 to $150 per user per month. Also, I’m curious to how the pricing statistics would change based on vertical markets served.

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Here’s a sampling of what’s available this week.

• Business Development and Sales Representative in Livermore, Calif.
• Technology/Copywriter/Blogger/SEO in Oneonta, N.Y.
• Support Engineer in the eastern United States
• Managed Services Operations Manager in Warminster, Penn.

The MSPmentor Job Board is free to anyone who would like to post a job or career opportunity — as long as the opportunity is within the managed services, cloud services or IT channel market.

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My wife and I have spent the past few weeks meeting with home improvement contractors and Home Depot. We may — or may not — remodel our aging kitchen. We’re still weighing the potential project “components” and costs. Call me crazy, but the process reminds me of a potential sales engagement in the managed services market.

Consider these three scenarios:

1. Contractor one is well-spoken and comes with numerous references. His work for some of our neighbors is stellar and he has incredible vision for how our kitchen could be remodeled. But we’ve met this contractor twice and we’ve asked him — multiple times — for a project estimate. He originally told us the sales quote would arrive in two weeks. It has been a month. We’ve yet to see an estimate from him.

2. Contractor two has a well-regarded team — rip-and-replace specialists, plumbers, electricians. We suspect he could handle the entire job. He’s a project manager of sorts and extremely personable, spending considerable time on-site making sure home renovations meet customer expectations. Here again, we’ve asked multiple times for a job quote but we’ve yet to receive one.

3. Contractor three is a tag-team involving Home Depot and a local contractor that is part of Home Depot’s outsourced “service provider” network (no joke). Here’s where things get really interesting:

• Home Depot has essentially given us 20 hours of free in-store consulting. A Home Depot employee has sat with us two or three hours per weekend, designing kitchen layouts and then using the layout software to generate a real-time price quote for all the “hardware” (cabinets, etc.). Each time we change a cabinet or a design point, the sales quote is updated dynamically — in real time.
• The local contractor, potentially working in combination with Home Depot, visited our house with a laptop. Using (1) our kitchen dimensions, plus (2) some custom requests (from us) plus (3) the Home Depot “hardware” quote, the contractor was able to generate a price quote for us during his first visit to our house. The quote covers installation services.

Also of note: We don’t have any “personal’ experience or “personal” references yet from Home Depot and the contractor, but we’re impressed by what we’ve seen so far. If we work with Home Depot and the associated contractor, all of the cabinet installation would be guaranteed for 25 years. And, the Home Depot service provider network leverages some sort of customer survey — making sure contractors have at least a 90-plus percent approval rating to stay in the service provider network.

Information Technology Projects and Managed Services

Now, apply our home improvement example to the managed services market. As Big Box retailers (Best Buy, Staples, etc.) continue to push into managed services, you can imagine the Home Depot price quoting model taking hold.

First, Best Buy can offer some basic hardware quoting services to small businesses — generating on-the-fly cost estimates for a 25-node small business network running email, for instance. Next, perhaps mindSHIFT — Best Buy’s managed services arm — could further customize the quote to blend in managed services and cloud services.

Get Moving

Where does that hypothetical scenario leave independent MSPs, VARs and IT resellers? The short answer: To compete with the big guys and with entrenched MSP rivals, you’ve got to generate accurate, comprehensive price quotes far more rapidly. It’s not enough to sit down with a customer, offer sound advice and great customer references. You need to follow-up rapidly and seal the deal with a compelling proposal.

That’s where sales proposal and price quoting software enter the picture. Two of the best-known options are Quosal and QuoteWerks. I’ve also heard some buzz about BigMachines, CIS QuoteBuilder, CNet ChannelOnline, QwikQuote and VARStreet (which Autotask recently sold back to VARStreet’s employees).

I wonder: How many incomplete sales proposals are sitting on your desk? And how many of your customers are choosing alternative IT service providers simply because they received a timely price quote?

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In a recent webinar, IT analyst firm IDC shed some light on likely SMB IT spending behavior for the current year, and it holds a lot of potential for MSPs looking to gain new SMB clients or expand existing SMB relationships. Here is a brief overview of some of the key predictions IDC made for what could be a profitable year for MSPs serving the SMB market.

IT Spending Will Rise

IDC expects North American SMB IT spending to rise about 6% this year, from roughly $144 billion in 2011 to $150 billion. In a shift from spending patterns reported last year, IDC sees greater growth occurring among small businesses (with 100-499 employees) than among mid-sized (500-1,000 employees), so MSPs may want to pay extra attention to what smaller clients and potential clients have planned for their IT activities this year.

Cloud Adoption Will Increase, and that’s Not All

Cloud technology as an enabling technology for businesses of all sizes has gotten a lot of industry attention in the past year (including from me), and IDC predictions indicate it has been justified. Cloud adoption is expected to exceed 50% among mid-sized businesses and hit about 33% among their smaller brethren. For the most part, cloud implementations are expected to have some level of integration with onsite systems.

But cloud technology is not the only type of IT system expected to experience growth among SMB users. Spending levels on networking equipment, software and (pay attention here) IT services by SMBs are all expected to increase this year compared to last year. Other IT areas where IDC is forecasting increased SMB investment include technology for mobile and remote worker empowerment (especially driven by smartphones and consumer mobile devices), and virtualization and network resources such as enhanced storage, with security as a key enabler.

Price Will Not Be the Primary Driver

One trend which bodes well for MSPs is that solutions and productivity are expected to trump price as primary drivers for SMB technology investment. This means MSPs do not have to worry as much about enterprise vendors, telcos, and other large managed service competitors using scale to undercut them on total cost. Improving agility and competitive position should matter more to MSPs than the price tag (within reason, of course!).

Of course, these predictions are educated guesses and may not come completely or even partially true. But they give MSPs a good general roadmap to follow as they accelerate their 2012 go-to-market strategies. And anyone who serves SMBs is used to altering their sales and marketing strategy to meet unexpected changes, anyway.

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Once a customer sees the ongoing stability of a remotely managed IT environment, some jump to the conclusion that all their technology headaches are gone, which can lead them to wonder what exactly they’re paying you for.  It’s a legacy issue that MSPs must address early on through constant communication, strategic pricing and a clear demonstration of business value through smart reporting and quarterly or bi-monthly business reviews.

Steps to Success

Not sure how to combat this issue? Here are several do’s and don’ts gleaned from N-able’s MSP Elite:

1. Don’t productize your services and fixate on price.  Posting a flat-rate service fee on your web site devalues and artificially commoditizes your services.
2. Do focus on customizing your value and the outcome for your clients by using technology to support your clients’ needs and business goals.
3. Don’t underestimate the customer experience and need for a personal touch. Going remote has its obvious advantage, but being seen and heard face-to-face remains critical. This is a relationship business.
4. Do establish a defendable and differentiated value proposition.
5. Don’t be afraid to walk away from a prospect or customer.  If you’re not seeing eye-to-eye out the gate, just call it a day and move on.  More than 80 percent of the market is unmanaged. Additional opportunity is out there.
6. Do become a valued business consultant as well as a technology provider. Listen to your clients and establish an ongoing meeting with a structured process about how technology and your services will, and are, supporting their business.
7. Don’t just send along a canned report that shows threats blocked, patched applied and servers fixed. Consistently track, report and celebrate what your team has accomplished. Customize the report to show how your efforts have met the customer’s needs and helped them achieve their goals. Reporting is going to be huge in 2012. From compliance to general accountability, reporting both on technology and business impact is going to be core to an MSPs’ service moving forward.
8. Do establish corporate values, technical processes and a signature of service that will ensure a positive customer experience and drive greater loyalty.
9. Don’t sell to anyone and everyone. Assess your portfolio and focus on the right clients. Understand who your target audience is, what they need and specialize your service to meet their needs.
10. Do have a plan.  A one-page strategic plan will help keep your team focused and on track.

More Guidance

For additional insight, see the following partner video on value-based packaging, pricing and reporting, featuring insights from J. Michael Drake, CEO of masterIT, which has been an MSPmentor 100 company multiple times since 2008.

Another good resource is the recent report called “Countering Artificial Commoditization and Poor Pricing Practices in Managed Services,” written by The 2112 Group and sponsored by N-able and NetEnrich.

Mike Cullen is VP of sales at N-able Technologies, which develops remote monitoring and management automation solutions for MSPs and IT departments. Monthly guest blogs such as this are part of MSPmentor’s annual platinum sponsorship.

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But performing the coding process still holds the potential to earn significant profit, and SMBs have a significant need for reliable coding services. As detailed in a recent New York Times article, a whole niche of start-up businesses has developed around teaching individuals and small businesses to code.

These businesses target everyone from students to housewives to entrepreneurs to established coders looking to improve their skills. While some of them are currently offering free online services, most employ some type of monthly student fee to generate revenue.

Those Who Can’t Teach, Those Who Can, Code

Certainly the people behind these learn-to-code businesses should be applauded for finding a need in the marketplace and attempting to fill it. However, in some cases, MSPs may have success targeting part of the same audience learn-to-code services are targeting: owners and employees of SMBs.

Learning to do their own coding may sound like a nice, practical idea for SMBs looking to improve in-house skills and save money. But in reality, the typical SMB employee or owner is already working far more than 40 hours a week and under a tremendous amount of stress trying to keep the business competitive in a troubled economic environment where larger rivals employ teams of expert coders and developers. In reality, most SMBs are probably better served by outsourcing their coding to a qualified MSP than by taking a “DIY” approach.

Keep the Costs Low

While MSPs can make a persuasive pitch to SMBs who are using or considering using a learn-to-code provider to instead outsource their coding, MSPs need to keep in mind that at least in the case of the companies profiled New York Times article, monthly fees run from $25 to $49 a month.

Obviously purchasing coding as a managed service will cost more, but MSPs must find creative ways to keep the cost within competitive distance, especially since one implied benefit of learning to do your own coding is that you eliminate the need to pay someone else to do it for you. Therefore MSPs should examine ways to work coding in as a portion of a larger development deal or as a “pot sweetener” for a client on the fence. The SMB code market can be cracked, make sure you are doing the cracking and not a DIY instructor.

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First, a little background: We’ll unveil the complete MSPmentor 100 global list on February 15 during a webcast. At that time, we’ll also unveil regional lists for North America, EMEA (Europe, Middle East, Africa) and AANZ (Asia, Australia, New Zealand). And, for the first time, we’ll offer a glimpse at up-and-coming MSPs in Central and South America.

Among the preliminary data points worth noting…

1. For the MSPmentor 100 Global List:  The top 100 MSPs managed 2.70 million desktops and mobile devices as of the close of 2011, up from 1.79 million desktops and mobile devices in 2010. But here’s the wild part: Two of the 100 companies are managing 1.8 million of those desktops. Big players are growing fast but we’ll also zero in on small MSPs as part of our report.

2. For the top 250 MSPs in North America: Combined annual recurring revenues topped $1.07 billion in 2011 — up 32 percent from 2010. The number of desktop and mobile devices under management topped 4.2 million in 2011, up from 3.1 million in 2010.

3. For the top 50 MSPs in EMEA: Combined annual recurring revenues were US$191 million in 2011 — up 53 percent from 2010. The number of desktop and mobile devices under management topped 164,000, up 41 percent from 2010.

4. For the top 25 MSPs in AANZ: Combined annual recurring revenues were US$102 million — up 44 percent from 2010. The number of desktop and mobile devices under management was 137,679, up 37 percent from 2010.

But who are the MSPmentor 100 companies? And what about regional honorees from North America, EMEA and AANZ? We’ll share all the details February 15 on our special MSPmentor 100 webcast.

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Here’s how the referral program works. First, Tigerpaw customers can refer a friend or colleague to the company by registering them online. Next, wait for Tigerpaw to send you a confirmation email that the customer you referred is actually eligible for the program. If you get the green light, your referral is free to make a Tigerpaw purchase. And once they do, you can select either a cash reward or credit toward your own Tigerpaw purchase for having delivered the referral.

Tigerpaw has leveraged incentive-based programs before to drive sales. In October the software provider teamed up with Corelytics to challenge its software users to meet sales and other business performance goals.

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N-able’s flagship product is N-central, a remote monitoring and management (RMM) software platform for MSPs serving SMB customers. Also, N-able helps resellers to promote N-central into mid-market corporate IT departments. The market for RMM software remains fiercely competitive, with roughly a dozen companies serving the industry in various capacities.

N-able Claims

N-able partners now manage more than 59,000 end-user customers, up from 22,000 in January 2010 — a 168 percent increase in the past two years. Also, N-able grew its international partner base in Australia, New Zealand, the Netherlands, Scandinavia, the UK, Germany and South Africa by more than 40 percent.

N-able did not disclose actual revenue figures or profit figures; as a privately held company N-able and many of its rivals don’t offer up such figures. But N-able has previously stated that the company is profitable and growing.

How N-able Got Here

N-able’s apparent growth can be traced to several moves. CEO Gavin Garbutt has evangelized a freemium strategy that aims to ensure MSPs pursue 100 percent customer penetration with basic monitoring and security capabilities, while striving to upgrade such customers to paid services over time. In late 2010, N-able also named JP Jauvin president and COO, bolstering the company’s management ranks while VP of Sales Mike Cullen remained on the road to accelerate N-able’s global sales and partner strategy.

N-able has also built or strengthened relationships with Ingram Micro, the Independent Community Bankers of America (ICBA), International Business Products Inc. (IBPI), the ASCII Group Inc., the MSPAlliance and NetEnrich. A recent N-able/NetEnrich research report, penned by 2112 Group, described how many MSPs were underpricing their services.

Where is N-able heading next? Garbutt has vowed to keep the company focused purely on the channel — positioning N-central for MSPs, or leveraging MSP and reseller relationships to promote N-central into corporate IT departments.

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