A business model focused on cutting costs has obvious limitations. That’s why managed services have to be about much more than lowering the cost of IT. And as much as customers love a bargain, most understand this intuitively, often citing other objectives for adopting managed services – improved uptime, access to technology advances and better security among them.
A new poll of MSPs by the MSPAlliance found customers hire MSPs primarily because they want to pay more attention to their core business. “Fifty percent of MSPs point to ‘focusing on core competencies’ as one of the leading reasons customers buy their managed services,” said MSPAlliance CEO Charles Weaver.
Only 12 percent of participants cited cost cutting. “MSPs tend not to lead with cost savings as a benefit of managed services or cloud, because there are simply too many variables,” Weaver said.
What's your message to customers?
Yet, the tendency to overemphasize cost cutting remains, as anyone will notice by looking around MSPs’ websites. Is this evidence of a disconnect? That depends on how you look at it, but may simply come down to perspective.
When you make a conscious strategy decision to focus on core competencies, the goal is to increase revenue. That should lead to higher profits, at least theoretically. And while cutting costs and increasing revenue are different objectives requiring decidedly different steps, the outcome is to keep the business viable by making it as profitable as possible. Profitability is the ultimate goal in both cases.
But as an MSP, it matters how you position your service. MSPs that lean too heavily promoting the cost cutting benefits of managed services should consider refining their message for a couple of important reasons. One is obvious enough: If customers’ main concern is to hand over IT responsibilities to a service provider so they can focus on their core business, then your core message should reflect that priority. You are more likely to get customers’ attention by addressing the needs they identify.
Where's the value?
But more importantly, you should frame your message within the context of freeing customers from non-core tasks because that’s where the value is.
Unquestionably, cost cutting is important and will forever be a concern for well-run businesses looking to maximize profit. But a business that doubles its income thanks to a successful new product or service cannot achieve that through cuts.
Value is best extracted from what you can add, not what you can cut. A business can reduce expenses by cutting staff – and as a side effect, some valuable institutional knowledge – but a company that can refocus its energies on profit-making competencies while retaining all of its institutional knowledge is looking at a brighter future.
Transferring IT tasks to MSPs allows the customer to strategize and innovate, manage competitive threats and identify new customer opportunities, improve operational efficiency and worker productivity. Add all that up, and what you have is value.
Telling customers you can cut their IT expenses is appealing but potentially perilous. Focus too much on costs, and you’re teaching your customers the wrong lesson: You’re a commodity. The next time your contract is up for renewal, customers may well be tempted to shop around because, in their minds, cutting costs is what managed services is about.
Teach your customer to instead appreciate the value you deliver, and you are sure to improve your chances of a long-term engagement. As a service provider, that should always be a top priority.
Pedro Pereira is Massachusetts-based freelance writer with two decades of experience covering and analyzing the IT channel and technology. He can be reached at [email protected].