The Key to Customer Retention and Big Margins

To be a successful MSP today, total data protection has to be the cornerstone of your business model, and not just an afterthought.

August 17, 2015

3 Min Read
The Key to Customer Retention and Big Margins

By Datto Guest Blog 2

To be a successful MSP today, total data protection has to be the cornerstone of your business model, and not just an afterthought.

According to John Manley, Virtual CTO at New York MSP Atlantic, Tomorrow’s Office, “If you become an MSP and leave out the backup and disaster recovery, then what are you managing? If the customer goes down, do you really want to fight that fire with no solution in place?”

You can’t just backup data when it’s convenient, instead, you have to be constantly ready for downtime, so you can recover as quickly as possible when it strikes.

According to a survey from The Hartford, 36% of businesses surveyed have been unable to meet a client need due to an interruption in their operation. Although it isn’t the majority, it’s certainly an alarming statistic when you consider how much downtime can cost a company.

Total Data Protection Plan

With a solid total data protection plan, you can guarantee security and stability for your customer, and stability for your company through monthly recurring revenue.

MRR creates stability for a business, but it also provides the ability to forecast sales and create an accurate valuation of the company–and, thus, a clear endgame.

Of companies surveyed by CompTIA, 59% of companies are counting on growth in the recurring revenue in the next 12 months.

According to CompTIA, to properly reap the benefits of recurring revenue, companies need better sales and marketing skills along with their technical knowledge. In CompTIA’s 4th Annual State of the Channel, they found eight in 10 channel firms expect their sales and marketing to change in the next two years.

Looking back 20 years, this model differs from how MSPs were set, when everything was focused on hardware sales, charging a minimal fee and getting the customer in the door. Vendors were channel-centric, and your revenue came through sales.

In the early 2000s, value-added resellers came in to the picture. Services were layered around the actual hardware, driving revenue in a new direction.

Then came the evolution of the MSP. No longer relying on hardware, or the unpredictable break-and-fix method, where customers relied on the “call you when I need you, pay you when I use you” approach.

Stronger, stickier customer relationships highlight the MSP’s value, allowing a return on the customer service investment.

Thanks to the cloud and SaaS, services are able to drive the steadfast local break/fix customer to a subscription model. Through the cloud, there are also benefits like improved business continuity, SMB friendliness, adaptable capacity, optimized economics, confident compliance, sustainable recurring revenue and better account management. For a deeper dive into the 7 Essential Benefits Of Hybrid Cloud Backup, click here.

Attractive subscription services based around the cloud, like disaster recovery and data backup, are also making the convincing a little easier.

Increased Security and Stability

Subscriptions provide more security and stability for both ends. You have a steady customer, and your customer has guaranteed protection, no matter what.

As in the past, companies are adapting and changing or various reasons. According to CompTIA, the primary catalysts for channel business transformation are:

  • Cloud computing pushing us in new directions (41%)

  • Customer demand for different services and IT delivery models (36%)

  • Desire to move to a recurring revenue model (35%)

  • New financial models are more lucrative (32%)

  • Vendors pushing us to change (27%)

  • Margins on product sales declining (23%)

  • Defensive move against obsolescence (23%)

As we see, the top reasons are focused around adapting to cloud computing, answering customer demand for IT and recurring revenue.

Regardless of what your reason is, constant adaptation and change aren’t just something to consider; these are things you have to do. If you do not evolve, you will perish and fall by the wayside.

Rob Rae is VP of Business Development, Datto. Guest blogs such as this one are published monthly and are part of MSPmentor’s annual platinum sponsorship.

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