Having Trouble Finding Good Technical People to Grow Your Business? Stop Looking!
Many service providers view the cloud as the enemy because it has commoditized many of their revenue drivers. I’m not going to sugar-coat it; it does. But, what cloud-resistant service providers fail to understand is that they can leverage the right cloud offerings to decrease their costs and deliver satisfactory profit margins. How can MSPs do this? Keep reading to find out the details.
I recently had a conversation with a leader of a highly successful MSP (client of Clarity Channel Advisors) who is in the process of converting one of their on-premise clients to a DaaS solution (good for them). The current managed services agreement requires that the client have a tech resource onsite one day a week. The MSP currently receives $14,000 per month for 65 end users. In the new DaaS solution, the MSP will be paid $16,000 per month.
In reflecting on the transition, MSP leadership was pleased with the uptick in recurring revenue but felt that profitability would be impacted. We analyzed the cost of both solutions and noted that the MSP was still planning on sending an expensive tech resource onsite once a week. A totally unnecessary expenditure in a cloud-based solution.
In final review, the DaaS solution agreement was updated to reflect “onsite resource as needed” and modeling shows that even after allocating labor, the MSP’s profit is projected at $10,540 per month on the new solution compared to the $7,525 they would have realized with the former managed services agreement.
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What service providers must understand is the automation of turnkey DaaS solutions can dramatically reduce labor costs and change the economics of their business. This is especially important as other revenue streams continue to dry up.
Ngenx, the 2013 Citrix Partner of the Year, recently ditched Citrix in favor of IndependenceIT (iIT) because they can leverage automation built into the iIT Cloud Workspace platform to reduce complexity, which in turn reduces their dependence on highly-skilled, expensive labor, thus lowering their labor costs.
Labor is an MSPs largest expenditure and even when you can afford the highly skilled engineers to deliver complex technologies, they can be very difficult to find. The more complex the technologies, the more skilled the engineers are required to administer those technologies, which means more certifications, which equates to higher salaries
Bottom line: Instead of looking for more highly-certified hard to find, expensive to retain engineers, look for a turnkey cloud solution that delivers the type of automation that will allow you to delivers margins you want.
For more information about developing an action plan to increase your recurring revenue and margins, email jimlippie@claritychannel.com and follow @jimlippie.
How do you avoid paying for expensive engineers? What kind of cloud-based solutions do you use for automation?
