This is the first of a three-part series profiling the 2018 finalists for the MSP 501 MSP of the Year Award. Winners will be announced at Channel Partners Evolution, Oct. 9-12. Read about finalists Cal Net Technology here and SabinoCompTech here.

These days, it is becoming increasingly difficult to differentiate oneself from a sea of “me too” managed service providers (MSPs) all claiming to offer great support, a proactive approach and strategic direction. Rather than relying on fancy promises and clever wording in order to differentiate itself, Premier Technology Solutions (PTS) has done what few providers, particularly in Asia Pacific, have dared to do: Risk everything on a hard business-model pivot.

The Aussie MSP took a giant leap of faith and watched as it paid off in spades, earning it the designation as a finalist for the 2018 MSP 501 Special Award for MSP of the Year.

When Break-Fix Fails

When Matthew Beesley, founder and director at Premier Technology Solutions, started PTS back in 2001, the company operated under the traditional model. Something would break, and PTS would fix it. Those were the rules of the game.

The company hummed along nicely this way for several years until it became clear to Beesley that break-fix wasn’t sustainable. PTS was quickly reaching a size that couldn’t scale without recurring revenue.

Beesley could sense that the winds of change had begun to blow.

“There is a particular day that sticks out in my memory,” recounts Beesley. “I came in one Monday morning, and there were 16 people sitting on the phones. Phones that weren’t ringing. I stood there thinking, ‘The phones aren’t ringing, and I have to pay these people’s wages regardless.’ That’s when I realized you can’t scale a business sustainably without some form of reliable income.”

Matthew Beesley

Matthew Beesley

This was a pivotal moment. It was clearly time for a big transformation. But to what end, and by which method?

Enter Monthly Recurring Revenue

From the moment the proverbial light bulb clicked on that fateful Monday, plans were set into motion to veer in the direction of PTS toward a monthly recurring revenue (MRR) model. Over the next three years, PTS tested different recipes for success. At first, the company tried to blend the two business models together, briefly transitioning into a monitoring and preventative maintenance solution provider, which meant tacking on the recurring-revenue model on top of their existing break-fix services. It wasn’t long before PTS had to admit that model was a big misstep.

“We realized pretty quickly that it’s impossible to operate using two such different case types,” admits Beesley.

It started to become clear that transitioning away from break-fix completely and diving headlong into the recurring-revenue, managed-service-provider model was the only way to go. It was time to pick a lane.

“The recurring revenue, managed services model provides a predictable, recurring revenue stream that one-time, lump-sum sales cannot,” says Beesley. “You know that revenue is going to come in day after day, which allows you to improve your service agreement, invest in efficiency and [provide] better quality services.”

An easy enough concept to grasp, sure, but this was uncharted territory. Not only was it a risk for the company, but there was also no standard for such a business model in the Australian channel. There was the lack of precedent to follow. The MSP model hadn’t quite made it to the land Down Under.

“This was the ‘standing on the edge of the cliff’ moment. We had no idea if it would work,” recounts Ray Sweeney, operations manager at PTS. “We knew it should work, but it also had the potential to stop the company dead in its tracks.”

But they charged once more unto the breach, as the saying goes.

The Customer Ultimatum

One of the hardest aspects of navigating the transitions was the customers. As far as they were concerned, PTS was already doing a great job, and there was no incentive for them to move to the new way of doing things.

The only way to get them to get on board with the fixed revenue model? Give them an ultimatum.

“No one wants to change unless they have to, so we had to remove that choice,” says Beesley.

The company knew that if it was able to keep at least one out of every five customers, it would be able to replace the lost one-time revenues with recurring revenue.

At the beginning of 2017, PTS officially let go nearly two-thirds of its customer base, expunging all break-fix and partial managed-services agreements along with many small managed clients that didn’t fit their refined value proposition and delivery model.

The purge equated to almost $80,000 AUD of monthly revenue, which made the decision an enormous commitment to the service-delivery model they had adopted and to the projected future success of the company as a whole.

Australia vs. the World

Perhaps more challenging was the lack of precedent to follow. The MSP model hadn’t quite planted firm roots in the land of kangaroos and koalas. During the “big shift,” the only guidance PTS received in terms of the managed-service model was from companies overseas.

“The biggest difference in the channel in APAC compared to other major markets like the United States and Canada is the maturity of IT services in general,” explains Sweeney. “If you talk to someone in North America, for example, you’ll be hard pressed to find someone not offering some form of managed services.”

But in Australia, not so much. PTS would become a pioneer of managed services in APAC, forging ahead in the vanguard of the Aussie IT channel transformation.

Done and Dusted

Despite all of the odds, the leap worked. Under the recurring-revenue model, the business became simpler and more efficient. Over the course of 2017, PTS grew revenue by $1.5 million AUD. The MSP just about doubled its monthly recurring revenue, agreement size and average price per user. Not only did the move triple the MSP’s profit margin, it reduced service desk response times by 70 percent and resolution times by 30 percent.

“As soon as we took that complexity out, the stress levels went away,” says Sweeney. “We had so much more belief in what we were doing. It was unshakable. We knew what we’d done was working. We almost kicked ourselves for not doing it sooner.”

These auspicious Aussies can now say, with full confidence, that they picked the right path. Want some proof? Just ask their customers.