Tommy Wald sold his Austin, Texas-based managed services provider (MSP), Riata Technology, after more than two decades in business. Now a private consultant to MSPs, Wald shares three suggestions he’d apply if starting an MSP from scratch right now.

1. Be a sales-first organization – The companies that focus on sales and marketing excellence will prevail. Technical skills, while important, are no longer the primary differentiator they once were. At one point we would all highlight our technical skills, our certifications, partnerships. They were really expensive to keep on our bench. Those are still important today. What I’m saying is they’re no longer as big of a differentiator.

2. Sell business workflow – Focus on specializing in a business or technical vertical where margins are more generous than the generally commoditized business service offerings. This may include staffing with a business analyst, like consultants that drive business discussions with the client; or developing a unique technical niche that requires very high-end technical skills. How you differentiate yourself is about how you sell higher into the IT value stack. You’re talking more about the business workflow. That’s really where most of the discussions are going: Line of business applications and such. I think … rather than maybe hiring up at the IT architect level, I might hire more of a business analyst consultant who specializes in a vertical, like healthcare. I can have a deeper discussion with our client.

3. Outsource – Hire out back office and other operations wherever feasible. This would include NOC, accounting, HR, data center and other non-customer facing operations. Build the business more on op-ex versus cap-ex and mitigate fixed overhead costs. To be competitive in the past, MSPs had to make a lot of investments. That required a lot of cap-ex and also a lot of additional op-ex to maintain it. I think the model today is rent versus build. The ROI is not there if you are to go out and build it on your own. The costs of outsourcing have become very low. Storage, for example, is almost free.

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