NetEnrich Company Blog -- ROC Your IT Operations

Quick news flash from NetEnrich: Later this month, Raju Chekuri, President and CEO of NetEnrich will take main stage at Cloud Slam 2012 – the world’s first hybrid format cloud computing conference, taking place May 30 through June 1, 2012 in San Francisco. You can check out the release here.

As solution providers grow and mature, the natural next step for many is tackling the midmarket and helping larger companies with limited resources overcome their technology challenges. While that migration seems simple enough on the surface, a number of MSPs will hit a wall and here’s why.

If you’re a solution provider looking to deepen your data center practice, or who needs advanced operational support for that practice, we have big news for you.

I was wavering about the idea of forecasting this year’s managed services trends, but then I talked with another MSP struggling to scale and increase profitability and decided: Enough. Even though we’ve heard a flurry of controversial predictions from the usual pundits, I want to drill home a clear point. You can get more, grow faster — and increase profits — if you just consider what works for the biggest and best MSPs in our industry. Here are my top picks for how successful MSPs will distinguish themselves in 2012.

It’s been about three months since NetEnrich announced its intent to donate 5% of new revenue generated by Ingram Micro VTN members to support the staggering rebuilding needs of residents in Joplin, MO., the site of a rare Class 5 tornado that left an enormous scar across that city on May 22, 2011. The unprecedented storm killed 162 people and caused catastrophic devastation, including millions in damage and thousands of homes destroyed. Our goal when we announced this incentive program was — and remains — raising enough money to offset the cost of  building a Habitat for Humanity home in Joplin.

Do you ever feel a little hypocritical? I mean, honestly, you pitch the value of outsourcing to your customers every day — highlighting all the logical reasons they should focus employee talent on their particular business rather than IT, right? So why is it that you are so hesitant to make the switch when it comes to your own business? C’mon man, listen to yourself. I know the idea of handing a portion of your managed services practice off to another company can be intimidating. But let’s talk it through.

Do you want your employees – your well-paid talent – writing RMM scripts or working on new high-margin services that bring the most value to your customers and prospects?

Do you need help delivering better service to your existing customers while also bringing new wins on-board faster and with white-glove service?

Do you want to explain to customers why their networks aren’t being maintained as well as they might expect because you’re short-staffed or do you just want to know it gets handled while you sleep like a baby?

Justin Crotty, GM and VP of NetEnrich, airs all these questions out to dispel misperceptions about partnering during the webinar titled “C’mon Man?! Why Do IT All Yourself?”.  By the time he’s done, you’ll understand how outsourcing certain aspects of your managed services IT operation not only frees up valuable in-house staff time for higher margin billing activity, it provides you with new talent and expertise that you can immediately begin offering to your customer base.

Ready to take your own advice? View our webinar now:

We often divide new technology into two categories: immature and mature. Immature, of course, is when something is first developing. Over time, technology improves and becomes mature, the point by which it’s considered robust and generally accepted.

As an industry, we often prejudice immature technology because of its lack of features, performance issues or difficulty in use. We pine for mature technologies, those that have all the kinks worked out and enough general market acceptability to make them relatively easy to sell and support.

I’m going to argue that technology maturation isn’t a good thing. In fact, it may even work against a managed service business.

Recently, Gartner CEO Gene Hall said, “Mature is a polite code word for increasingly obsolete."

I agree. Immaturity of technology is part of the reason the channel is able to make money. The old saying, “Where there’s mystery, there’s margin” is a reflection of immaturity – the technology is so new and imperfect that end users need outside help to make it work properly.

What’s valuable to the channel is a balance of moderately mature technology and market adoption. It’s at this critical inflection point that solution providers have the best opportunity to make money on goods and services, as there’s enough market awareness to drive sales and enough mystery remaining in the technology to necessitate outside help.

These principles apply to the managed services market. Some would argue that managed services are the continuation of mature technology adoption by other means. When technology reaches a certain maturation point, end users will find it simple enough but burdensome to operate on their own. They will then turn to a managed service provider to assume administration.

MSPs are able to charge premium prices for such services so long as the market for those services remains relatively immature. Once the market matures – or reaches saturation – MSPs will lose the ability to charge premium prices, and they’ll see margins erode.

So, how do MSPs maintain high margins amid maturing technologies? Two ways. First, continue to adopt and support technologies that end users can’t implement or manage on their own. Second, lower your delivery costs by remotely managing and administering the stable services, such as core infrastructure management, that are considered more mature by most small-to-mid-market enterprise standards.

NetEnrich can help on both fronts. You will always need to offer foundational managed services, such as network monitoring and management. You can maintain your profitability by remotely managing these services and using partners such as NetEnrich on a fixed-fee basis, to free up your staff and financial resources for investments in more complex engagements, such as managing virtualized environments, Unified Communications or cloud, which create a higher value to your customers and higher margin returns for your business. Better, NetEnrich can help make easier that adoption and management of these next-generation services, ensuring continued profitability.

Of course, all of this is code for growth and expansion, rather than maintaining the status quo. Too often, vendors, solution providers and even end users try to wring value out of increasingly obsolete technologies and ignore new opportunities in emerging technologies. We think what’s needed is a balance between the two extremes. 

Keep an eye out for next quarter’s webcast series, beginning in January – we’ll explore the best ways to grow your managed services portfolio without breaking the bank.  Of course, expect Justin Crotty to have fun with a few of our topics. Why not? This is a great business that we’re all in, and it’s fun!

On behalf of the entire NetEnrich team, we want to wish you a very happy holiday season.  May your days be filled with peace, joy and happiness throughout the New Year!

Cheers,

Raju Chekuri
President and CEO, NetEnrich, Inc.

Our last month’s BIZ DEV webinar series topic featured managed service pricing.  In fact, it seems to be one of the hottest issues in the channel today. Many MSPs are seeing prices and profitability erode because of what The 2112 Group has coined, artificial commoditization. In other words, they’re competing on price not value. 

Recently, our friend Joe Panettieri at MSPmentor wrote in Am I Just Plain Wrong about the differences between per-user and per-device pricing. He’s been advocate of the approach that the TruMethods' consulting firm aptly calls “the cake pricing model,” in which the services are billed for their combined value, rather than discrete offerings.  

What got Panettieri rethinking about this model is recent chatter about per-device pricing, in which MSPs charge based on the number of servers, endpoints and, increasingly, mobile devices under management. The model has some advantages, since it’s based on a simple calculation of device volume and not discrete services, but it leaves little room for capturing the service experience outside of device management. 

Panettieri generally favors per-user pricing and believes this will eventually be subsumed by per-location pricing, in which MSPs charge a subscription or flat fee. But the debate over which pricing model is best does raise interesting issues.  In fact, one line from the comments in Panettieri’s blog really stood out for me: HTG Peer Groups’ CEO Arlin Sorensen said "the battleground for managed services is in the end-user experience."  

What Sorensen is talking about is perceived value, or the benefit the end user gets from the managed service expertise, quality and results that are delivered. Too often, MSPs want to sell services based on what the technology does and how it works. However, often lost in the equation is “why” use a technology and what benefit is derived from a technology’s use in that business, with employees, suppliers, even that business’ customers. 

Business users are becoming far savvier about technology and are increasingly looking for technology to do more than just digitize information and automate a process. They’re looking for true business benefit, services that will enable them to grow their business or focus more on their core value propositions.  

We believe where managed services brings significant value is relieving businesses of the IT burden in addition to introducing a strong business case for that IT use. If MSPs can show business owners, executives and IT directors how a managed services solution can increase the value they bring to their customers, and perhaps how it can create a strategic difference for their company. Now, that’s value. 

Without wading too much into the pricing-model debate. I agree the cake-pricing model is the most advantageous. With that said, if MSPs focus on value delivery and demonstrate the business benefit that comes from their services, the pricing model is essentially irrelevant. The customer will choose to buy, and remain a long-term customer, if the value meets the relationship, the brand promise and the overall experience that is created from start of the engagement.  Having long-term, committed and profitable customers is the icing on the cake.  And, we all know that’s the best part. 

We joined with N-able Technologies to sponsor a market report on the topic of MSP Pricing. Click on the link and receive your free copy.

Jennifer Anaya
VP, Corporate Marketing

Famed Irish writer George Bernard Shaw said, “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”

He was talking about risk, innovation and differentiation. When you adapt to the world around you, you essentially become a part of the landscape. When you adapt the world to yourself – and mold the world to your liking – you become unique.

The next generation of managed service providers won’t become part of the landscape. They will change the world around them through vision, innovation and fortitude.

And that’s part of the problem we’re combating in managed services today: too many providers becoming part of the landscape. We, as an industry, have done a masterful job boiling managed services down to kits that practically anyone can open up and start selling. At this pace, managed services will be no better than Amway or Avon. Surprisingly, no one has tried pulling a Mary Kay marketing scheme to give every MSP a pink Cadillac.

What does it mean to be successful by changing the landscape to your world vision? Look no further than the icons of the industry. Larry Ellison. Steve Jobs. Bill Gates. Thomas Watson. Mark Zuckerberg. What these people did was not play by the rules created by the rest of the industry, but rather rewrite the rules to meet their vision. And here’s the thing about them: Each of them was considered unreasonable when they started out.

We can talk about technology and business models and marketing schemes and vendor alliances built on APIs and channel programs, and it’s all meaningless when managed services – as a market segment – is built on industry scale and not individual scale. What’s the difference? Individual scale is when a business is built to grow by expanding resources to meet customer needs and market demands; industry scale is when the industry creates legions of providers for the purpose of pushing more of their product and not necessarily the sales and profitability of the individual provider.   Understand the difference?

What we need are more unreasonable people in managed services. We need thought-leaders who aren’t willing to accept the latest 5-step guide to becoming a MSP, or are willing to sell the same set of services as the other 5,000 guys in the room at some conference in Las Vegas, Chicago or Orlando. We need people who will look at the current technologies and imagine new applications that create value.

The managed services market needs to heed Shaw’s advice. The value to changing the world around you means you won’t eventually become just another tree in the forest.

Justin Crotty
SVP, GM NetEnrich, Inc.

Throughout our Q4 BIZ DEV webinar series, we’ve focused on the increased need for value-based pricing as one of the much-needed steps MSPs should take to avoid artificial commoditization — the self-imposed lowering of prices and profits. We’ve heard from industry expert Larry Walsh and others about the idea of selling managed services based on value rather than lowering prices in response to misperceived competitive pressure.

The missing element is often the lack of truly understanding the market value your expertise holds and how to position it. So, how do MSPs uncover and align the value of their specialized expertise when it comes to price?

You can start by joining us for the Dec. 7 BIZ DEV webinar with Walsh, hosted by Ingram Micro. Walsh will reveal his new research on managed services pricing, plus share advice on how to overcome this troubling pricing trend in the managed services market. Register now!

However, value-based pricing is only one factor in building and sustaining a successful – and profitable – managed services practice. Understanding, articulating and selling your value is the other half of the equation. Do you know how to empower your sales team so they can share your value in a compelling way? We can help you with that, too. At noon ET/9 a.m. PT, on Dec. 13, NetEnrich VP and GM Justin Crotty will sit down with MSP sales expert Frank Albi to discuss value-based selling and how you can differentiate yourself from your competition through effective pricing strategies and sales tactics.  Click here to reserve your spot at this webinar.