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Managed Services: 5 Myths That Doom Early-Stage MSPs

The managed services space is still ripe with opportunity, but far too many MSPs fail because of some simple myths and misunderstandings about the market. Here are five.

The managed services market has been growing rapidly, and seems set to continue to do so for quite some time. As this growth continues, many new service providers will continue to enter the market.

Thus, there’s a lot of market growth and there’s no shortage of competition, a situation that won’t be changing anytime soon. While a number of companies that start now will prove successful in building a managed services businesses, many will not meet the same fate. If the past is any indication, many new service providers will be the victim of some common myths and flawed assumptions that lead to critical mistakes and often disastrous consequences. Following are a few of the most common of these myths.

1. If We Build it, They Will Come

Quite often, executives at early-stage MSPs have technical backgrounds and expertise. While this background is invaluable, it can also be a contributing factor to letting technology guide service decisions. When these managers find out about the latest innovative offering, they’ll want to roll up their sleeves and start working with it. Taken to its logical conclusion, this will lead to a desire to provide a service based on this new technology. The underlying assumption is this: If we build it, customers will come. However, this urge to let technology drive new service offerings is a serious mistake that emerging MSPs should make every effort to avoid.

The best, most profitable and successful service offerings will be based on an assessment of the customer, the MSPs' strengths and capabilities, an understanding of applicable market, and yes, technology trends. Successful MSPs tend to be the ones that truly establish themselves as partners with their customers, and that takes asking the right questions, gaining a true understanding of the customer’s business and objectives, and working to deliver solutions that help customers meet those objectives. Customer needs always should trump technology. When they see a solution built for them, customers will come.

2. Who Needs People or Process? We’ve Got Tools

This fallacy is a logical extension or outcome of the first myth. With a technological background, it’s easy for MSPs to adopt the latest operational tools and assume that those alone will suffice to establish the capabilities required to deliver service offerings. However, even the best tools won’t compensate for broken, incomplete or nonexistent processes or a lack of staff expertise, skills and time. There’s no way around it: MSPs need to make significant upfront investments in building processes, teams and infrastructure, and this initial investment may take some time to recoup. Often this upfront investment will pay off only after additional new services and customers come on board.

Further, the people and processes that are put in place for an initial offering are integral to an MSP’s ability to support new services and customers. When MSPs take the time and effort to build expert teams and efficient, scalable processes, they’re setting the stage for success—not just with the initial offering, but with the services that will follow.

This is not to discount the importance of investing in good tools, which perhaps are more integral to the success of MSPs than any other businesses. However, the full potential of tools can be best exploited with well-conceived supporting processes and properly skilled people. So yes, you do need tools, but you also need the people and processes to ensure they—and your entire business—provide the most value.

3. Hire Great People and Hope for the Best

Managed services success is about products, process and people. While people are a vital ingredient, even the most highly trained, experienced and motivated staff will not be enough to compensate if the other pieces are lacking.

People need a complete and reliable infrastructure that supports them in their efforts. Each individual—whether they’re in sales, operations, support, finance or any other group—needs a specific set of tools and enablement resources to maximize his or her contribution to the business. By investing in tools and processes, MSPs can put their great people in the best position to succeed.

It’s also important to recognize that service offerings should arise organically, based on the experience and track record of the team. This requires an effective self-assessment for the early-stage MSP to gain a true understanding of critical differentiators, strengths and value. Based on an honest, accurate understanding, organizations can begin to develop a business model and service offering that is right for the business and its customers. It is also important to recognize that, especially early on, tools and infrastructure investments and the processes established have to be aligned with the service offerings to be supported—so, too, do hiring decisions.

4. The More Options You Have, the More You Can Sell

It can be an understandable line of reasoning: A manager thinks that the more quickly the business can spin up more and more types of offerings, the better the chances that sales will be successful in landing more new accounts.

While it’s understandable, it’s a serious miscalculation. Coming up with a huge list of potential offerings and options that customers may not need or that may not ultimately deliver value is a recipe for failure.

Early-stage MSPs are usually well-served by starting small, establishing success and building on that success to grow new business and deepen account penetration. After establishing this early success, service providers can better understand the value being delivered, which is vital. This requires an understanding of customer pain points and an ability to address those challenges.

Ultimately, products should be bundled and sold with customer value in mind. With a deep enough understanding of the prospects’ business, the MSP can solve problems and deliver benefits that may not have even occurred to the prospect.

Sales should be trained to understand and articulate the value of various offerings to each prospective account. Rather than presenting a laundry list of offerings to a prospect, sales should be equipped to gain enough of an understanding of the prospects’ business to build a tailored proposal that squarely hits on the required criteria and effectively demonstrates how the pain points will be addressed. In this way, less truly is more. Rather than overwhelming a prospect with choices that don’t necessarily bear any direct relation to his or her business, you’re presenting a tailored proposal that puts your organization in the best, most compelling position, which can only boost sales and business success.

5. If We Sell it, We Can Build it

This is the corollary to the first myth, in which a team of technologists decides to build a service regardless of whether there is a market for it. On the other end of the spectrum is the MSP that is too sales-focused—selling a service first and only then figuring out how to actually deliver it.

Given their ongoing interactions with prospects, your sales representatives in particular can be instrumental in helping identify target markets and defining the products and services they require. Sales representatives will often come back from customer engagements and forward their customers' requests, and this is a very good thing. But MSPs have to ensure their salespeople never sell something they don’t have and aren’t 100 percent certain they can deliver on.

When defining your initial service, it’s important to collaborate and leverage the perspectives of other individuals and teams within the organization. Beyond sales, it’s particularly important to gather input from finance, legal counsel, technical teams, customers and prospects. This spectrum of input is essential in helping ensure you’re moving forward with well-conceived plans so you can build and sell a new offering.

Conclusion

Like any new venture, starting a new managed services business is a gamble. You’ll be betting that you have the right offering, the right market, the right sales force and the right skills—not to mention the cash—to cover the bet and make it pay off. By avoiding the traps posed by the myths above, new MSPs can significantly boost their odds of success.

Monthly guest blogs such as this one are part of Talkin' Cloud's annual platinum sponsorship.

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