“Seismic” Events in IT Services

The hype and hysteria surrounding the rise of managed services in the IT channel has neglected two of the most fundamental elements that should be driving solution provider decision making: brand and unique value proposition.

First, let’s debunk one of the greatest myths of managed services: It ain’t about the tools. It’s about the partners you choose and how you differentiate yourself. Aren’t these the same things that have driven solution providers’ decisions for years? Maybe things haven’t changed that much.

Let’s also face another reality that is difficult for the IT channel to admit: Managed services isn’t about cool technology or flashy applications. It’s about the ability of a solution provider to acquire managed capabilities with a reasonable investment and to quickly turn that investment into revenue and profits for his or her company.

Over the years I’ve had many conversations with solution providers about managed services and where to place their bets. They’ve told me about the agonizing lengths they’ve gone to in evaluating the technical capabilities of different applications and weighing the merits of building their own data centers or NOCs (network operations centers) to support their managed services businesses. Others have talked about the price differentials they will be charged for the various applications or tools.

All of this heartburn and overanalyzing is misguided. They are worrying about the small stuff.

On the other hand, I rarely hear about solution providers who worry about developing a solid value proposition or designing a marketing and brand strategy around their managed services capabilities. Ignoring these critical differentiators is a huge mistake. Solution providers’ ability to clearly articulate their unique value proposition and design effective marketing and sales plans will determine success or failure in this market, just as it always has.

Managed services is not about solution providers’ technical capabilities or fancy infrastructure, but rather their ability to develop solid value propositions and solutions offerings to their clients. For customers, times haven’t changed that much. They want great service at a price they can afford. They want to do business with reputable and accountable organizations they can trust.

The days of leading with vendor certifications and technical capabilities are over. Sure, there is a need for technical competencies—those are table stakes. But being “Gold Certified” or a “Platinum Partner” of any given vendor does nothing to articulate the unique value you bring to customers. These authorizations only reaffirm the same capabilities and certifications that hundreds, maybe even thousands, of other solution providers have earned.

Another truth: Establishing a managed services practice doesn’t have to be expensive. With the right partners you can deliver the commodity stuff—data centers, NOC service, help desk, and so on. Spending your resources on duplicating these commodity investments makes no sense.

Your clients only care that you will solve their business problems effectively, efficiently, and at a good value. Focus your dollars and resources on the things that truly differentiate you: your value proposition and brand promise. These will never be commoditized. In fact, they are the only things you can defend as unique. Business models and technologies can be duplicated. Well-crafted value propositions and your company’s brand promise cannot. That’s old school.

http://www.channelproonline.com/blogs/pov_article/managed_services_fundamentals_justin_crotty/

Make sure your end customers understand what criteria to use when selecting an MSP - that is when they are evaluating you.  These four rules will serve them, and you, well.

It continues to amaze me how we in the high tech industry continue to lament the impending commoditization and destruction of any profit stream we might currently be enjoying.  Impending doom and commoditization has been the channel chant for as long as I can remember.  Now in the managed service space we are hearing the same things - the gold rush is over, there is no opportunity left, we’re all doomed.

We have nobody to blame but ourselves.

Don’t believe me?  Next time you have ten minutes to kill, walk into any bakery in your town.  That’s right - a bakery.  One of those places that specializes in fancy cakes for weddings, birthdays, etc.  Take a look at some of the prices they are charging for their cakes.  Its not unheard of to see wedding cakes priced above $500 and often, into the thousands of dollars.

Last I checked a typical wedding cake, regardless of flavor, color, or variety is basically comprised of flour, eggs, vanilla, sugar, baking soda, and milk or cream.  Now, I’m no commodities expert, but in my opinion those ingredients are about as basic as commodities get. 

Maybe the average wedding or birthday cake has about $4.00 worth of ingredients in terms of cost of goods in it when it is sold to a consumer.  Yet that cake is then sold to the consumer, often without negotiation or haggle, for hundreds or thousands of dollars.  The profit is obvious - and extraordinary.

Why?  How can a bakery earn huge margins on products comprised entirely of commodities?  Especially commoditities that do not require significant skills or certifications to deliver?

The answer?  Two things: Value and solutions bundling.  Still don’t believe me?

Then try this:  Walk into said bakery and ask to see a list of ingredients in any particular cake you might select.  The bakery will comply and give you the ingredients list.  Now, ask that bakery to line item the cost of each of the ingredients that will be used to “build” your cake.  Then inform the bakery that you will be providing some of the ingredients on the list from other sources - presumably because you can get those ingredients cheaper someplace else -  and that you might make some ingredient substitutions to further reduce your costs.  See how the bakery handles that request.  They will likely ask you to leave.

Sound ridiculous?  Before you answer, think hard.  That’s exactly what we allow our customers to do to us in this business.  We present solutions to customers,  allow them to line item the ingredients of that solution, demand product substitutions or compare ingredient costs, and drive our value into the dirt.

Trent Dyrsmid, in his post to the Comptia Focus on MSP Blog is thinking along the same lines - How do I get my cake to come out right?  Trent gets it.

Bakeries protect their value in two ways.  First, they provide a very value-added service.  Who among us can possibly put together a spectacular wedding cake without trashing our homes or ruining the reception?  Second, they do not allow any modifications to the finished product.  You either take what they offer, with some minor decorative modification possibly, or you take your business somewhere else.  Bakeries do not allow their customers to unbundle their offerings - they will not tolerate your demands for a price list or for ingredient substitutions.  Why?  Because doing so would destroy their margins.

So why do we do it?  Let’s face it - the price of cakes is not going down.  The ingredients are all commodities and the price of those commodities rises every year.  So why do managed services providers fret about commoditization?  Because they know that in this space, we’ve trained our customers to expect it.  We’ve trained them to place no value on the skills and capabilities we bring to the table and instead we revert to the lowest common denominators when articulating our value and differentiation.  Can you image a bakery that listed on its business card as a value proposition “Certified ConAgra Flour Gold Partner?”  Or “Kroger Vanilla Extract Partner of the Year?”  Who would care?  Nobody.  What would it do for that bakery?  Nothing.

Maybe we should look closely at how businesses in commodities markets derive huge profits from the most basic selling principle: Provide a solid value for a fair price and focus on the value-add in the selling of the solution, not the commodity ingredients.  What do we have to lose?

MSPMentor calls it like they see it.  For an effective path into the managed services space, its about the partners, not the tools.  We couldn’t write any better ourselves.

http://www.mspmentor.net/2008/03/17/what-is-a-master-managed-service-provider/#more-412

As in any solution strategy, hardware or service, solution providers need to choose their partners wisely.  Being from Ingram Micro, my position on this issue goes without saying.  As services models and service providers evolve, it is critical that solution providers take into account who their partners are and what the strategies  - or agendas - of those partners - really are.

Direct or indirect?  Do you partners claim to support both?  If they do support both, and you run into selling or account conflicts, don’t pretend to be shocked and horrified.  You’ve been around long enough to know better.  

Is your partners’ success completely dependent on your success?  If so, they are highly motivated to make you successful and satisfied.  If not, well, who can blame them for looking out for themselves? 

And lastly, do your partners work with you or against you?  Meaning, do they support the channel model AND other, competitive models as well?  Do they provide you a really killer price while driving down your value in the market by doing so?  Will they sell against you given the chance?

The moral of the story - make sure you know what you’re getting into.  Understand who your partners are and what they are trying to do - what their business model is.  If their success is dependent on your success, those are generally the horses to hook your wagons to.  

It amazes me how much press many business models get when they are actually bad for solution providers an bad for the channel.  The old saying still holds water - you get what you pay for.   Or even more to the point: Buyer Beware.

One of the great benefits of a well-executed managed service strategy is the improvement of customer satisfaction levels with your suite of capabilities.  Solution providers around the country are finding that a properly executed managed services offering can improve customer satisfaction levels right along side profits and revenues. 

Every business owner or manager knows the inherent problems in poor customer service.  Especially when that customer experience is the first one a potential partner has with your company.  Often times you don’t get a second chance to make a good impression.

So what do you do when such an issue comes to your attention?  The best defense is not defensive at all.  Own up to your mistakes or shortcomings, pledge to try harder and resolve the concerns, and ask that the offended party give you another chance.  Sometimes they will.  Often they won’t.  In either case its an expensive and humbling lesson. 

Excuses and deflections will never fly.  Honesty and perserverance might.

 http://www.spinningsilkmultimedia.com/ingram-micro-unfriendly-to-small-business/ 

Justin

Seismic has set the standard for distributor managed services platforms and is drawing recognition as one of the best known offerings in the space.  Other distributors are following our lead - and its about time.

Justin Crotty

http://www.mspmentor.net/2008/02/14/distributors-continue-managed-services-moves/

Solution providers already know that these days, a one-size-fits-all model of doing business does not work. To effectively service their customers, more solution providers are entering into a peer-to-peer networking model and matching their strengths and weaknesses to other solution providers. Vendors and distributors have recognized this and have built their own partner networks to assist solution providers. Learn from our channel experts how peer-to-peer networking can help a solution provider grow its business, and what to look out for before signing on to a network.

Speaker: Justin Crotty, Vice President of Services, North America, Ingram Micro
Speaker: Tim Hebert, CEO, Atrion Networking
Speaker: Diana Krakora, President & CEO, Amazon Consulting LLC

Hot Button Panel One: 1:00 – 1:45 p.m. ET
Partner-to-Partner Networking: The Benefits (and Pitfalls)
http://go.virtualtradeshowslive.com/channelgrowth

The news that Dell and EqualLogic executives have been assuring their collective customers and partners that they have good channel intentions should come as no surprise.  http://www.crn.com/it-channel/205921230;jsessionid=MXYQ2AY5LIICWQSNDLPSKH0CJUNN2JVN 

This is standard operating procedue for Dell since declaring their solidarity with the channel while continuing their traditional direct selling strategy.

The task facing folks like Greg Davis, Dell’s Vice President and General Manager of the Dell Americas channel organization is a daunting and thankless one: establishing growth success via the channel while having to re-assure partners on a continuous basis.  I don’t know Greg, but I don’t envy him.  However, this story caught my eye for one reason - Greg has some help.

Enter Bob Skelley, Director of the Americas Channel Group at Dell - former EqualLogic executive and import to Dell via that acquisition.  Bob comes from a solid channel-oriented history at Microsoft and is well known to distribution from his role as Director of US Distribution at Microsoft.  My dealings with Bob while while he was with Microsoft and I was the head of the North American Channels organization at Ingram taught me that Bob is a straight shooter, an honest fellow, and a firm but fair partner. 

I’m not endorsing the Dell services strategy in any way - to be honest I’m not sure I understand it.  However, the good news for solution providers is that Bob is a guy inside Dell that, despite the ongoing services strategy vagaries and channel paranoia surrounding Dell’s ongoing services channel journey, will get up every morning and set out to do the right thing by the partners he is being tasked with supporting.  Greg Davis needs guys like Bob Skelley.  I hope Bob made a few bucks, or stands to make a few bucks, on the EqualLogic deal, because he’s gonna need something he can wrap his arms around and feel good about on the days when he and his channel peers at Dell are taking a beating from the solution providers still unsure about what the Dell channel services strategy looks like.

Lastly, Bob Skelley is a fellow UMASS alum like me.  At the end of the day us UMASS guys have to stick together - Go State U!  It’s good to see my UMASS brethren out there making things happen and fighting the good fight, regardless of the colors of the flag they are fighing under.  If I was drinkin’ beahs I’d buoy Boab one right now. 

My question to Bob is this: Why can’t we get guys like John Calipari to coach our hoops team?  These guys in Memphis might have found themselves a ball coach.  I know, I know…..I’m still not over it either.

Justin Crotty

If its happening in IT services its happening here (or soon will be).  You’ve stumbled upon the Seismic blog - a decidely un-corporate, informative, and entertaining place to understand the services evolution transforming the IT channel. 

Ok, so that sounds really grandiose.  To be frank, I’d rather be a quarterback in the NFL and playing in the Super Bowl.  In lieu of that, selling IT services isn’t too bad.  It just doesn’t have the supermodels, the TV endorsements, or the glamour that the NFL offers.  That doesn’t mean we can’t make it interesting and fun while making a few bucks together. 

For those of you who worry that the capitalist pigs have overthrown the blog world and that this is just another example of Corporate America using a blog to drive revenue and profits….well….you’re partially correct.  But rest easy.  Together we’ll make sure this blog is informative, accurate, and valuable to those who find IT services interesting.  And let’s never lose sight of the fact that we shouldn’t take ourselves too seriously.

Stay tuned.  Peace - Justin