“Seismic” Events in IT Services


The Elephant In The Room by Justin Crotty

The managed services market is growing rapidly and has strong, long-term potential for many who are pursuing it.  It is changing the way IT services are consumed and delivered.  It is helping many of us diversify and strengthen our value propositions and balance sheets.  We are all bullish about the future and the opportunity in front of us. 

There is one significant hurdle, however, that nobody seems to want to acknowledge – the proverbial elephant in the room.  For those of us who target the reseller, solution provider, or managed service provider market as our customer base, this issue is top of mind.  Selling managed services is hard, but not because of the technology involved. 

Not enough end users are consuming their IT services in a “managed service” form factor yet.  There is a very real, and very problematic growth bottleneck at the point of sale with end users of these services.  We, as an industry, are simply not getting the penetration into the end user base that is required to grow and scale this market quickly.  And for many of us, that growth is not happening fast enough. 

In fact, the technology sale is not the problem.  The bigger issue here is the selling itself – how do we take our offerings to the next end user?  And the next?  And the next?  If you ask several solution providers how many customers they have and then ask them how many managed services customer they have, you will find that the managed services penetration into their overall customer base is low.  Why? 

We, as an industry and a channel are still not investing enough in the sales and marketing capabilities of our respective organizations.  Everyone is to blame – vendors, distributors, solution providers.  Nobody invests enough in developing their sales and marketing capabilities. 

When I hear a VAR ask a vendor how much margin is available for him to sell a managed service, I know we are not evolving.  The margin in any managed service is how much you can get, not a number determined by a vendor or application provider.  Yet we continue to ask those around us, or blame each other, for margins we can or cannot get out of any particular offering.  The reason that this concept is so hard for us to grasp is that we simply don’t understand how to sell value and differentiate ourselves from one another.  And until we recognize that and take steps to resolve it, we will always struggle to provide the value proposition that customers demand from us. 

If you find yourself fortunate enough to have some dollars to re-invest in your business, where are you going to focus those dollars?



The Copernican Theory of Fragmented Markets by Justin Crotty
June 23, 2009, 7:59 am
Filed under: IT Services, Managed Services

The managed services market is never without its intrigue. Vendors, application developers, tool providers, platform aggregators, managed service providers, solution providers, and end customers all swimming about in the fragmented, highly competitive, primordial soup that is a growing market.

However, there are many companies among us who are vying for the managed service provider or solution provider business, that prescribe to a vision that is hindering the explosion of opportunity in this market. Vendors, application providers, peer group organizers, and service providers are among this group.  We, the above mentioned suspects, are not the center of the solar system or universe.  The Sun does not rotate around us, nor do solution providers, managed service providers, or end customers.  So why do we keep acting like they do?

This may come as a shock to some of you.  Possibly even bruise egos.  Some of you may accuse me of heresy.  Perhaps you should sit down, maybe take some water. 

Fragmented markets must eventually organize.  They cannot, by nature, remain fragmented if there is a legitimate growth opportunity to be had or if scale is required to obtain that growth.  Why?  Because singularly focused applications or companies, or specific tools that deliver a specific value, are in-of-themselves unable to deliver the growing ease-of-use and broader applicability that the scaling market will require of them. 

If I’m an ice cream shop and I make the best vanilla ice cream in the world, how long will it be until a customer asks for chocolate or strawberry?  What do I do then? 

  • Do I learn how to make chocolate or strawberry ice cream? 
  • Do I send them to a partner who makes and sells those flavors? 
  • Do I buy and integrate a partner who makes those flavors? 
  • What do I do if the customer starts to ask for adjacent products like milk shakes and sundaes?
  • What if they ask for a gluten free, dairy free, soy free chocolate malt? Then what?

The point is the universe doesn’t revolve around my vanilla ice cream shop.  It doesn’t matter if I make the best vanilla ice cream in the world. Customers will eventually demand I diversify my offering into additional flavors or confections.  My customer will start to demand more “functionality” from my company in the form of product breadth, an elegant customer experience, and the convenience of getting all of those things in one place.

What are you doing about offering different flavors?  What is your plan for milk shakes and sundaes?  Can you grow without offering those things?  Can you stay singularly focused and niche forever?  Do you see strong growth opportunity or are you already at war in a market share fight?

Beware – market share battles in nascent, fragmented markets should be a clear wake-up call – it’s time to revisit the long-term strategic plan.

“Geocentric Companies” – those organizations that believe they are the center of the universe and their customers revolve around them – are everywhere in this fragmented managed services market. Can you spot them?  Once you convince yourself that your customers are beholden to you, expect trouble.

Heliocentric Companies” – those that believe the universe revolves around their customers – are the ones that emerge from the fragmentation and assume leadership positions, sometimes for the long-term.  They separate from the pack by offering the breadth and customer experience required to sustain growth and long-term value to their customers. 

What kind of company are you?  More importantly, what are you doing about it?



The Top Four Things Your MSP Doesn’t Want You To Know by Justin Crotty

There is widespread agreement that managed services is an IT service delivery model that is here to stay.  As with any other relatively new market, the SMB managed service space is highly fragmented with hundreds of existing application and service vendors and just as many new entrants to the industry competing for solution providers’ mind-and- market share.

A decade ago during the boom and bust of the dot com era, a similar landscape presented itself to IT solution providers.  Many businesses made emotional or hurried decisions when it came to vendor and partner selection.  Some businesses were swept away by fancy marketing, messaging, and branding campaigns by new entrants and fly-by-night dot-com companies.  The results of many of those decisions are well documented.

The same caution and logic must be applied in todays highly fragmented, early stage managed services market.  Many MSP’s, application providers, and service providers may not be what they appear or what their websites, blogs, and press releases claim.  Because most of these early stage companies are privately held, it is hard to get detailed information about them to help you make buying decisions and partnership selections.  Future success, stability, longevity, and financial solvency for these small players and new entrants may be challenging or downright bleak – and their management teams know it. 

Here are four things those management teams may not want you to know about their operations:

4.  I Run My Company with 3 People Out of a Van Down by The River

Small is no indictment of quality or financial stability.  However, it pays to be diligent when making MSP provider or partnership selections.  Does the potential provider or partner have a sustainable business model?  Can they demonstrate financial solvency?  Are they capitalized appropriately to grow as you grow?  Can they support your needs long-term?  Look under the hood and ask questions about how their business is built.  If they refuse to answer your questions or provide vague answers, steer clear.  They aren’t being specific because they know you won’t like the answers.

3.  The Only Metric I Care About is My Revenue Multiple

There is certainly no crime in building a business to one day reap the rewards when you sell or merge that business.  However, when the revenue multiple is more important than product quality, good support, or solid operating methodologies, that can cause problems for clients and partners.  Again, ask some tough questions.  How is the company financed?  Who holds ownership positions – employees and owners or VC’s and private equity people?  The answers will give you some indication of the time horizon that business is operating under.  Beware of short-term thinkers and the churn-and-burn operators.  Your best interests are secondary to theirs.

2.  I’m A Solution Provider Just Like You (aka I Sell to End Users Too)

As a distributor, I get asked about selling to end-users every day by solution providers who are concerned that Ingram Micro will take their end-users direct.  Yet those same solution providers have no qualms about doing business with MSP organizations that openly sell to end-customers.  Those MSP organizations may even use the fact that they have end-user sales experience as a selling point in their messaging to attract solution providers as customers.  If your partners and suppliers sell to end-users, they pose a potential competitive problem for you.  Proceed with caution.

1.  I Offer You Little Long-Term Value as a Partner

Do your homework.  Look for substance beyond the bootcamp, blog, or white paper.  Separate the spin from the reality.  What does the potential partner offer you in terms of competitive advantage, long-term defendable value, or scale?  How do they make your company better?  How do they make you look bigger?  How do they augment your capabilities?  What can they help you achieve that you cannot achieve on your own or with anyone else?  What is unique, lasting, or significant about their value proposition to you?

These are uncharted waters.  Don’t navigate them alone.  Call us to talk shop and help you make the difficult decisions critical to your success.  www.ingrammicro.com/seismic



The Value IS The Service by Justin Crotty

Also published on MSPmentor.net on  February 18, 2009 as monthly guest column contribution.

 

Generally speaking, IT managed service providers are technologists, both in training and previous professional pursuits.  The managed services market is also highly fragmented, with a long list of small technology and software companies all battling for the attention and business of end users and IT service providers.  The value focus in all of the selling and marketing efforts has resulted in a disturbing trend carried over from the hardware selling models: A focus on tools, technology, and features/functions.

 

Avoid this trap at all costs.

 

Here’s a newsflash: Only technology providers get excited about technology.  The rest of the world just wants their IT problems handled so they can conduct whatever business they are in.

 

It is critical for successful managed service providers to stay above this fray and avoid the “speeds and feeds” trap that is so prevalent in IT marketing and solution selling.  Tools are exactly that – pieces and parts of the overall finished service.  Tools and technologies are not the services you are selling, nor are they the value you provide to your clients. 

 

Your unique expertise and ability to deliver complex solutions to your clients, when added to the tools and technologies, is the service you deliver, and it is that expertise and unique value proposition you need to focus on when marketing and selling your capabilities.

 

Without question, the tools and applications you choose need to work and fit your business.  Solid tools and strong technology is the foundation for any competent and quality service you deliver.  However, too many MSP’s are focusing on and marketing the parts of their overall solution.  For example, the reason an end client should choose you to provide IT systems management and support has nothing to do with the tools you use to deliver that capability.  The assumption by the end user is that you can provide such a service – what do they care which PSA you have selected to run your business on?  Yet many MSP’s still weave vendor literature and brands into their managed services marketing and selling materials and ignore the larger question:  Why you over anybody else?

 

Don’t believe me?  Who made the transmission in your car?  Are you sure?  Do you care?  You want your car engine to perform, but you don’t really care who made the various parts, so long as the auto manufacturer stands behind the product, right?  You are buying BMW, or Toyota, or Honda, or Nissan.  You are buying the value proposition and brand promise that those various auto makers deliver.  You are not evaluating the combined parts and components that go into those cars which are delivered or made by third parties.

 

End client prospects for IT services are evaluating their decisions in the same manner.  They are looking to your brand, your value proposition, when making their decision.  If your value proposition is on target, and you are able to differentiate your capabilities around delivering a high quality service at a fair price, the tools you use are your choice and are irrelevant to your end clients.  So long as you ensure those tools work for you, they will work for your end clients.

 

Of course, Seismic offers the widest selection of tools and capabilities in the market.  But if it’s your value proposition or brand promise you want to tune up, Ingram Micro can help provide market-leading expertise with that also.



Economic Crisis – A Rare Opportunity by Justin Crotty

Also published and originally appeared on MSPMentor.net in Feb 2009 as participating sponsor guest article.

 

 I saw an old proverb once that said of economic opportunity or commerce, “Be scared when others are greedy and be greedy when others are scared.”  Fitting advice for any MSP these days.

 

The current economic crisis is a monster – no doubt about that.  If you are under the age of 80, this is shaping up to be the worst market downturn of your life.  Cautious and prudent fiscal, managerial, and operational policy in our personal and business dealings is critical.  But what many companies and managers, in the midst of a crisis like this, may not recognize is this: Downturns are significant opportunities that don’t come along very often.

 

I am not suggesting that the current economic situation is anything other than an unmitigated disaster – it is.  Blame whoever or whatever you want for the mess we are in – government, mortgage brokers, Wall Street, hedge fund managers – everyone had a hand in it.  We didn’t ask the hard questions when times were good.  Home values were up, stock funds were delivering strong returns, money was cheap, and debt skyrocketed.  We turned a blind eye to the fundamental economics that govern markets.  Only after those very fundamentals reminded us just how far we had drifted did we stop and look around and ask each other, “how did this happen?”

 

Now we’re in a mess and the question everyone needs to ask themselves is: What am I going to do about it?  How am I going to grow my company?  Win new clients?  Retain current clients?  Make money?  Grow revenue and profits?  Invest in innovation? 

 

HP’s was born during the Great Depression.  Amazon, ridiculed and left for dead in the wreckage of the dot com bust, rose from the carnage to become the innovative, industry behemoth it is today.  IBM, during the downturn of ’79-80, bet big on a thing called the PC.  Microsoft, a small software company that successfully weathered the downturn in ’90-91 emerged to become a household name around the world.

 

What did these companies have in common through tough economic times?  Innovation.  Vision.  Risk-taking.  Market awareness.  Confidence.  Belief in self.   

 

It is critical to the current and future success of our collective businesses and companies to continue to innovate during challenging times.  No IT channel companies are better positioned for innovation than MSP’s.  MSP’s have been on the bleeding edge for years.  Now is the time to capitalize on those innovations and attack your competitors who have not made such investments relentlessly. 

 

Be prudent and manage carefully, but do not abandon the innovation and aggressiveness that is required, not only to persevere through the downturn, but to emerge from it stronger, faster, and further ahead of your competition.  Don’t succumb to the temptation to hunker down and wait it out – let your competitors make that fatal mistake.  Focus on your value proposition to your clients – reduced costs, high quality, predictable budgeting.  The downturn plays to your value as an MSP – companies need what you have to offer.

 

In the book Outliers, Malcolm Gladwell illustrates that successful people and companies, through years of preparation and dedication, capitalize on that preparation when they find themselves in the right place at the right time.  We, as MSP’s, have spent the past few years investing, building, and learning.  Suddenly we are confronted by a significant challenge, but one that we are well prepared for with a killer value proposition to leverage. 

 

We are in the right place at the right time.



Tough Economic Times Aren’t The Apocalypse by Justin Crotty

Though nobody can question the fact that tough economic times are upon us, there is reason for optimism.  I shook my head yesterday as the Fed “announced” we have been in a recession since last December and stocks took a major dive.  Tell us something we didn’t already know.  Amazing – the fed tells us something we’ve known for months and suddenly we lose confidence and stocks tank.  I will never understand the stock market.

But I digress.  The good news for managed service providers and other IT solution providers who are pursuing recurring revenue services and software offerings is that tough economic times give us all an opportunity to present a strong value proposition to end customers who are having a difficult time. 

Here’s how:

1) Managed delivery models reduce costs for end users to deliver quality IT management with solid SLA’s.  The ability to reduce the monthly spend for a prospect will get them to listen to you today.

2) The predictability for the end user to consume IT services in the managed form factor allows for fewer surprises and an ease of budgeting that many end users will find helpful in these times.  If I know what my spend will be each month over a contract period, I feel better about making decisions today, especially if that spend is less than what I am paying now.

3) Marketing and differentiation are more important than ever.  Solution Providers who are not focused on marketing and selling their unique value proposition are missing a key opportunity to take business.  Sell the value prop and sell your capabilities – why are you unique?  Why should the end customer work with you?  What do you bring to the table that nobody else does?  It tough economic times you can win business by demonstrating value and properly marketing it.

Focus, effort, and creating value are always key drivers of success in the IT space.  Those are still the tools to use to win business in a tough market, and tough markets present opportunities to those who take advantage of it.



Managed Services: Old-School Fundamentals by Justin Crotty
May 16, 2008, 8:03 am
Filed under: IT Services, Managed Services, Miscellaneous

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/