More and more IT service companies are moving away from the traditional, break-fix service model and making the transition to managed services — predictable and proactive business-focused IT services. The shift is occurring for several reasons. For one, margins on product sales have been steadily eroding over the years. Take desktop and laptop computers, for example. These were once mainstay products for many IT service companies but their price has been dropping steadily. It’s now at the point where there’s almost no profit attached to the sale.

This decline in selling price means IT service companies are working harder for less revenue. The second impetus is that the IT service industry is intensely competitive and, with the small- and medium-sized business (SMB) market burgeoning, competition is becoming even fiercer. As a result, many IT service providers are being forced to lower their prices just to stay in business. The third reason for the move to managed services is that most IT service companies are currently operating in break-fix mode, which means that 100% of their billable technical resource time is dedicated to reactively correcting the IT failures discovered by the customer. The result is little predictability when it comes to a technician’s time. At times, they are pushed beyond capacity and at other times they are sitting around waiting for work to come along. Operating in a break-fix service environment also means that IT service providers only interact with customers on an emergency basis, which can create a negative experience. Under these circumstances, most customers just want their network up-and-running quickly. They don’t care how it’s done or who does it, which makes it difficult to develop tight customer bonds and easy to be displaced by a lower-priced competitor.

Getting Started There’s no doubt that becoming an MSP offers many benefits. But knowing how to start the process can be confusing. To help organizations understand where they are in the process and where they need to go, N-able developed the MSP Maturity Model. The model, which is based on industry best practices, Gartner analyst research and observed behaviors from N-able’s own partner base of more than 1,300 MSPs, helps service providers assess their business and develop a plan to improve their managed services offering.

 Break-fix – This is the initial stage of the process. Break-fix service providers have the least amount of process maturity. Their processes are ad-hoc and not documented, service delivery is unpredictable, service level objectives don’t exist, and 100% of technician time is dedicated to reacting to failures discovered by the customer. Break-fix service providers typically attract break-fix customers, who are low margin and costly to manage. Responsive – This level is similar to Break-fix except the service provider has some documented processes, offers up/down monitoring, and while 100% of billable technical resource time is still dedicated to correcting failures, the failures are often caught by the monitoring tool and not the customers.

Responsive customers are loyal as a group but if their service provider is not delivering on expectations, they will not hesitate to terminate the relationship. Proactive – This tier differs from the first two levels in that preventative maintenance is at the heart of the Proactive MSP’s approach to service delivery. Because of this, Proactive MSPs can minimize the threat of failure, capture performance and capacity utilization information and use service level objectives to set targets. In addition, 50 to 70 per cent of billable technical resource time is dedicated to correcting failures.

Managed – This is the first level in the hierarchy that takes a “utility” approach to service delivery. This level is one of the most challenging to attain because until now these companies have sold time as a product. Not directly billing for technician time is foreign to them. Managed-level customers are business savvy but not very technical. They are more interested in performance, capacity and regulatory compliance than they are in routers and switches. Value – This is the logical evolution from the Managed level. While the Managed provider manages IT based on the value of the IT components, the Value provider manages IT based on the business process that it supports – regardless of the infrastructure that requires the service.

As with the Managed level, the Value provider generally abstracts the amount of time required to provide a service in favor of a flat-fee based on the value of the business service. Seven Obstacles to Success As we’ve seen, the move to managed services can be daunting for both you and your customers. Change is a difficult concept for most people and most organizations, which is why the right combination of technology, best practices and sales and marketing support is necessary for a smooth transition to managed services.

There are seven major obstacles to an MSP’s success: 1. Lack of C-level commitment 2. Lack of a standardized remote monitoring and management toolset 3. Failure to adopt or properly implement best practices 4. Poor value illustration to the customer 5. Absence of demand-generation sales activities 6. Lack of targeted marketing 7. Lack of service automation and management software and processes

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