One particular difficulty VARs face in making the switch from reactive, break/fix shops to the proactive, fixed-fee model of managed services is setting their prices.
Managed service providers fear pricing themselves out of the market or, worse, charging customers a fixed fee that falls short of their realized costs.
“They just don’t know what to charge,” said Mike Cullen, vice president of sales for N-able Technologies, a managed services platform provider. “They’re no longer able to do the job and pass the cost on to customers. Before you enter the market, you must have a firm understanding of your own costs and what the market will bear. There’s a risk associated in making that decision. You won’t be successful if you choose wrong either way.”
Partners can struggle, Cullen said, as long as four years before they settle on a pricing structure and longer when facing other process changes in making the transition, such as staffing models (you’re no longer making money when a tech is at the client), policy and documentation (what policies need to be set to meet the service-level agreements), and the methodology of the delivery (I can’t afford to keep troublesome customers).
Cullen and his team at N-able have been leaders in providing those entering managed services and making those process changes with a road map, benchmarks and a blueprint to follow.
The vendor’s programs—such as N-able Blue Print, a road map and model of managed service business benchmarks; MSP Start-up, a 30-day crash course in managed services business transformation; and N-able University, a one-on-one guidance program with partner specialists—prepare VARs for the business processes they need to change as revenue begins streaming in monthly, but in smaller increments.
Using N-able’s blue prints and guidance, partners now fix pricing in an average of eight to 12 weeks, down from as much as four years, Cullen said.
The business model involved is so vastly different from the one in which VARs are used to operating in that the transition requires significant business process changes that can upset a practice, if not properly executed, he said.
Based on the domain expertise, gained from N-able’s experience in managed services over the last five years and the experiences of MSPs and their customers, Cullen’s team sets road maps and blue prints for providers to follow in developing their business strategies.
Cullen’s team prepares VARs for the challenges of transition they wouldn’t see on their own, such as staff utilization, policy and documentation for things like SLAs, and the methodology of the delivery.
N-able is graduating 25 to 35 new partners every month from MSP candidates to providers, according to the company.
“One of the most important aspects of our offering is that it ensures partners aren’t just signing up, they’re [successful] in making the transition,” Cullen said. “It doesn’t do anyone any good if partners can’t make the transition.”