Reloaded: Shockey Monkey: Ultimately, who pays the bill?

GTD, IT Business, IT Culture, Mobility
2 Comments

Over the past week I’ve outlined what I believe to be the future of technology management in small to medium businesses. I’ve discussed how we got here, what we need to focus on managing, how we need to involve the decision makers in the management of business aspects of technology and who will do the work in the future… which is already here.

If you would like to consider the full thesis, here are the details and factors as I see them:

1. No future without the past
2. unRMM – What’s managed?
3. unPSA – Whose business is it anyway?
4. Derrivatives – Who does the IT work?
5. Ultimately, who pays the bill?

Before we figure out who pays the bill..

Before you can send out the invoice you need to put something on it. Exactly what are you billing?

In the distant past the invoice consisted mostly of infrastructure components (networking gear, computers, printers, monitors) and majority of the profit came simply from facilitating the transaction. The hardware business is tough and the margins are almost non-existent these days even if you’re as sophisticated as Dell and HP – and almost all of their profit comes from large Fortune 500 and government contracts. In small business, hardware game has passed. Regardless of how slick and charming the hardware guy may seem, people aren’t stupid and they won’t pay $3000 for a workstation just because of your smile.

In the more recent past, majority of the revenue was service based and highly profitable as managed services providers realized high scalability – one engineer managing hundreds of endpoints remotely. But businesses are downsizing the infrastructure and the complex junk. When you remember that most of the MSP value proposition was built back in the days when spyware was a huge problem and people couldn’t keep up with their system patches and unreliable backups that were criticial to onsite infrastructure – those problems have largely been addressed by Microsoft and others over the years.

Managed services value proposition was built on the problems we had in early 2000’s – missing patches, spyware, malware, failed backup jobs, hardware instability, etc. As these issues are not prevalent today more small businesses are rightfully asking why they are paying so much to have their technology managed when most of their technology is either reliable or in the cloud where the service is managed by the provider.

Just as we learned how to build profitable and scalable businesses without the huge hardware margins, we will find a way to build profitable businesses as the MSP model starts to sunset and faces huge competition from larger (cheaper) providers.

Where is the money, Vlad?

It’s actually much simpler than it seems. However, it requires a change in the model and restructuring of how the business plan is executed.

Let’s rewind: You used to sell a ton of infrastructure and make a large margin on configuring it all to play together. You no longer do that but now you make a huge margin managing all those systems remotely as your clients become less and less dependent on them. As your clients invest more in portable devices and mobility becomes a norm dictated by their LOB apps (no, there is no software vendor on the planet, including Microsoft, that wants to support the customer with their on-premise server deployments)… well, pretty soon you won’t have much to manage on site.

This is usually where the philosophical fights start… but please keep on reading. It is normal to be scared and to resist change because it means lack of visibility and predictability. Reality is you can’t maintain the status quo because all your vendors and suppliers are teaming up against you and sooner than later they will make it impossible for you to execute your business model profitably.  If you can agree to at least consider the following point I think it will make the world of difference to you:

Just as we transitioned from selling hardware to selling management services remotely for a fraction of an in-house IT persons salary, we can transition to what is next. What is next is the reality of most of these services being delivered remotely through the cloud – from voice to email to faxes to meetings – everything is becoming virtual, mobile, on demand and portable.

The bad news is you no longer get to profit from managing that technology.

The great news is that you no longer have to sink time into managing that technology.

Back in the early SBS days it took weeks to build a client network and onboard them. Then we got into Swing Migration and suddenly it was under a week. Then it went to the cloud and we no longer had to deal with Exchange at all. I can tell you first hand that many of your competitors and peers have even forgotten how much Exchange sucks, I know because I hear the outrage every time there is even a minor issue with Exchange that we host.

So no, you will no longer have to maintain an expertise in eseutil or schedule blocks of hours away from your family to defrag mail databases.

However, that time can now be reinvested and – just as it was when we moved from hardware to MSP – scaled to a more profitable venture.

You can’t profit from hoping that your clients are stupid

Read that a few more times.

Posting Facebook updates, tweets, updating iTunes and upgrading the firmware on your iPhone or your printer is no longer a geek job. Anyone can do it.

In the long long ago you had to create a system floppy disk. Copy the new ROM to the floppy along with the flashing tool. Reboot and boot off the floppy. Run the flash. Try to save the existing rom. Realizing that the backup would not fit on your current rom. Removing all the extra junk Microsoft put on the boot disks. Going at it again. Something going wrong. RTFM. Crossing fingers, etc. That era is gone.

Now everyone can patch.

Most of the time they don’t even know it’s happening. They just restart with the new version of Firefox or IE.

And that’s the scenario for the on premise gear. When it comes to online services… forget about it, you don’t even know when it’s done unless the provider bothers to email you.

You cannot continue to hope that things will remain complex because folks building all these gadgets and software solutions need to sell more of them. They can’t sell them as efficiently or as quickly if there is a shadow fee of an IT person that’s going to move in with you to deploy it. Small businesses are not buying IBM clusters to play chess or Jeopardy with. They are buying iPads and Android phones that a single-digit-per-hour retail store employee is all to happy to configure for them!

Profit from the fact that your clients are smart and get busy with more success

Now read that a few more times. Smile

You can’t profit from ignorance and people that are bad at math. It takes a lot of money to build a casino. Lottery is cornered as well. You can’t hope that there will be an unlimited amount of inept people out there because if they are inept how will they earn the revenue to pay your services.

When businesses are in the startup mode, they like to do things on their own to save money and cut corners. When they mature and grow the cost of their time exceeds the cost of your service.

Focus on creating services that are affordable enough to be delegated to you.

Deliver a solution that makes it easy for the business owners to delegate complex tasks to you.

(fact: It’s taken me over 20,000 words to get to the bottom line which is highlighted above)

There are thousands of different things that you can do better, faster and more effectively for your clients when it comes to technology.. for a fee. All that’s missing is an impulse for them to call John when they are looking at a problem they shouldn’t be dealing with.

Maybe your customer will not buy a printer from you. Maybe they won’t even ask you to set it up for group printing. They won’t even bother asking you how to connect their iPad to it. The secretary can change paper and ink cartridge on his/her own. But eventually that secretary will spend two hours troubleshooting the printer and the manager will step in to “help” – if they are smart, they will get in touch with you within the hour. That’s where you can offer to have it worked on right now for a higher fee or later tonight for a lower fee. You can come on site, have someone pick it up, listen to them tell you all the other challenges they are facing and find a way to help.

No, you won’t be able to get them to sign a management agreement for 50 times what the printer costs. Those days are coming to an end.

You will however be able to collect a multiple of their salary because it’s impacting their business.

You will have far more clients because the fact above will make most of your peers and competitors close down their shop.

The easy IT money era is over. The smart IT era is beginning.

If you’d like to see what it looks like, please join me this Thursday at noon EST:

Shockey Monkey Reloaded

Thursday, December 1st, Noon EST (max 1000 seats; will be recorded)

https://www1.gotomeeting.com/register/812869640

You can be the IBM they can afford and trust. And yes, people will trust you far more when you’re not screwing them with fuzzy math and stuff they don’t need.

2 Responses to Reloaded: Shockey Monkey: Ultimately, who pays the bill?

  1. Jim Van says:

    Sunsetting of the MSP era, eh? At least as we’ve known it, I agree. Between cloud trends and mobility, most of our clients are abandoning the traditional client/server arrangement in favor of the cloud-based server/portable device model you describe.

    What amazes me are the number of MSPs who still expect to make $100-$150 per seat providing traditional support. It’ll be interesting to see who’s left standing in a year or so. Like you, I think the days of large profits are pretty well gone, and, like many other industries, the customer has taken the drivers seat…

  2. Vlad Mazek says:

    Jim,

    True, true.

    I wouldn’t say that there is no room for $100-$150/hr or even far more than that, however, those tasks will be fewer and farther in between and you’ll have to have a relationship in place to get them.

    I actually think that the net profitability and revenues will continue to climb for IT solution providers that are smart about this and ride the wave. The folks that expect to have it easy and just make small adjustments, not so much.

    -Vlad

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