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Pricing Pressures?

I've had a number of people asking me about pricing pressures lately...customers telling them that they need a price reduction, flat out. Now here's the kicker... They don't want less services, just a lower price.

Our company has seen a number of clients down-sizing over the past 18 months. We've seen comapnies go from 25 employees to 6, from over 100 employees to 35, and most recently we were talking to a company who has gone from 1000 employees to 100. We don't seem to have net-fewer clients but a number of our clients are definitely smaller.

MSP are telling me, however, that even clients who haven't had to down-size are asking for a lower price. It's funny that several years ago, we went to these clients, showed them how we were going to cut their IT spending in half and now they are demanding that we cut it in half again.

I always tell people that, if they're going to bring me a problem, they also need to bring me a potential solution. Unfortunately, the most popular MSP solution in this case is reports back to their clients showing all that they've been doing.

So let's talk about this for a moment... This is something that the MSP needed to be doing all along as part of their MSP deliverable. The big danger without reporting, if you're doing a great job, is that the client starts to think they don't need you. After all, if everything is great, why do they have to pay you every month. Part of your job is to show your client, on a regular basis, that everything is great BECAUSE they pay you every month.

While we're on this topic, reports alone are not ther answer. Similar to Jerry Seinfeld telling you that no one really wants to go to your wedding. Let me be the one to tell you, your customers don't really want to see reports...but they like to know that they're there. If you've built a real MSP program and you have more than a handful of customers, you should have some sort of a vCIO (Virtual CIO) interfacing with your clients. And if you do, it should be your vCIO's job to look at those reports and notify your client of the highlights...bring attention to the things that they need to know about. Other then that, your clients just want to know that the reports exist. It'll help you justify your existence, but it wont help you with porice protection.

To justify your pricing, you essentially have to sell your program all over again. You need to show your clients how much it cost to have an internal IT department and the total cost of ownership attached to purchasing, maintaining, and training their users on the various components of IT. Then you need to show them how much you can save them by having you manage their IT by bringing to them the value and diversity of an entire IT department vs. just one or two semi-trained individuals. Finally, if you can eliminate some of their hardware, licensing and/or refresh costs by delivering some services via HaaS (hardware as a service), now you're really showing them the value of what your company does and they will understand the immense cost of trying to reproduce what you are doing for them.

That's MSP.
- R

MSP is dead!

Don't you wish...cloud boy! Buah, ha, ha, ha...

I just thought I'd start off the year with a big controversial headline. The reality, of course, is that MSP is alive and well, in spite of the economy, the cloud and the flood of wannabes that are emerging from the woodworks, adding MSP to their line card, and coming up with "me too" offerings.

I'm actually very excited about 2010. My company has actually changed its sales model (a bit) and the changes are putting me back (somewhat) into the forefront of the sales arena and I'm very excited about it.

To start with, a few years ago, we came up with several "lite versions" of our MSP program. Sure, we had great reasons for doing it but I think, in the end, it turned out not to be a great idea. We now have a remote only offering, we have a "mostly monitoring and patching" offering, and I think we did a crappy job at positioning those products. Instead of defining when those products needed to to sold, in order to fill a niche, they were positioned as lower priced options. The reality is that our full service, total care offering is the best value. The lower priced options could end up costing more, if it's not what the end-user really needs.

Of course, everyone is ready to blame the economy..."companies are only willing to commit to our lowest price option". This is just not true. Yes, companies are looking at every dollars but no one will take something that appears to be lower priced, if they understand that it's going to cost them more. Instead, they become disgruntled. They remember the lower contracted price and will act bewildered at why their bills are not fixed at that price.

I recall years ago, before we had the lite versions, talking to other MSPs who had multiple offerings. They were always surprised when we told them that all of our customer were "full on MSP, total care, and (for the most part) AYCE, All You Can Eat". They couldn't seem to get their clients onto that model...but 100% of our clients were there. I believe the reason was, because they had lesser plans and we didn't. Because they had plans with a lower price of entry, their salespeople were taking the easy road, presenting all the plans, and failing to sell the client on the higher value proposition slightly higher priced plan.

Well, "Phoooey!" on that. I'm back in sales and I'm selling full-on MSP to clients who are going to be 100% satisfied with our services. And it's got to be even easier now because I can reduce my clients IT spending even more by leveraging our hosted-"cloud" solutions, SPLA, HaaS, the list goes on.

I said, "Look out boys, I got a license to fly".
That Caddy pulled over and let us by...

Until next time.
- R

Stereo: Two Speakers

OK. First read this article in MSP Mentor from a few weeks ago...
http://www.mspmentor.net/2009/11/05/google-managed-services-shifting-to-applications/

Then, remember the original title of my blog, "Google Must be Stopped". Am I the only person that remembers the movie, The Net? Here's the basic theme: It was about a time when all companies were connected to a central network, not unlike the Internet, and one company took control of it in such a way that it could hold everyone else hostage. Of course, when this movie came out, everyone who saw it envisioned Bill Gates' Microsoft. I think Microsoft has become Google's brilliant decoy.

Don't forget, I could be easily convinced that the Internet (or maybe Google) is actually the antichrist. Think about it..."he will rise from obscurity", "he will try to change the laws", "he will confirm a covenant with many", "he will not answer to a higher earthly authority", “he will do as he pleases”, "he will be worshipped by many people", "his name will be related to the number six", OK - possibly 666, whatever, "he will be empowered by the devil himself". Need I say more?

But seriously, back to that article... Is Google serious? Right now there is a land-grad to be had. Every MSP needs to get out there, maintain relevant to your customers, show them the value of having you there and knowing where their data resides, whether its at your data center or theirs. But up until now, if you have a 20-user clients...you're charging to install it, you're making a few dollars on the licenses, you're taking responsibility for that server's health and charging to manage it over the next three or four years. If you put it out in your data center, then you are providing it "as a service" to your client, potentially forever. And, best of all, if you're doing it all properly, your customer is getting a bargain.

Instead, Google wants you to give them your client and lose all that revenue, in exchange for about $200, and essentially go figure out a new way to make your living, maybe go back to being a break/fix house, and leave your customer with sub-standard service and support. I don't know about you, but anyone who thinks this will work for them...go for it.

I'm looking for clients who see the value in our local relationship and customer touch. I want customers who have BMWs in their parking lot. They already know that when you pay a little more, you get a much smoother, much more comfortable and quite ride, and if there's ever a problem, you get World Class customer service. My business partner always uses the term, "pennywise and pound-foolish". No thank you.

At the risk of repeating myself, Microsoft is the good guy here, people. Microsoft is on our side. Of course, survival mode says that they are going to have to compete against The Goog, and we will most likely be the casualties. So it's every man (or MSP) for himself. Is the end in-sight? Not if you know what you're doing... It's time for the land grab.

But you know what worries me? Does anyone else remember the '05 Connectwise Partner Summit when Arnie Bellini said, "we are declaring war on Dell"...? On the other hand, here's Google, at the same Summit, four years later and telling us how they are going to take away our clients, give us 200 bucks, and we should go do something different. Yikes!

Well, I gotta run. After I update my blog (using Blogger, owned by Google), I need to go update my Google Ad Words, and Google a few of my competitor to see what they're doing on Google. So now I have a Googlaphonic stereo with a moon-rock needle. Not bad for a car stereo, but I wouldn't want it in my house. (Old Steve Martin joke - not for everyone.)

Peace
- R

You in trouble nah...

You done landed on Mr. Gilmore's property.

In case you haven't heard, and you probably haven't... I wouldn't be making any big announcement either. Last week, at TechData's TechSelect 10th Anniversary Partner Conference at the Contemporary Resort (Disney World) Hotel in (or at least near) Orlando, Florida...they made me President of the Advisory Council. Yeah...me?

What does that mean? Well, the only thing that I know for sure is, I don't get to vote...or maybe that was just something we made up for Sam? Speaking of Sam...my friend, my cohort, "my partner in crime", Sam Ruggeri stepped down to the position of Past President, which he will hold for a year. Talk about a hard act to follow... Sam is probaly one of the most well-liked people in IT today. You'll never find anyone who is as personable and gives so much of himself to the IT community. Seriously, a guy who would give you the shirt off his back. Now...they have me to contend with. :)

Of course, a few minutes before the big announcement, they asked me if I would be OK saying a few words up on stage. I said, "sure...no problem". So they called my name, I said a few nice things about Sam (knowing I could draw some additional applause) and then I fumbled threw a few quick words and sat down. I'm surprised the crowd didn't start chanting, "Sam... Sam... Sam", and demanding an encore performance. But they didn't, and now they are, for the most part, stuck with me.

I think we're going to to great things with TechSelect in the coming years. The first ten years saw its infancy stage, some growing pains, and some great accomplishments. As we enter it's second decade, it's time to step-it-up once more and drive even greater value to the membership. I'd like to see an organization that is heavily driven by its membership and continues to propel TechData as a leader in the industry. I think the PeerSelect groupings at the 10th Anniversary Conference was just one of many thing to come to promote the sharing of best practices and camaraderie among the membership.

I'm looking forward to being a part of it all of it...and, I'll do my best not to piss off too many people along the way. No promises... :)

- R

Private Cloud?

What the hell is a private cloud? It's almost bizzaro that everyone is talking about cloud computing and most people can't even agree on when it's a cloud and when it's not. Let's recap... :)

When you plug your hair-dryer into electrical socket in your living room (and it turns on), you have no idea where that power is coming from. It might be coming from that power plant near your business partner's condo, it might be coming from that nuclear (pronounced New-Q-Lar, that's apparently the Republican pronunciation) power plant that's up the road a bit, or it might be coming from somewhere else. The point is that you don't know and it isn't very easy to figure out.

This is the same way that Google's search engine works. You throw something into that search bar, it throws it out into the cloud, and somehow, within microseconds, huge piles of servers, that could be located anywhere in the world, decide what to send back to you and BAM!, it appears on your screen. Where did that come from? You don't know and it isn't very easy to figure out. That's cloud computing, my friends.

If you think that throwing a bunch of servers into a rack at a datacenter and giving your customers some terminal server licenses is cloud computing, you are way off base. That's just hosted services..and there's nothing wrong with that, it's just not a cloud.

Like everything else that we do, our company is building out a hybrid suite of services based upon our Guaranteed Networks IT management platform. Our solution, through proprietary equipment, as well as partnership with established hosted infrastructure providers, will create the best of all worlds. We don't believe in the one-size fits all approach. We know that some customers will want premise based computing, others will want to go to a data center, some of them will demand a cloud but almost every one will require a hybrid solution...and that's what we intend to deliver. We're delivering it right now.

The other day, someone told me they were building a "private cloud". Instantly, I thought that was brilliant. I imagined a series of redundant data centers, linked with a backend private fiber infrastructure (that didn't hit the Internet), and all kinds of security and data loss prevention measures on the front-end. I got very excitied. This is what we're doing...with data centers in Miami, Boca Raton, Atlanta and Nashville.

After talking for a little while, I realized that he was just building a bad-ass Citrix server and providing some hosted services for his clients. You can imagine my disappointment. On the up-side, he taught me the lingo..."private cloud". Then I realized, hey...we're building a private cloud too. Unfortunately, the terminology is already getting misused. I guess I need a new name for what we're building.

What are you guys building? I promise not to steal the name. :)

- R

You're in then you're out...

Is anyone else noticing a dwindling of MSPs out there?

I've actually talked to a number of former self-proclaimed MSPs who have said, "I'm not doing MSP anymore". Some of them felt that they weren't delivering sufficient value to their customers or, quite honestly, they just could never figure it out.

At the same time, I think there's a lot more folks who have added it to their portfolio and that's really the dangerous part for those of us who are true MSPs. If everyone starts saying, "we do managed services too", then we all have to work even harder to differentiate ourselves. It also serves to commoditize our offering. All of your competitors are going to download your marketing materials, change a few logos, and create their own "Me Too" marketing materials. Then they're going to go to eveyrone of your customers and devaluate what you've been doing by offeing Me Too at a lower price.

I think this where we the "Lifestyle MSPs" needs to look alive. We can't just develop our offering and then leave it alone for the next 10, or even 5, years. The would be like Microsoft releasing XP and then thinking that there would never need to be another operating system..and just like Microsoft, we're occasionally going to relase something like Vista and we'll have to backtrack, but we gotta keep it going. We have to be vigillant and on the move. Remember, a rolling stone gathers no moss (of course, you could end up looking like Keith Richards).

My other word of advise is... Don't do anything to commoditize your own offering. We've all done it, we think it's the right way to go, and then we have to do all sorts of undoing. There's a lot of yo-yos out there who are pricing their services by the seat, by the server, by the site...OK. You have to start somewhere. But I don't think this is ever something that you want to publish because MSP isn't about that. That's for Dell and CDW so that they can SKU it up and then have the lowest bidder go out and do thew work. We're MSPs. We need to evaluate each client and charge them based on their needs and the complexity of their network infrastructures. When clients add PCs, their price shouldn't automatically go up by a certain multiplier. Sometimes, YES...other times it might stay the same. If you don't know why, well then... you are one of the yo-yos...and I'm done talking to you for today. ;)

- R