The Story of GN

In the early days (2003-2004), I was asked to speak at a number of events surrounding this thing that we were doing, which had been recently dubbed “Managed Services”. One of my introduction slides jokingly said, “If Al Gore invented the Internet, Rory invented Managed Services”.

A bold statement, I know. After all, it’s common knowledge that Gore invented the Internet. Right?

Well, we had never really called it Managed Services. Originally it was just a “flat rate service contract”. Later, around 1998, we began branding it as Guaranteed Networks®...and went straight to calling it that. But in the beginning, it was just what the name implied, a flat rate service contract.

I believe it was in the movie, Tin Cup, where Kevin Costner’s characters talks about a “defining moment”. He says something along the lines of, “a defining moment is a moment that when it occurs, you either have to define the moment or the moment will define you”.

So here it is, the defining moment and birth of Managed Services... Drum roll, please? We had a customer who always had all kinds of difficulties and we’d bill him and bill him and he hated technology and hated to pay all those bills. Then one day he said to us, “why can’t I just pay you one flat monthly fee and you guys take care of everything”.

That was the defining moment. Did you miss it? I can rewind. :)

As this request made its way through our company, several of us couldn’t sleep for days as we thought about how we might be able to do this. Our first thought was, “sure!” If a client who normally spent $3000 per month would be willing to give us $4000 per month, we could assume the risk. Couldn’t we? Maybe we could even take part of that extra $1000 and purchase insurance, cover everything, even the hardware. But it needed to be priced attractively to the client and still profitable to us. What’s funny is that this client didn’t even want a bargain price. He just didn’t want to have to review individual bills. Mostly because spending money on IT really irritated him.

On the surface it really was just a shift of risk but then came the brilliance behind the equation. The question became, if a customer who regularly spent $2500 per month would commit to $2500 for a period of 12 to 36 months, could we provide them with a better level of service? Even better, could we convince a marginally happy customer who regularly spent $2500 that they could be really, really happy by switching to our program at $3000, where the level of service was significantly higher? And even better yet, now that the customer was going to be paying a flat rate no matter how much work we did, could we front-load our services, do other proactive management tasks, and lower our support cost on that customer. So that, in essence, we could be charging more, providing a better level of service and doing it all at a lower cost to us. Isn’t this what everyone calls a win-win situation? It was brilliant.

Whenever I talk to folks wanting to enter the MSP space, they were always very concerned with pricing. Pricing in the very early days was extremely easy for us. We just picked a number out of our..uh..out of the sky. The conversations went something like, “I don’t know. Do you think they’ll pay us $1200 a month? OK then, $1200 a month it is.” We signed up our first few clients by simply coming up with a palatable price and off we went. After that, we realized that we were charging way too little. In fact, as of this writing, we still have some of those very early clients. Every year we try raising their price and they’re still paying too little. You know who you are... ;)

Next the pricing methodology became quite complicated. We developed a spreadsheet which required a lot of fact gathering. Besides knowing the number of servers and workstations, we wanted to know how many ports they had on their switch(es) and whether or not each port was being used. We wanted to know the capacity of their tape drive and how much they were backing up. All of this went into a giant spreadsheet which in -turn spit out a number. Then we’d stare at that number for a little while and decide if it seemed to low or too high, and we’d adjust it accordingly. I think that part went something like this, “I don’t know. Do you think they’ll pay us $1200 a month? OK then, $1200 a month it is.”

Initially we signed up four clients. When we got to ten clients we paused. It was time to make sure that the entire concept made sense. In other words, it had to be profitable. We looked at all the numbers and knew what we had to do. We had to figure out ways of being more efficient, reduce our cost of delivering services and we needed more clients. A lot of time was being wasted visiting every customer. One customer never adopted the name of our product, Guaranteed Networks®, they called is Wes Weekly, named after their assigned engineer, Wes Boggs and the fact that he visited them weekly. We also found that, since we were visiting customers on a regular basis, they knew the engineer was coming so they’d find things for them to do, whether there was anything that really needed to be done or not. We viewed this as the tail wagging the dog and not the model that we were after.

Also, along the lines of becoming more efficient and reducing our costs to deliver services, we began looking into remote support technology. Internet bandwidth was becoming increasingly available and providing remote support over an Internet connection had become a viable option. The first product we considered was from Intel and I believe it was called LANDesk. But we were kind of a big Novell house back then and made the crazy decision to try and manage our clients using Novell’s ZEN, which originally stood for Zero Effort Networking. That’s right...we tried to implement ZEN over the Internet (possibly over VPN) and use it to manage multiple “tree branches”, including clients who didn’t have NDS (Novell Directory Services). After all, the marketing materials all said it could be done.

After finding out that our company and some guy in Germany were the only known installations of ZEN in an all Microsoft Windows environment, we started looking else where...

After looking at all the avenues, we selected Desktop Streaming by Expert City to just do remote control (for now). This technology was later sold to Citrix Systems and became known as GoToAssist, the service provider’s version of GoToMyPC.

We also knew that we needed more clients. We had inadvertently entered into the insurance business. And actually, for a long time, I was afraid that insurance regulators would get hold of this and start trying to regulate us. We figured out what insurance companies knew all along... Collect “premiums” from a lot of people, only some of them will file claims and you’ll end up with a pile of cash.

In the days when we had ten clients, I remember one where we were covering absolutely everything, even the hardware (which we still do today). One day, they had a $1200 fiber switch go down hard. It stopped working. Done. Our tech services manager came to see me and asked, “What should we do?” I said, “call TechData and buy them another one, ship it overnight”.

The goal was to show this client the value of our services. The problem was that this client was only paying us $1200 per month and now, we were spending $1200 on them. Obviously, we were not profitable on that client that month but here in 2009, they are still a managed service client of ours (today) and that switch is still in operation.

So again, how does an insurance company insure your $50,000 BMW for only $2500 per year? If you wreck it, they are going to be out a lot of money. But we all know the answer...you’ll probably own a car your whole life and most people will only be in a few car accidents and of those only a few will actually require a complete replacement of the car. Some people will never get in a car accident, yet they will still pay for insurance, month after month...and that’s where the money is. We knew that if we got monthly recurring monies out of every customer, even if we covered everything, only a few things would have to be "replaced" and we’d get to keep the rest of the “premiums”, but the client would have peace of mind. This is what they really wanted...and no one in IT was selling this.

Desktop Streaming brought us great efficiencies and slowly, but surely, we were convincing clients of how much we could do remotely. We instructed every engineer who visited a client to, when appropriate, communicate to the client that their issue could have been solved sooner, faster or earlier, if they had only contacted our support desk and allowed us to address the issue via remote control.

Forging ahead, we decided to comb through our existing customer base and see how many of those clients could be converted and soon we were up to twenty “GN clients”, as they became known. Around then, we had another idea that would eventually become the cornerstone of today’s managed services. The thought was, wouldn’t it be cool if we could somehow monitor our client’s networks and find out if they were to go down during off-hours, like on weekends? That way, we could try and remedy the situation before everyone shows up for work on a Monday morning and find that things are down.

We began searching for products that could help us and much to our surprise, found that we were not alone. There were two other companies doing some things similar to us...and they were companies with cool one word names, “Centerbeam” and “Everdream”. Centerbeam seemed to provide something a lot like Guaranteed Networks but (at least then) only to companies that had 2500 or more employees. Everdream, on the other hand, called themselves The Desktop Management Company and it looked like they would manage any number of desktop...even just one...and they seemed to have internally developed software with which to manage your desktops. Ugh...competition!

We knew we needed to stay ahead of the curve, so we continued our search and the first thing we found was a company that I believe was called IPswitch. They had products called “What’s Up?” and “What’s Up? Gold”. It basically told you what was up on any given network. More importantly, we were sure that we could use it to alert us in the event of an off-hours network failure.

Developing a strategy around What’s Up? Gold had already started when we were tele-marketed by some guys out of Ottawa, Canada called N-able Technologies. They claimed to have a thing they called N-Central that did exactly what we were looking for. This person over the phone was telling us that we could buy their software and become a managed services provider. We could increase the efficiency of our technical support staff, monitor our client’s networks and be alerted on all sorts of conditions.

I signed up for their webinar and had a screen capture program ready to go. Every time they put up a slide, I took a snap of it. The funny thing was that so much of what they were telling us that we could do, we were already doing. I told my N-able sales rep (and now friend), Dirk Vanderwal, that I was going to have to see this webinar one more time with more people from my company present. He agreed.

I remember calling Wes and saying, “you gotta see this. I was just talking to a company that has essentially stolen our secret business model and is going around telling everyone about it.” But the important thing was that they had software that would make our lives easier.

Late 2002 was a tough year, the Dot Com crash had taken place and confidence in technology companies was being lost at an alarming rate, the attacks of 911 had compounded the issues. Nevertheless, we’d made good money in early 2002. Starting around July of 2002, we experienced what many now call the IT Nuclear Freeze of 2002. Customers who needed to do technology refreshes weren’t budging, every order on the table was being pulled. No one was spending any money. Interestingly enough, our “pay as you go” customers weren’t calling but our managed services clients didn’t seem to skip a beat. They just kept paying their bill and we kept doing what we did. Thanks to managed services, we survived the IT Nuclear Freeze of 2002. Shortly thereafter, at a time when spending money seemed like a bad idea, we plopped down our $50K for N-Central.

N-able Technologies had some great things going on there and they had some incredible people on-board. I don’t know who will be ultimately known as The Father of Managed Services but if anyone deserves the title as The Godfather of Managed Services, it would have to be Mike Cullen, Vice President of Sales at N-able Technologies. Mike got it. He could see it, he could breathe it and most importantly, he could sell the vision...and he resembled an Italian mobster but with a Canadian accent. He’s still one of my favorite people in the industry. Love the guy. Possibly because, like me, he loved good red wines and whenever we would hang out he was always buying...which meant we drank the good stuff. I used to tell him that he was Vice President of Buying Great Wines. I was going to get him business cards with that on it.

In the beginning, we were excited about the software but not about the idea that N-able was out there throwing around our secret sauce and potentially creating competitors for us but then we realized that it didn’t matter. It wasn’t about the model, it was about service delivery. We realized that even if we handed out the secret sauce to lots of solution providers, only a few were actually going to make a meal out of it. In fact, I would regularly see the same faces time and time again. They were thinking about managed services, they wanted to get into the business but they found roadblocks or stumbled along the way.

So we were happy to share what we were doing with others in the industry. In 2007, we actually recieved an Industry Contribution Award from CompTIA, the Computer Technology Industry Association, for our sharing of best practices around managed services.

Today, there are lots of people who say they provide managed services...but not according to my definition. I was just recently in conversation with a number of “MSPs” and I find that a large number of them aren’t really doing what I would call managed services. Most of them are simply providing monitoring and then billing a pre-paid block of time when they have to do something for their clients. To my company, that’s monitoring plus block time...not managed services.

I always say that we call it managed services because we manage when services are provided to the client...but if you are digging around looking for a reason to bill your client, that’s not what managed services is about. You are still susceptible to having your customer say, “no thanks” or reduce their monthly block. Remember, the idea was that you would bill your client a flat monthly fee and then YOU figure out how to be more productive and efficient and drive down your costs. That’s managed services. That’s Guaranteed Networks MSP and that’s the birth of managed service...according to Rory.

Note: Your results may vary. :)