Take a Firm Stand on Flexible Managed Services (Article)

(as published on VARInsights)

This company’s break from conventional managed services contracts and programs was a key to achieving double-digit revenue growth.

“It’s surprising how many prospects tell us their previous IT service providers never assessed their environments or asked about their business goals before making a recommendation,” says Abbey Colville, director of marketing and operations at VCS.

By The Business Solutions Network 

What Does Your PSA Vendor Think About Your Next Big Business Decision?

It was in 2008 that Vision Computer Systems (VCS) was first introduced to ConnectWise and replaced its manual service tracking processes with the ConnectWise PSA (professional services automation) tool. VCS’ business has changed significantly over that eight-year period, and many other IT vendors have come and gone — except ConnectWise. “Before ConnectWise, I had never had a vendor contact me to find out how I was using their product,” says Abbey Colville, director of marketing and operations at VCS. “Their developers have contacted us on multiple occasions to get direct feedback on what we like about their tools and what we would like to see improved. They have also developed a whole ecosystem of managed services products over the years that we now use in nearly every part of our business to drive automation and efficiency.”

Some of the other ConnectWise products VCS now uses include: LabTech RMM (remote monitoring and management) software, Quosal quoting tool, Cloud Console cloud services management tool, BizDox visual documentation software, and the ConnectWise Campaign Director marketing manager. “All of the products work well together and allow us to run our business and manage our customers’ IT environments,” says Colville. “Whether we’re doing a marketing campaign, entering a work ticket, remotely monitoring a customer’s server, or invoicing a customer, ConnectWise is involved.”

Every year, VCS reevaluates all of its vendors and replaces the underperformers with what it deems to be best-in-class companies. “Over the years, we’ve changed antivirus vendors, backup and disaster recovery products, and several other technologies, but ConnectWise and its ecosystem of products remains,” says Charles Lobert, VP of sales and technology at VCS. “It isn’t just the quality of their products that makes us excited to work with them, it’s the strategic partnership we’ve formed with them over the years, too. They are one of the few vendors we turn to before making a major business decision. Their feedback has played a key role in the changes we’ve made in our managed services program and our decision to embrace the cloud as the future of IT.”

Just about any VAR that makes the decision to start selling managed services runs into some obstacles along the way. Some move too quickly and learn the hard way that it can take nearly two years for monthly recurring revenue streams to catch up to and overtake project-based revenue. Others run into roadblocks with their commissioned salespeople who balk at the idea of trading an immediate large cash bonus for a small monthly recurring commission spread out over a year or more.

For VAR-turned-MSP Vision Computer Solutions (VCS), neither of these scenarios was the biggest issue. VCS’ leadership team was not aligned on some basic principles that make up managed services contracts, including the length of the contracts, the litmus test to determine whether a prospect qualifies as a managed services candidate, and how much flexibility should be permitted with contracts. Ultimately, the foundation for VCS’ services was rebuilt when two-thirds of the leadership team made the decision to move on to new opportunities in late 2013. Going into 2014, VCS experienced a slight dip in monthly recurring revenue over the subsequent seven months. However, led by the strong leadership of the company president, David Marino, VCS reorganized, implemented key policy changes, and experienced its strongest year-over-year growth the following two years.

Managed Services Contracts: Why Flexibility Matters

Although there is no exact formula for developing managed services contracts, industry experts tend to favor the following three principles:

1. Longer contracts are better than shorter contracts. The reasoning is twofold: First, companies with contracts have a higher valuation, which is advantageous if the owner wants to sell the business. And second, longer contracts make it more difficult for customers to shop your competition once they’ve made a commitment to your company.
2. Giving customers fewer options is better than more options. If all of your customers are using the same antivirus software, antispam software, backup and disaster recovery (BDR) solution, firewalls, VoIP systems, and servers, you can manage more customers with fewer resources. Plus, training new employees and keeping up with product updates and certifications become much simpler.
3. Only prospects meeting strict requirements can be on managed services contracts. Companies that only view IT as a necessary evil or don’t want to make the necessary investments in technology must be avoided at all costs.

VCS understands the reasoning behind these principles; however, it has chosen to look at things a bit differently. What is the primary reason for this? “The managed services rules we have all been taught to follow are self-serving and do not take into account what is best for the customer,” says Charles Lobert, VP of sales and technology at VCS. “We choose not to lock customers into long contracts and try to make them become long-term customers. We want the relationship to be mutually beneficial. We want to be partners with our clients. We believe that if our product and service offerings meet our customers’ needs at a price they can afford, and we can continue to provide an exceptional client experience, there is no reason for them to shop our competitors or leave. Not having a contract puts the responsibility on us to make sure that we are providing a best-in-class experience every day, on every ticket, for every client.”

To prove its commitment to breaking from the status quo, VCS stopped the practice of selling managed services contracts in late 2013. If any new customers weren’t happy with VCS’ performance, they were free to quit the relationship — no early termination fees or other strings attached. Lobert says this decision was right for VCS and its customers because it forced the MSP to self-evaluate its offerings and services and not to take any customer relationships for granted. “Early on, we also made the decision that we would not outsource any of our technical support services. Even emergency service is handled in-house,” he says. “This makes it easier for us to develop closer relationships with our customers and to quickly mitigate any problems that may arise.”

Another policy that VCS implemented was the decision to perform a full assessment prior to entering into any IT project or managed services deal. “It’s surprising how many prospects tell us their previous IT service providers never assessed their environments or asked about their business goals before making a recommendation,” says Abbey Colville, director of marketing and operations at VCS.

During its assessments, the MSP often uncovers a number of areas where a customer’s IT is lacking, starting with backup and recovery procedures. “We not only get into what they’re currently using to back up their data, but we try to get a sense of their tolerance for downtime,” says Lobert. “If, for example, they are backing up data to tape each night, and they reveal they can’t afford to lose more than 15 minutes of data or be down for more than 2 hours, that is an obvious red flag we need to address.”

Another area where VCS parts ways with convention is how it handles legacy systems, such as Windows Server 2003, which Microsoft stopped updating on July 14, 2015, and Windows XP, which reached the end of extended support April 8, 2014. Most MSPs use these as the litmus test for whether a prospect can become a managed services client. But VCS came up with a workaround. “We created a light version of our managed services offering, which includes remote monitoring and management, but does not include service and support in the monthly price, and then we try to work with them to put together a plan to upgrade the legacy systems as soon as possible,” says Lobert. “Customers that insist on using their own antivirus or backup systems instead of ours can choose our managed services light program.” For customers choosing this option, the MSP spells out the potential risks that go along with not making the recommended updates, and it lets clients know they assume all liability for their decision, too.

VCS’ flexible managed services offering is paying off nicely for the MSP. For starters, its customers have an average tenure of seven years. Additionally, in 2015 VCS’ revenue grew 25 percent over the previous year, and it is currently on track to achieve double-digit growth this year. While flexible managed services are a key component of VCS’ growth, two other business decisions play important roles, too.

MSPs: Don’t Fear the Cloud, Embrace It

Ever since Microsoft discontinued Windows Small Business Server (SBS) in 2012 in an effort to shift small business customers to Office 365 and cloud services, many MSPs have been in a panic about their future. As a result, some have tried to talk customers out of going to the cloud and have treated the cloud as a competitor. VCS took a different approach and looked at how it could adapt its business and add value to its customers’ inevitable move to the cloud.

Two specific areas where end users often run into roadblocks during their move to the cloud are: 1. Getting their data from point A (i.e., on-premises) to point B (i.e., the cloud), and 2. Getting their WANs cloud-ready. “Making this transition can be very disruptive and costly to an end user if proper planning isn’t taken,” says Lobert. “We use data migration tools, such as those from BitTitan, which reduce the complexity of this process and ensure steps are followed at the right time and in the proper order.”

Prior to starting the migration process, Lobert says a network assessment is a must. “Once the blinking server lights leave the main office and move to the cloud, the network becomes even more mission-critical than it was before,” he says. “Prior to migrating a customer to Office 365, we make sure its network is up to date and has adequate bandwidth to avoid downtime and data bottlenecks.”

Another point of hope for MSPs like VCS is Microsoft’s CSP (cloud service provider) program, which enables Microsoft partners to retain customer business relationships, including providing monthly billing and post-sales support services. This is a welcome change to Microsoft’s previous “Advisor” program, which required MSPs to turn over the billing and support to Microsoft, and oftentimes to only earn low single-digit commissions.

“The managed services rules we have all been taught to follow are self-serving and do not take into account what is best for the customer.” 
Charles Lobert, VP of sales and technology, VCS

Get Serious About Marketing

Prior to hiring Colville as director of marketing and operations in 2013, VCS had no formal marketing strategy or programs in place. And, while the MSP did spend money on various marketing tasks (e.g., Google ad words, mailers, local event sponsorships), these activities were all outsourced to marketing and PR firms. Colville brings to VCS a bachelor’s degree in integrated public relations along with Google ad word certification and Google SEO (search engine optimization) training. (To get a sense of how complex keyword search has gotten in recent years, do a search on “Google Panda” and “Google Penguin.”) Within a short period after starting at VCS, Colville discontinued all outsourced marketing spend. “Externally, our marketing had to change significantly,” she says. “Consistency was the largest and most crucial part of marketing we were missing before. The number of touch points needed before brand recognition starts occurring is far more than ‘nonmarketers’ realize.”

One of her first projects entailed combing through the MSP’s website and removing potential Google red flags such as thin pages (a page that offers little or no value to the reader), duplicate content, and low-quality content, and verifying all backlinks. After that, she implemented a diverse marketing program that included email, social media, SEO, and special landing pages to drive responders to. Equally important, says Colville, was using the ConnectWise Campaign Director marketing tool to track all of VCS’ marketing activities.

“What’s helpful about this tool is that it helps us organize, track, and follow up all of our marketing activities,” she says. “Plus, it helps us fine-tune each activity, right down to the subject line on an email. For example, we can track the performance of an email based on the day and time it was sent, and we can see how making a few tweaks to the subject line affects our message open rates. This is invaluable for ensuring our message is getting prospects’ attention. We’ve learned, for example, that instead of putting ‘Office 2016’ in the subject line, it’s much better to include ‘Office 365.’”

The marketing tool also gives VCS insight into where each of its leads comes from, and it helps the MSP rank the engagement level of responders. “This has played a key role in helping us shorten our sales cycles,” she says. “In fact, for leads marked as ‘highly qualified,’ our team closes the sale nearly 70 percent of the time, compared with approximately 45 percent of the time previously. Since moving our marketing in-house, we’ve been able to reduce our overall marketing spend 60 percent, also.”

Take Your Most Strategic Customers to the Cloud

As VCS looks to the future, it sees the cloud playing an increasing role in its business. “Office 365 and cloud backups were the initial phase, but next we’re going to see cloud-hosted desktops and other on-premise computing going to the cloud,” says Lobert. “We’re seeing a growing interest among financial services companies and law firms that want to be able to have the same access to all of their data and business applications at home or on the road as they do at the office.”

Lobert says VCS is planning to use the Microsoft Azure platform to deliver the next wave of cloud services to VCS’ clients. And, although it is too early to predict exactly what VCS’ next iteration of cloud offerings will look like, it is highly likely that the MSP’s offering won’t be conventional.

Vision Computer Solutions (VCS)

Founded:
1995
2015 Sales Revenue:
$2.6 million
2015 Sales Growth Rate:
25%
2016 Projected Sales Revenue:
$3 million
2016 Projected Sales Growth Rate:
15%
Employees:
13
Phone:
(248) 349-6115
Website:
www.vcsolutions.com
Verticals:
financial, legal, professional services
Vendors:
ConnectWise, Datto, Dell, Microsoft, Star2Star, Webroot
Distributors:
BlueStar, CDW, Ingram Micro, SYNNEX