Calculating ROI for Managed Services

[CITEComputers]

Hello everyone,

A few months back I started a managed services company. I believe that we offer the most robust MSP offering in the area (with only 2 competitors in a market of ~150k residents). Here's my problem: I'm a network engineer, NOT a businessman. I freely admit that and I pay people to manage a lot of the business side for me, as I learn how to do it on my own. I'm getting better and better and I can see my perspective shifting from that of a computer guru to a business owner.

One sticking area for me, though, is calculating ROI for managed services. The idea behind managed services is that it saves money when compared directly to break/fix or hiring IT staff, at least in most cases. In theory, that's fantastic. But how do we go about showing that to our potential customers? I've found various ROI calculators around the web, but nothing that lets me customize it with our pricing. Nothing that lets me see the numbers being run, behind the scenes, so to speak.

As we've gone out and talked to business owners, we've discovered that they absolutely do not care about the technology. They don't care if we are using one RMM vs another to provide them better services. They don't care if we can remove all the virus issues they've been having. They don't care about anything "technical." What they care about is how much money we can save them versus what they are currently doing. They care about the benefits and the biggest benefit they care about is the impact on their bottom line. We need a concrete way to show this to them.

Can anyone give me a bit of advice on this?

Thanks!

 

[RCD_Technology_Solutions]

Ill Start...
It is like insurance.
The company will have a known cost associated with IT services
It will define SLA and general engagement.

Some clients are "needy" any will cost you more time (money) Some clients are not so needy and will use you when they need to.

I think it would be helpful to know what your "plan" is , what you offer and what you charge.

Also there is a section called managed services, you might want to move this to that section..

Bob

 

[GhostDog]

It's not a ROI scenario. You don't make widgets faster or increase sales by X when you hire an IT guy.

It's having a parachute when it goes wrong.

Rather, like Bob said, sell it like insurance companies sell insurance. Point out what their costs are with no plan, no watchful eye and preventative maintenance, worst case scenario. Point out how much it would cost for a full time IT person. Then show them how affordable your rate is in comparison to both.

 

[drpcfix]

It's really hard to start out as an MSP and just start getting sales. When I was building my business - the only sales I got in the first 1.5~ years were long time existing clients that knew me really well.

To get into a new client, that's going to pay you monthly, they have to be coming from that model and already like it - or they are like 1 in a million. Nobody wants to pay monthly for IT unless they've had a lot of problems.

The main points I used were;
1. Unlimited IT Support - don't worry about next month's bill being larger than this one, you don't want to worry about your staff calling us because it will cost you $120/hr..
2. It's priority service, we'll answer right away - if we don't have an agreement going - it's best effort, and can take a day or two to get to you

Once we worked with a new client - we'd start out hourly and tell them on day 1 - we can start hourly, but after a couple months of working together if we are going to continue we'll need to be on a "monthly retainer" I would call it at that point (just so they understand the concept without the whole sales pitch). Just say something like, we have a lot of customers and pretty much need all our business clients to be on monthly retainers so we can have stable income and keep ourselves in business.

When a couple support requests go by, and they trust you - you can start to say "so, can we talk about a monthly deal?" - this is when we'd show a 2 page flyer highlighting what they get with our managed IT and managed helpdesk product.

I think it worked pretty well.

We did want term commitments on our contracts, which makes things harder.. We ended up softening that to like cancel anytime with 90 days notice, and sometimes 30 days notice. I personally hate term commitments when I'm signing up for things, it became hard to sell when I'm personally so against it..

 

[ComputerPro]

We found using the 'insurance' analogy was a bad idea, for us anyway. We lost a sale that way (after revisiting months later they are now on our plan though).

They were the ones who basically said "so its like insurance then". At the time I was a little naive in MSP sales and acknowledged. They passed on the MSP plan at that time and said they were very happy the way things are currently with break fix. They said the service is great now and they don't mind paying for any work we do when they call us. They just didn't like the idea of 'paying first ' like insurance only 'to be covered' if something happens. At the time I focused my rebuttal on how 'consistent, fixed monthly IT expenses' were easier to manage and predict spending. They still declined mostly due to the relation of insurance which nobody really likes paying for anyway lol.

Some months later (after we knew better), we told them that there is one huge difference between MSP and insurance and why they are very different.

Insurance is doing nothing and waiting until something bad happens. It may happen, it may not.
MSP is 'Proactive' service and constant work being done so that bad things 'don't happen'.
Only 'if' they do happen then 'like insurance' it is covered.

But that is a huge difference. Imagine if your auto insurance bought you oil changes, new tires every year, new brakes every 2 years etc, because they 'didn't want' something bad to happen. True insurance just sits back, collects money and waits. MSP is work done all the time. HUGE difference that the client will definitely think about as we learned the hard way.

 

[TenYardFight]

Very well said. Many are not just pitching wrong, they are servicing wrong. I have been guilty too. Just collecting the monthly money, not really providing proactive service. We called it "patch management", when we weren't really "managing" patches. We were deploying any and all of them...

 

[YeOldeStonecat]

Points to drive home...
*Uptime. Monitoring and maintenance, keep computers running better, keep them updated, less "downtime". A "down" computer causes a business to have an unproductive employee. Yes some businesses can tolerate this..they can use someone elses computer, they can go file paperwork, sweep the floor, something "manual". But other businesses afford to have an employee not being productive in front of their computer. It causes the employee to not be productive...he/she is being paid to...what..sit there and wait for someone to fix their computer? I have some clients that tell me he can't afford to have a computer so much as hiccup or fart...he wants fast, reliable computers...so his staff can work at their best all day every day. He replaces his computers at the 3 year mark like clockwork. Just like expensive tools, equipment, cars, motorcycles, regular maintenance, checkups, tuneups, all part of keeping things running optimally. Detect issues BEFORE they cause a problem, replace a failing HDD before it dies and causes a client to stand still picking their nose for a day or two. Keep the well oiled machine running smoothly!

*Security...security of data. Some businesses have confidential information on their network. They want to do as much as they can to protect that. If they have a "breach"...they can have some hefty fines and coverage to shell money out for...for all of their clients.

**Side note of above....those businesses which have confidential data on their network...often pay for "cyber insurance". Cyber insurance companies often have a list of requirements to be met...before they offer coverage...or at least...before they will quote coverage. And the more "items" on that checklist are covered...the lower their insurance rates will be to your client. Having a higher end firewall, good disaster recovery, monitored antivirus protection, managed updates on computers, MSP monitoring..those can all lower the costs of cyber insurance. I have had more than 1 client tell me that our MSP costs more than paid for themselves by lowering their cyber insurance premiums.

***Let me repeat that. I have had more than 1 client tell me that our MSP costs more than paid for themselves my lowering their cyber insurance premiums.

*Managing their backup, monitoring, ensuring the backup/disaster recovery services are running well, and they can recover their data if disaster strikes. I am sure many of us here can recall stories of businesses that had some disaster strike...and they needed to recover their data...and "oops...something's wrong with the backup, it wasn't working...didn't anyone test it? Didn't anyone remember to do it?" Whoops!

"How much is your companies data worth?"

*Quick help. Our MSP clients get preferred service, quicker response...especially if they're on a top tier plan. One thing we say is they can call us for small issues, "guilt free 3 minute phone calls for a quick thing"...stuff like that.

*Handle software updates...many clients run LOB software that has reqular updates. You..the outsourced IT...handle those updates, so that when the clients office opens for the day...the staff can get right to work with the properly updated tools (software). Example...yesterday I got a notification from SOS, that an update was ready. A client of mine is a nursing home, and SOS is their EMR software, typically has 3-6 updates per month. I take care of all of that for them. Accountants are another one...they run software that gets frequent updates, especially early in the year for tax season, and towards end of the year. Non profits often run software that require frequent updating. Foundations with their donation software, battered women shelters with their case management software, for some examples.

**We handle that outside of business hours...such as early in the morning, or late at night....when the updates can be installed, perhaps the server rebooted....and that has a higher price tag. That has certain value.

*Speaking of servers....those take special care, updates and maintenance and reboots happening outside of business hours. We, the IT, handle that...so the servers are ready to rock and roll at 8am when the clients staff come rolling in for work. Servers are updated, more secure, checked for problems, and perform better. They're typically more complicated than a regular desktop computer...so usually clients don't know how to handle servers. There's much more to them than just rebooting them. Need to ensure services properly started, databases are fired up, check event viewer, stuff like that.