4 Changes That Yield The Biggest MSP Revenue Gains

By The Business Solutions Network

This MSP is projecting up to 50 percent revenue growth in managed and cloud services this year with 30 percent of its growth coming from new backup and disaster recovery (BDR) sales and related services.

Since Bob Gentzler took over as president of the company, Heartland Technology Solutions (HTS) moved its business to the cloud, stopped selling à la carte managed services, and changed its name to OXEN Technology.

Photo By Jason Nabb

OXEN Technology, formerly known as Heartland Technology Solutions (HTS), got its start as a VAR and break-fix IT provider more than 31 years ago. Of all the changes the company has undergone over the years, including acquiring four companies and transitioning from breakfix to managed services, the past 18 months have been some of the biggest ones. Last January, Bob Gentzler became the new president of the company, and during his short tenure he’s already been instrumental in facilitating several changes. Following are four changes that are yielding the biggest results.

Change #1: Get Out Of The (Self) Hosted IT Space
One of the first projects Gentzler became involved with was identifying areas within the business that were impeding growth. A top culprit was the MSP’s co-location facility, which was managed by its technicians. Although Gentzler agrees that there is money to be made in cloud computing, he’s quick to point out that not every method of taking customers to the cloud is equally viable. “Building your own private cloud offering is a major undertaking,” he says. “First, there is a large capital investment that is required, and it is not a linear investment. You have to forecast how many resources you’ll need to meet your customers’ needs, and you can easily tie up hundreds of thousands of dollars in enterprise-level hardware before you start selling it. Additionally, you can’t hire just anyone to manage it; you need a staff of highly certified engineers.”

The average MSP cannot compete with the economies of scale and human resources available to big companies like Amazon and Microsoft. Rather than seeing these companies as competitors, Gentzler says that they can be good business partners for an MSP, and that’s the route OXEN is now pursuing. “Selling Office 365 is just one example of how we are using Microsoft’s scale instead of hosting Exchange and Microsoft Office apps in our co-location facility,” he says. “We are also working with CloudJumper to accelerate the cloud transition process for our clients. They contract large chunks of IaaS [Infrastructure-as-a-Service] resources from various cloud providers and can offer a better value and price than I could offer on my own as a small MSP.”

Change #2: Manage Hybrid Cloud Environments
After making the decision to stop expanding its co-location center, OXEN Technology hired a seasoned IT professional with Amazon Web Services (AWS) and Microsoft Azure expertise. “This person has led the planning, evaluation, training, and conversion of our own infrastructure to the cloud,” says Gentzler. “We felt it was essential to start with our own infrastructure to show customers our commitment to the cloud; plus, it helped us understand our costs, which was a key in determining our pricing.” To date, the MSP has migrated 90 percent of its business to Microsoft Azure.

OXEN Technology also is currently selling IaaS offerings in the Azure and AWS environments, such as servers, storage, and backup and recovery, and it’s adding value by bundling desktop support and help desk services. Gentzler says he expects his company will be completely out of its co-location facility by the end of 2016. The MSP is already seeing a big improvement in its sales cycle and profitability, too. “We no longer need to worry about customers’ future growth plans — or the expenses, labor costs, and capital investments associated with operating our own co-location facility — before quoting pricing,” says Gentzler. “Our cloud providers take on those burdens. Plus, we’re now able to provide cloud services in a true utility manner where customers only pay for the services they use and the price adjusts as their businesses expand or contract. Simplifying our sales conversations and value propositions has enabled us to shorten our average sales cycle by more than 30 percent, and it gives us a competitive advantage over MSPs that offer only on-premises or self-hosted IT solutions.”

Change #3: Move Away From À La Carte Managed Services
Although OXEN had been referring to its company as an MSP for nearly four years prior to Gentzler joining, he discovered that many of the company’s managed services clients were only buying one or two services such as managed antivirus or patch management. The problem was that the company had a 20-item à la carte menu and customers had the burden of picking and choosing the right IT solutions and services as they saw fit. “This was problematic as some customers simply don’t know what they want or need,” says Gentzler. To combat this problem, OXEN developed a few managed services bundles, starting with WorryFree Network Essentials, which covers the needs of 80 percent of its clients and includes network and computer monitoring, managed antivirus and firewall services, and system patching. “We also offer additional services, including two versions of our BDR solution, ranging from file backups to a full DRaaS [Disaster Recovery-as a-Service],” he says. “The latter service also features customizable retention, RPO [recovery point objective], and RTO [recovery time objective] services for clients that need to meet special regulatory requirements,” he says. OXEN offers Security-as-a-Service, too, which includes placing a realtime security monitor on a client’s network and active management and remediation of any issues. “Our cloud services are also now sold as a bundled offering, called WorryFree Cloud Workspace,” says Gentzler. “We can still customize a solution to meet the needs of a client with unique demands, but that is very rare these days.”

The MSP also came up with minimum requirements for taking on new managed services clients. “For instance, if a small firm only wants to contract with us to patch their computers and services, it doesn’t make sense for us to take them on as a client if we don’t see a larger opportunity to serve them,” says Gentzler.

“We’re now able to provide cloud services in a true utility manner where customers only pay for the services they use.”

Bob Gentzler, president, OXEN Technology

 

Change #4: Eliminate 4,000 “Competitors” Instantly
Throughout the Midwest, there are more than 4,000 businesses named Heartland. Whether you need a bricklayer or someone to put new shoes on your horse, there’s a Heartland company that can do that. Not surprisingly, trying to brand a company with this name is an exercise in futility. After seeking advice from vendor partners, customers, and its peer group, the management team revealed its decision to change the company’s name at a company/partner retreat earlier this year.

The MSP wanted a name that wasn’t overly used, but still represented its Midwestern business values, heritage, and financial strength. “We’re not about selling something new and shiny just because we can; we’re about making life simple for our clients,” says Gentzler. Three descriptive words that continuously rose to the top during our rebranding planning phase were: strong, trusted, and simple. From there, the MSP began looking for something that would embody each of its core traits, and it landed on the name OXEN. “Not only do oxen exemplify these traits, they work closely with one another to get the job done,” says Gentzler. “Also, there are only three other Midwest companies with oxen in their name — and none of them are IT companies — which makes it much easier to distinguish our company and build our brand.”

After agreeing on the new name, OXEN Technology, the MSP did an internal launch after reviewing its decision with key vendors at a full company retreat in late April, and it did a full public rebranding, complete with a new website (www.oxen.tech) shortly afterwards. Since the launch, Gentzler says it has sparked a lot of conversations with clients and prospects and has given his company an opportunity to explain and reiterate its core values and differentiators.

OXEN Technology’s business is also in the midst of unprecedented growth. “We are projecting up to 50 percent revenue growth this year in managed services sales, and as much as 30 percent of our growth will come from backup and related services,” says Gentzler. “Just a few years ago, more than half of our overall revenue came from selling servers, storage, and software. We’ve seen that revenue steadily drop to the point that it will most likely make up only 20 percent of our revenue three years from now. Our managed services and cloud services revenue is steadily increasing, however. And, although the top line revenue numbers from services aren’t as big as those from selling products, the profit margin is two to three times higher, which is a much more important metric. We have had to break our addiction to revenue and focus instead on adding value to clients. When we do that, our customers are happier, and our bottom line improves at the same time."