Confessions Of A Managed Services Convert

By The Business Solutions Network

Since changing its stance against managed services, this VAR-turned-MSP experienced 40-percent+ revenue growth for the past two years in a row.

Not only did Atlas use to sell only break-fix services, but many of its clients were former managed services customers, says Gregory Zolkos, CEO of Atlas.

Photos By Michael St. John

If there’s one thing that every IT solutions provider (ITSP) shares in common, it’s the need to adapt to change. Whether change occurs as a result of new industry regulations, or it’s driven by technology, adaptability is a key for success in this space. Atlas Professional Services (Atlas) has experienced its share of changes since its inception nine years ago — especially within the past two years, which included a transition from break-fix to managed services and the acquisition of a managed services company. I recently spoke with Gregory Zolkos, CEO of Atlas, to get his insights regarding these big changes, which have resulted in impressive revenue gains in addition to numerous awards and accolades.

Know The Pros And Cons Of Selling Managed Services
Zolkos chuckles as he thinks back to the earlier days of his business — before the big transition to managed services. “Not only did we use to sell only break-fix IT services, but much of the business we won came from beating out managed services providers,” he says. One of the tactics Atlas used was questioning MSP competitors’ motives. “I’d tell a prospect, for instance, ‘The more you use their service, the less profitable they’re going to be, so it’s only natural they’re going to spend as little time as possible resolving your IT issues,’” says Zolkos. And, there were plenty of realworld examples the VAR could draw from to strengthen its case. “Many of our customers were previously on managed services contracts and became unhappy with their MSP’s performance,” says Zolkos. “For example, despite the fact that managed services customers pay more money than their break-fix counterparts, it’s not uncommon for them to wait longer for service — sometimes days longer.” On the flip side, Zolkos explained to prospects that his customers only paid for services they really needed, and there was a built-in incentive for his technicians to get there and get to work as quickly as possible.

Despite learning to successfully compete against managed services providers, Atlas was faced with an unexpected trend in 2012 that it couldn’t ignore. “Several customers and prospects told us, that despite being unhappy with their previous managed services provider, they actually liked the managed services model of paying a fixed rate each month for IT services,” says Zolkos. “Plus, these same clients were often paranoid every time they called us with a question, wondering whether we were going to bill them for the time.”

After enough requests, Zolkos made the decision that Atlas was going to start selling managed services — only it wasn’t going to make the mistakes it saw so many others make. Specifically, it vowed to avoid the following five pitfalls:

1. Manage Customers With Spreadsheets. One of the biggest culprits of missed SLAs (service level agreements) and inconsistent customer service can be traced back to a spreadsheet (and sticky notes). Once your business grows beyond five or six customers, it’s just too difficult to rely on manual systems to track and prioritize customer problems. Zolkos recognized this early on in his managed services transition and invested in a Connect- Wise business management platform. Next, he hired the best ConnectWise consultant he could find and committed to getting as much value out of the tool as possible. (Check out the sidebar below to learn more about why Atlas selected ConnectWise and how this tool helps its business.)
2. One-Size-Fits-All Managed Services Bundles. A common tactic used by MSPs is requiring customers to use a specific BDR (backup and disaster recovery), antivirus, email spam filter, firewall, and network security software as a prerequisite to being on a managed services plan. Even if a customer recently purchased an antivirus subscription or is using a new firewall made by a manufacturer the MSP doesn’t work with, the MSP will insist on a replacement at the customer’s expense. “I understand the logic behind this decision, but I still don’t subscribe to it, and I know that it turns off a lot of companies,” says Zolkos. “The other extreme — allowing customers to choose whatever IT products they want or keep all their legacy products — is a mistake that must be avoided, too.”

   Atlas believes in a balanced approach, which entails giving customers the choice of up to three different vendors for every component of the managed services bundle. For example, with BDR, the MSP allows customers to select from among three options: Acronis (image backup) and eFolder (cloud backup), Datto (local and cloud backup), or Symantec (local backup only, and the client is responsible for taking a copy off-site). For antivirus, Atlas gives clients a choice of McAfee (cloud-based), Kaspersky (requires on-premise console), or ESET. If a client can’t agree on one of the three options, Zolkos says he has no choice but to raise his monthly service fee, but he says it’s rare that ever happens. “Most companies are happy to have a choice, and they’re understanding about the fact that it’s just not feasible for an MSP to manage dozens of different brands of IT hardware and software,” he says.

3. High Assessment Fees. It’s a smart business practice to do a proper network assessment before quoting a customer a monthly price for a managed services plan, says Zolkos. “But some MSPs go overboard with assessments. I’ve known some MSPs that charge customers 80 hours of labor [about $4,000 to $8,000] to assess five servers,” he says. “The reality is that the MSP could know everything it needs to know in about five hours [$250 to $500]. Any extra time added is just an excuse to inflate the price.”
4. Lengthy Service Contracts. Some MSPs try to lock customers into two- or three-year contracts to guarantee a “sticky relationship,” says Zolkos. “Fact is, if we’re not doing our job and making our customers happy, we deserve to be fired. It’s a poor business strategy to make it difficult for customers to cancel.” Having a short-term agreement puts the onus where it belongs, which is on the MSP. And according to Zolkos, that approach has served his company well. “We’ve maintained a 99 percent customer retention rate since we started selling managed services, and the few that have gone away have been largely due to companies going out of business or being acquired,” he says.
5. Slow Response Times. As a long-time advocate for convincing customers why they shouldn’t buy into managed services because of subpar service response time, Atlas had to ensure it didn’t fall into this same trap. As managed services gained momentum, Zolkos realized he needed to hire more technicians, but where could he find candidates with the right skillsets? It was while attending a University of South Florida (USF) Fast 56 Awards dinner that Zolkos found the answer. “During our conversation with the owner of another managed services company, ICS, the owner admitted to me that he didn’t enjoy selling IT data services, and he wished he could focus exclusively on providing VoIP services. I told him ‘I can help,’” says Zolkos. After several follow-up discussions, the two companies determined it would be beneficial for both for Atlas to acquire the IT data services business of ICS.

About six months prior to making the acquisition official, Zolkos met with ICS’ largest clients to get their feedback and address any concerns. “The last thing you want to do is surprise a new customer with, ‘Hi, I’m your new IT guy; I’ll need all your login credentials and other confidential information. Here’s my number if you have any problems,’” quips Zolkos. Atlas also joined the Chamber of Commerce in Brandon, a city near Tampa where ICS was headquartered, and the acquisition of ICS’ IT data services business was completed in early January of this year. “We picked up 150 new accounts and three new technicians, which gives us plenty of room for growth,” says Zolkos. “And we were recently surprised to find that we won the ‘Small Business of the Year’ award in Brandon even though our company isn’t even based there.”

One of the biggest challenges following the acquisition has been determining how to merge ICS’ vendors with Atlas’ vendors. For example, ICS worked with six BDR vendors, which were all different from Atlas’ BDR vendors. “We applied our previous strategy, which was to give clients a choice,” says Zolkos. “The choice was that they could migrate to one of our vendors or pay an extra $30 per month to keep their BDR. Most opted to pay a little extra to keep what they had.”

“If we’re not doing our job and making our customers happy, we deserve to be fired.”

Gregory Zolkos, CEO, Atlas

 

Over the past two years, Zolkos led his company to 56 percent and 42 percent revenue growth respectively. He also was named to the Tampa Fast 50 two years in a row, the Florida Fast 100, and the Inc. 5000. This year, accolades for Atlas include:

• A USF Fast 56 Finalist (#18)
• One of the Best Places to Work in Tampa Bay
• One of the Top 501 Managed Services Providers in the World.

When asked to summarize the key to his success, Zolkos insists that it comes down to putting yourself on customers’ agendas rather than forcing them to get on his company’s agenda. “We don’t force our solutions on clients, we avoid long contracts, we’re flexible with their IT environments, and we recognize that the password management policy for a law office, for example, shouldn’t be the same as the one used for a group of physicians. In short, we try to be as accommodating as possible to make it easy to do business with our company.”