3 Keys To The Best Year In Managed Services

By The Business Solutions Network

This MSP saw new sales grow 11.5 percent and profitability improve dramatically in 2014, after improving its operational efficiency.

“Our mantra to our customers is that we can help them ‘Get Ahead of IT,’” says Todd Molloy, director of sales and marketing at Systems Engineering.

Photo By Blair Colby

Systems Engineering is not a newcomer to the IT services space. In fact, the employee-owned company has been in business since 1988, has grown to 125 employees, and has a geographical footprint that extends beyond Maine into New Hampshire and Massachusetts. Despite its success, in 2013 the MSP (managed services provider) recognized various areas of improvement that it needed to address, which it did, resulting in its best year ever in 2014. During a recent conversation I had with Todd Molloy, Systems Engineering’s director of sales and marketing, he shared three keys that made the biggest contributions to his company’s revenue and profitability growth.

Key #1: Sell Bigger IT Security Bundles
When it comes to providing customer service, MSPs have to avoid extremes. One extreme is giving customers carte blanche choices of hardware, software, and services. The opposite extreme entails dictating every detail of what customers can and can’t have and leaving no allowance for customization. MSPs that lean toward the former (i.e., anything goes) struggle to fulfill service level agreements (SLAs), plus their profit margins typically suffer as they attempt to service a wide array of product brands. MSPs that are too heavy-handed in what they will/ won’t allow, on the other hand, can easily alienate and lose customers who want more flexibility. A few years ago, Systems Engineering tended to be lenient with regard to its managed services offerings, but changes in the IT security threat landscape made the MSP think differently. “The bad guys have gotten worse, and the consequences of a data breach are higher than ever before,” says Molloy. “We have come to realize that as a trusted advisor, we needed to play a more proactive role in our customers’ security buying decisions.” Starting in 2014, Systems Engineering began incorporating multiple layers of protection in its standard managed services bundle, including Web content filtering, managed IPS (intrusion prevention system), malware filtering, network performance monitoring, and patch management. “Rather than putting the burden on customers to make eight decisions about their security, we simplified it into one,” he says. “As a result, customers had a better security posture, fewer IT fires, and greater peace of mind about their network security — and our revenue and profit margins grew at the same time.”

The key to accomplishing this goal, says Molloy, was educating clients about the “why” behind the change. “We conducted quarterly lunch-and-learns across several major cities located within a couple of hours of our facility, which attracted more than 200 IT and executive personnel across a variety of industries. We ensured the sessions were thought-leadership based and nonpromotional, and we used an hour-and-a-half interactive presentation format. At one of our sessions we did a role-playing exercise where we asked audience members to imagine they were a C-level executive at a company and had just experienced a data breach. We then asked them to talk about the steps they would take to mitigate their risk. These sessions, combined with our marketing and sales efforts, played key roles in our security sales growth.”

Key #2: Manage Your Existing Recurring Revenue Better
One of the reasons customers prefer managed services over the break-fix alternative is that it helps them project their IT spending. However, as Molloy points out, some things. such as a customer’s cloud storage growth, are difficult to project over a 12-month period. “There are lots of ways to lose money in this business,” he says. “And, it’s not realistic to tell a customer that you need to bill them for an increase in cloud storage they incurred six months ago. The fact is, networks are dynamic environments, and MSPs have to avoid charging customers for hardware they no longer are using or failing to increase their monthly invoice when new employees, servers, and/or software licenses are added.”

The MSP’s solution comprised multiple components, including change management and auto discovery tools, plus changes in its communication processes. “It really comes down to awareness and accountability,” says Molloy. “The first thing we changed was our billing criteria. Instead of selling cloud backup, for example, for a flat rate of X dollars per year, we changed to a cost per gigabyte model. Then we trained our salespeople to use our Solar- Winds N-able N-central RMM [remote monitoring and management] tool, so they could stay on top of customer activities that warranted a monthly rate change.” (To learn more about why Systems Engineering uses SolarWinds N-able N-central, see the sidebar below.) Providing customers with a good billing experience while at the same time getting paid for services is all about paying close attention to the details, says Molloy. “Account management personnel play a key role in this process as well. Even when things are running smoothly, a good account manager is able to add value by providing outsourced CIO services and helping with customer strategies such as short- and long-term IT planning, aligning IT and business processes, and budget planning. We invest a lot of resources to hire account managers who have a sound grasp of IT as well as business principles, which are skillsets that shouldn’t be undervalued or taken for granted.”

Key #3: Improve Employee Operational Efficiencies
While there may be some truth in the old adage, “Variety is the spice of life,” giving engineers too much variety in their daily work tasks can result in a number of undesirable outcomes. “Before we segmented our engineers into two groups, we found that there were too many incidences of repeat tickets,” says Molloy. “When you have every engineer performing every possible IT project or troubleshooting task, it inevitably leads to inefficiencies and a lack of accountability.”

To combat this problem, Systems Engineering segmented its engineers into a managed services team and a project-based team. “The managed services team focuses exclusively on watching our customers’ assets via our RMM software portal, patching networks, operating our help desk, and managing support tickets,” says Molloy. “This team is responsible for detecting and correcting anomalies such as backups not working, servers running too hot or approaching capacity, and other software or hardware problems that our customers experience. Our project-based engineering team, on the other hand, focuses on setting up Active Directory services, virtualized servers and computing environments, unified communications, and security solution implementations. Occasionally, if something goes wrong immediately after an implementation, we’ll bring back the project team to troubleshoot it, but for the most part it is the managed services team that ensures everything stays up and running after the implementation.”

Since segmenting its engineers into groups, Molloy says he’s seen a dramatic improvement in the company’s service efficiency. Systems Engineering keeps track of several service metrics, such as first response SLA (service level agreements), resolution metrics across four priority levels, backup tickets, time to resolution, and median hold time on help desk. “In 2015, we improved our time to resolution performance by more than 10 percent and reduced our recurring tickets by 20 percent,” he says. “Having the right people in the right jobs and enabling them to be accountable for their work is invaluable,” he says. “We are also now experiencing fewer scheduling challenges, more effective help desk calls [e.g., higher one-call resolution rates], and fewer billing issues. We’ve also been able to keep our prices flat while at the same time increasing our profit margins.”

Running a more efficient business also has freed up Systems Engineering’s salespeople to do more prospecting, says Molloy. “Over the past few years we’ve developed our existing sales force and added new salespeople, which has enabled us to expand our business into New Hampshire and Massachusetts, which contributed to 20 percent of our revenue in 2015,” he says.

As an employee-owned business, each of the MSP’s employees benefits directly from the company’s growth, and the positive improvements in its operations have led to improved employee morale as well. “In 2015, we were named to the State of Maine’s ‘Best Places to Work’ list for the second year in a row,” says Molloy. “We have a ‘work hard, play hard’ culture, and each employee has a voice in the improvements and changes we need to make. We have a structured, 360-degree review process where employees can give feedback on their supervisors or managers just as easily as they can give feedback on their peers. We also are transparent with our employees with regard to our finances and keep everyone updated via quarterly financial reviews.”

Although Systems Engineering doesn’t publish its sales numbers, the fact that its sales revenue grew 11.5 percent in 2014 over the previous year, it achieved doubledigit growth in 2015, and is projecting to do the same this year suggests it has and continues to make sound business choices. “Our mantra to our customers is that we can help them ‘Get Ahead of IT,’” says Molloy. “IT has become so complex that an internal IT generalist simply can’t keep up with today’s customer demands. Our company has a broad range of IT talent covering a wide range of technology certifications and industry experience. This comes into play not only during the sales and post-sales support process, but it is also a nice benefit for our new hires, knowing they have senior engineering specialists close by who they can learn from and gain knowledge.”