Magazine Article | September 15, 2016

The Smart Way To Raise Your Managed Services Margins

By The Business Solutions Network

An MSP’s comprehensive IT and business consulting offering enables it to beat out a cheaper competitor and win a lucrative deal with a community bank.

Like many channel IT companies, MSP (managed services provider) Connecting Point’s offering has evolved over the past five years. One of the biggest changes, says Ted Warner, the company’s president, is replacing a la carte services with comprehensive IT and business services offerings. “We see ourselves as a general contractor,” says Warner. “We may not sell bandwidth or do cabling, but we often find ourselves working with these companies on our clients’ behalf to ensure their pricing and service level agreements align with our customers’ needs.”

As a result of its hands-on, white-glove approach, Connecting Point is almost never the cheapest service provider competing for new business. In fact, oftentimes it’s the most expensive choice. This was the case with a customer win the MSP had with Morgan Federal Bank, a community bank headquartered in Fort Morgan, CO. The bank was expanding and recognized its need for several IT improvements. A bank manager reached out to Connecting Point, along with a few competitors.

Warner and Connecting Point’s Director of Managed Services, Jesse Rosales, convinced the bank’s president that paying more was actually the better deal.

Demonstrate Industry Knowledge, Best Practices
A few things that distinguished Connecting Point from its competitors were its commitment to using proactive managed services tools, adherence to industry best practices and continuous improvement principles, and providing vCIO (virtual CIO) services. “Some channel companies sell basic remote monitoring services and think that makes them an MSP, but we believe it takes more than that,” says Rosales. “We assign a network administrator to each client to optimize their networking and security resources. On a regular basis, our network admin reviews a checklist of 250 items as part of our myITProcess to make sure the network is in alignment, and he assigns the customer an alignment score, which ranges between 1 and 100. New clients rarely score high on the list. But over time, as we are able to configure their firewall, inventory their server and computer warranties, patch security holes, and ensure their backups are working properly, that number increases.”

Another differentiator Connecting Point offers over smaller competitors is bench strength. “We have 18 employees, and many of our competitors have only five employees,” says Warner. “Customers don’t want to entrust their IT support to a provider with only two engineers. We can offer help desk support, a dedicated network admin, and a project team, which were all services the bank was very interested in.”

Show Your Client Metrics That Matter
After winning the deal, Connecting Point helped the bank get its network and security up to par. “We use an automated monitoring and management solution called N-central, from SolarWinds N-able, which alerts our staff to problems before they happen,” says Rosales. “Prior to adopting N-central, we used to have to log in to each customer’s environment manually to approve patches and perform routine maintenance tasks. But now we can set global rules and allow the automation tool to do the bulk of the work for us, which has reduced our monthly monitoring labor activities by nearly two full days.”

The MSP also implemented Mimecast email spam filtering, eFolder backup and disaster recovery (BDR) services, Dell SonicWALL GMS (Global Management System) network security monitoring, Dell SonicWALL NSA (Network Security Appliance) firewalls, and Cisco Meraki MR32 cloud-managed wireless access points (APs).

“We also included our vCIO services, which comprises quarterly meetings that include a review of their three-year technology road map,” say Warner. “Many new clients initially have high ticket counts [e.g., one ticket per endpoint per month] and longer resolution times [e.g., one hour]. Morgan Federal now averages only .33 tickets per endpoint per month, and its resolution times average about 35 minutes per ticket. They also have passed along compliments received from banking auditors telling them their network and security policies are solid.”

Connecting Point provides the bank with monthly reports that highlight several additional key performance indicators (KPIs) such as network uptime, active threats mitigated, tickets per endpoint, and the customer’s myITProcess alignment score, which has consistently improved over the past eight quarters.

“Although our price is around $1,000 more per month [around $3,000 per month instead of $2,000 per month] than what our competitors quoted, we have been able to demonstrate enough additional value to the client that they feel the higher price is worth it,” says Warner. “Our comprehensive managed services offering has contributed to an average gross margin increase from 15 to 20 points in the old model to 50 to 60 points in the new model, making it a win-win.”