In my recent blog “Who Are your Competitors” I outline who Managed Services Providers really compete with. Somewhat ironically it’s the very entity they are trying to win over, the small business law firm, insurance company, health care provider, etc. who has an internal IT department. If you have ever tried selling outsourced help desk services to the help desk manager you know what I mean. It can be an uphill battle and get pretty personal.
In most cases for small businesses you are positioning an outsourced service. Trying to convince a self-service small business that your people are better than theirs or your training is an uphill battle as it becomes a debate of people and not service. One way to win is to redefine the playing field. Deliver services in a way that the internal small business IT department just can’t match. Change the rules to create differentiation. If you deliver an end-to-end service that the internal IT department can’t deliver you start to eliminate your competition.
To help get out in front of the opportunity MSPs must enhance their capabilities through technology, services, and automation. In many cases this can be and should be done through strategic partnerships.
It’s easy to confuse a Supplier from a Partner from a Strategic Partner. The differences are both significant and important.
- Suppliers provide product and base services that are commodity in nature and don’t add much value as measured by the customer.
- Partners complement what you do in ways that lower your cost and/or provide you a product or service that gets you to market faster. Key beneficiary is you and not necessarily your customer. Partners are easily replaced with other partners that do exactly or close to the partner they replaced.
- Strategic Partners create value and differentiation for you. Strategic partners when used correctly will allow bringing services and capabilities to market at levels beyond what you could deliver without them. The very nature of the partnership improves your brand in the marketplace.
Finding the right Strategic Partners to complement what you do in a way that enhances your service offerings is critical. In many cases the overall cost to deliver the service will be less expensive than if the service was built internally. Additionally aligning the strategic partner’s services as a variable cost protects your business through normal revenue and workload ups and downs.
While there are many areas where partners can be used, strategic partners will help you deliver foundational services in areas including yet not limited to NOC, Help Desk, and Hosting. Understanding how to select the best partners will also allow you to compete better as you have a better sense for what is possible in the specific categories you are looking towards partnering on. The Strategic Partners you select should represent high levels of capabilities in the areas they compete in.
So how do you select the best strategic partners? While price and quality of service are 2 attributes that rise to the top, other less obvious factors that you should consider include:
- Billing Methodology – assure your strategic partner’s billing terms align to how you bill your customers. Managing cash flow to your advantage is an important aspect to your financial vitality and your ability to grow your business without additional cash consumption.
- Escalation Alignment – Service coordination is never an issue when there aren’t any problems. Problems are inevitable and assuring your strategic partner’s escalation requirements, process, and time lines align to yours is paramount in assuring a seamless service experience for your customers.
- Service Level Alignment – Defined agreement to what constitutes a level 1, 2, and 3 service level and priority 1, 2, 3, and 4 impact is critical. As we know what might be a less impacting issue for one customer might not be for another. When the CEO of one of your customers can’t access her presentation hosted in the cloud she’s giving to the board tomorrow this is a high priority issue and needs to be acted on accordingly. You strategic partners have to understand and be able to manage to this.
- Business Alignment – Simply stated your customer’s measure of success must align to yours and yours to your partners. Make sure your Strategic Partner has business metrics that support continuous improvement in service level. As an example if you outsourced your Help desk consider compensation based on the elimination of problems and resolving problems faster. In other words don’t pay them based on Full Time Equivalent (FTE) labor, call volume or hours of work. Create a win/win and you both can share in the improved financial performance as your customer enjoys a better service experience.
- Branding – Before selecting a Strategic Partner make sure you’ve figured out how to brand the service that your strategic partner is helping you deliver. As an MSP you don’t resell your partner’s service yet, instead, you integrate it into yours. For suppliers and partners there isn’t necessarily a right answer as sometimes private label, co-branding, or partner branding makes sense. For Strategic Partners co-branding makes the most sense. Keep in mind your customers aren’t dummies. They realize you don’t have a world-class hosting facility stuck in the backroom of your 2000 square foot office and would rather know you selected a best-in-class strategic partner doing your hosting.
- Financial Terms – If you have net-30 day receivable terms with your customers figure out how to get net-45 payment terms with your partners. This will help keep your cash flow positive and help buffer for your handful of customers who pay late. You are far better off negotiating hard for 45 day terms and paying on time instead of accepting 30 day terms and paying late.
Today’s successful businesses know they can’t and shouldn’t do it alone. Select your Strategic Partners in areas that matter most, lower and align your cost to your revenue, and will differentiate you in front of your customers and prospects. Change the game and provide services and capabilities that help your customer’s business compete better.
They’ll reward you with many years of business.