I had the privilege to spend two years working with a managed IT security and services organization as its vice president/COO. So, now let me say this to all those reading. Profit success in managed IT services is not about being the greatest sales organization; instead, it’s about being in control of the greatest service organization.
Robert Stephens, founder of the Geek Squad once said, “Marketing is the tax you pay for being unremarkable.” I love that quote. It is so relevant to managed IT services, or any service focused deliverable.
Delivering managed IT services is more about your remarkability than your marketing.
Managed IT services starts with a business plan, not a marketing plan. Those from either the traditional managed service provider (MSP) community or those progressive dealers from the office technology channel beginning to or delivering IT services; please keep this in mind. The selling of multiple technical services and their products takes discipline, with the ability to perform remarkably, and all the while doing it with absolute attention to the understanding of and controlling of cost. The cost associated with workforce hours is the most critical to the MSPs profitability.
Profitability success in managed IT services is managing your recurring cost along with the customer’s reoccurring revenues.
IT service is managing the complexities of the customer’s technology infrastructure. This infrastructure is a web of hardware and software, on premise and cloud-based, user additions and removals: it all requires monitoring, interactive care, both proactive and reactive. Service-based businesses deliver service; they don’t drive their business off the quick sale of a hardware product’s gross profit. They live from the gross profit of recurring services revenue, providing they control their reoccurring cost. These costs include people or human capital, products, along with pass-through vendor management cost.
The profit killer in all service-based deliverables is uncontrolled payroll.
The gap between available hours and unaccounted for hours must be less than 15 percent and what we account hours against must have an understood ROI. One of the most prolific PSA vendors in the IT services industry, ConnectWise has a great motto: “IT didn’t happen unless it’s in ConnectWise.” You must also think this way. Regardless of your ERP, or PSA, understanding the importance of technical time accountability is becoming extremely necessary to control the profitability of the declining print use market, and will be demanded in your IT services deliverable. The hours worked must be billed. Whether included in a recurring contract or in addition to a recurring contract. All labor hours must have accountability. Services profitability, regardless of industry, is only determined correctly when all technical hours available have a revenue stream to offset their cost. Unaccounted for hours or an overstaffed workforce will always cause the pain associated with misinterpreted profit.
So, in preparation, dealers must plan for and align their copier/print services cost of labor to the changes in the service needs of printing equipment. Today’s printing equipment is less and less service intensive – the storm which disrupts the profit of all service-based business models: when the products it services require less and less service intervention, while at the same time the user of the product depends on it less and less.
It’s during this time there must be action to realign the workforce to mirror the realignment of the work needs.
The time is now to re-evaluate, prepare and modify. The dealers’ greatest area to improve and control cost during a declining use market is by closing the gap between their service hours available and those hours accounted for. The majority of profit loss or profit gained is in how one manages their workforce needs.
Today some dealers are still subscribing to technician workforce benchmarks from 1970. With today’s technology along with much more reliable equipment, there should be a re-evaluation to create new benchmarks based on new realities. Too many are moving cost buckets around to insulate the impact of known problems. You must align the gap between the hours they have available and the hours accounted for.
Keep in mind as needed changes become apparent the focus on HOW will get blurred by the rhetoric of those more comfortable in the past or from those who cannot assist you in bringing the future to the present. “The true test of leadership is their ability to deconstruct obsolescence, as they construct relevance.” This skill is never found in the comfort of complacency. Being remarkable will cost you, so budget for it, and then charge a premium to those you deliver.
Innovation gives birth to the new-way and takes the life of the old-way. Those who understand constant modification can live closer to forever.
R.J. Stasieczko
