MSP customers have more than one IT need. So why would you sell a client just one service? Since you already have a relationship, it makes sense to broaden it with more services and higher level consulting and advising.
The good news is that SMBs prefer bundled services – it’s that whole “one neck to choke.” Research from AMI-Partners shows SMBs are 3-4 times more likely to opt for service bundles.
Meanwhile results from the annual Kaseya MSP Pricing Survey shows that bundling is a key approach to success and that faster growing MSPs bundle their services. At the same time, they don’t go overboard with options, but instead limit their offerings to a small number of tiered service bundles.
Bundled Services Increase MSP Efficiency
The rationale is simple. To be most effective, MSPs need to be able to monitor and manage as many aspects of a customer’s IT infrastructure as possible. When there are large gaps in coverage or when there are several service providers involved, finger pointing becomes inevitable and diagnosing who did what and when they did it becomes a major portion of the support work. When an MSP can
take primary responsibility for the production infrastructure and is able to monitor from a single IT management solution, cause and effect are much easier to identify; and process improvements can more easily be put in place to reduce the volume of disruptions and the subsequent unplanned remediation work.
By offering a comprehensive service bundle and discussing the value of having a single service provider, MSPs also avoid the challenge of being “nickeled and dimed” by customers trying to get a better deal by taking a “one from column A, two from column B” approach.
Higher growth MSPs will even turn prospects away if they are not willing to buy a complete service. For those operating primarily in a confined location, e.g., a city, county or region, much will depend on the needs of clients and the level of competition.
Some MSPs find that they can do well by delivering only minimal managed service capabilities, such as remote monitoring and patching, while the bulk of their revenues come from time and materials contracts. Others, probably in larger cities and more competitive environments, find that clients are looking for MSPs to not only smooth their IT spending by offering consistent or fixed monthly rates but also to take on more of the risk of IT service delivery by offering service level guarantees.
Wherever you are, you are likely to find that clients look to trusted MSPs to offer more and more capabilities.
More on the Beauty of Service Bundles
Kaseya has been tracking MSP pricing trends and the growth of service bundles.
As shown earlier, high-growth MSPs are 24% more likely to offer a small number of comprehensive service bundles compared to their lower growth peers, according to Kaseya’s annual MSP survey.
It’s easy to see why this may be more than just correlation, and may actually be causal: standardization.
The Magic of Standardization
By standardizing offerings, MSPs can lower service delivery costs along many dimensions to support increased growth and margins:
- Sales transactions:Offering a pre-defined suite of services lowers the transactional costs of doing business–from statements of work to SLAs to licensing agreements to onboarding, and so on. With a few comprehensive bundles, you don’t have to start from scratch, building a customized list of services and deliverables.
- Staff efficiency:IT staff can focus solely on helping solve client issues without having to research the details of the services, SLAs, etc. In addition, since services are standardized, IT staff proficiency improves and any service optimizations can be easily leveraged for all clients at once. In fact, most successful MSPs start managing by policies and machine groups versus client-by-client or machine-by-machine. They create, update and apply policies to groups of machines, managing exceptions while keeping systems in compliance of predetermined conditions. They aggregate management tasks and think how they can apply changes by machine group (i.e., Exchange servers) across their entire customer base.
- Infrastructure:While not a requirement when creating pre-defined service bundles, MSPs should work to standardize devices and software sets across their client base. Again, this makes it much easier to manage, troubleshoot and rebuild when issues occur.
- Scaling:By standardizing service offerings, high-growth MSPs are able to more easily scale their client base without having to increase their IT staff at the same rate.
Of course, you will have clients who demand–sometimes for very good reasons–exceptions to your pre-set service levels. However, there is a real difference between negotiating exceptions on occasion versus creating a laundry list of offerings that result in customized offerings for every client.
Setting Service Package Levels
Creating a small set of comprehensive service bundles is a key step to unlocking higher rates of growth and profitability. How should you establish your service package development efforts?
Unfortunately, the answer isn’t the same for every MSP.
One MSP market can look very different from any other–varying by such things as size of clients, vertical requirements and localized expectations. No one expert, no matter how much experience they have building and running successful MSPs, can provide an answer that is exactly right for you. You have to do research with your current customers and with the customers you’d like to have in the future.
That said, here is a simple approach to help you start your own process:
Bronze Package: Generally speaking, this package is for clients who just want to make sure someone is tending the IT shop while they’re busy running their business.
- Monitoring only
- Does not include onsite
Silver Package: This package is for clients who see IT performance and availability as integral to the success of their business, but who also have simple, straightforward IT network and infrastructure configurations.
- May include some defined onsite hours per month that do not roll over or accumulate over time if unused.
Gold Package: These clients may be very similar to Silver Package clients, except they just feel better knowing someone will be onsite occasionally. Or, these clients may have non-standard endpoints that can’t be accessed via remote management.
- Includes onsite
Wait — There’s More!
There is a way to add in a fourth package. But this package is not meant to be offered to all clients. This package (which we’ll call Platinum, to keep the metals theme) is devised for those high-value clients who want to go even further in their services outsourcing.
Platinum Package: This is for clients who want everything the Gold Package delivers, but also have specific projects, such as replacing existing equipment. In addition, extra services–such as email, Office 365 or data backup–may be selected for Platinum customers. Of course, the more projects per client, the higher the cost of their particular Platinum package.
- Includes everything in the Gold Package but includes projects
- Not meant for all clients
Every year brings new changes to the technology landscape, and MSPs have to make sure they keep up. Over time, your particular package offerings will need to evolve. Security services, for example, could become a standard component of your Silver Package; or Mobility Management could become so pervasive that mobile monitoring is standard in your Bronze Package.
There are other areas of opportunity. Cloud services are huge, and you can help clients with their transitions such to Microsoft Office 365, which you can then manage for them. Another area is managing the networks which connect clients to the cloud, insuring uptime, performance and security.
By looking for ways to standardize and simplify your service packages, you can ensure that you’re defining your clients’ expectations, exceeding those expectations, and optimizing your company’s growth and profitability.
For more in-depth advice on MSP best practices, check out our three eBooks.
- Lessons on Achieving Managed Services Growth
- The Dynamic and Influential Role of the MSP
- Formulating the Right High-Level Strategy
- MSP Business Planning for Business Growth
- Vertical Strategies and Top Vertical Markets
- Creating and Building a Strong MSP Brand
- MSP Marketing Strategies and Tactics
- Choosing the Right Technologies For Your MSP
- MSPs: Making Sure the Price is Right
- Building Effective Service Bundles
- 22 Critical Metrics and KPIs for MSPs
- Finding and Keeping the Best Employees Chapter 12 Contracts, SLAs and Master Services Agreements for MSPs
- Making Statements of Work, Work For You
- Mastering the Complexities of Successful Customer Onboarding
- Building and Tuning a High-powered Sales Engine
- Creating the Most Helpful Service Desk Possible
- What You Need to Know About Offering NOC Services
- What is a vCIO? It’s More Than What You Think It Is
- Security is an MSP’s Job One
- Customer Management
- How to Have the Conversation on Cross Sell New Services