IT service providers and managed service providers are often told that scalability is the key to growth and yet few pursue it. Why?
Largely, that thinking is a misperception. To many MSPs, scalability means being able to service customers at a rate of growth that feels unreachable, making the very idea of it seem impractical.
Instead, MSPs need to think of scalability as a way to leverage optimization and efficiency to deliver more business without the equivalent need for more resource. It's about freeing up time and improving profits, not necessarily increasing customer numbers.
This type of optimisation depends on three things: standardisation of business best processes, minimising the breadth of technologies being managed, and automating activity where possible and practical. Such an approach will allow MSPs to reduce the amount of resource required per customer, without compromising service delivery.
Changing an MSP to be scalable means a shift in mindset. IT support companies that are just getting started will typically take a highly reactive approach to each customer's need and provide a customized service. Driven by eagerness to please and a reliance on only a few customers, smaller MSPs quickly find that 80% of their activity is comprised of "outliers"—actions and requirements that are unique to a particular customer, and nearly impossible or inappropriate to replicate.
This approach will work for a small MSP, despite its inefficiencies, but part of 'growing up' is a move to standardization. Without this shift, everything becomes too cumbersome to work, from how support tickets are managed to reporting, and especially the onboarding of new employees.
Processes and service agreements need to be standardized across the business so that every customer receives the same style of service, but at varying levels according to their needs. Higher-paying customers will receive a broader selection of services, more demanding SLAs, or be supported across more devices, but the processes supporting them are identical to any other customer. By taking this approach, growth becomes more predictable—the real cost of supporting a given number of endpoints becomes calculable, as does margin.
This is not just a shift in process, but a shift in attitude and culture. The business looks to create a standard set of processes that will satisfy the majority of customers, versus one-offs that meet the needs of only a few, helping to level the playing field and optimize quality as well. Exceptions to this rule need to be kept to a minimum, if not eliminated entirely.
Almost every episode of Kitchen Nightmares has a scene where Gordon Ramsay lambasts the restaurant for its overlong, complicated menu and tells them to keep things simple. The advice is to do a few things very well, rather than doing everything to a mediocre standard.
It's advice that can work for MSPs too—and they don't even need an expletive-filled rant to incentivize them to do it. Simplifying the menu of services and products offered means technicians have more focused, relevant expertise and can provide a far better service.
If an MSP is servicing 20 customers and has 20 different versions of backup and recovery, then this increases overhead substantially. Any new technician who manages backup services must be trained on 20 different systems, rather than one.
There will be an investment in time needed to move customers over to a standard service, but this investment will be well worth it for longer-term gain. With this approach, it's important to balance a single customer's needs with the needs of your entire business. The time and resource drain of a single customer that deviates from the norm will make it highly unprofitable very quickly, not to mention negatively impact the service delivery of other customers. Ultimately, it comes down to being prepared to turn away customers if they do not fit your business model.
The final part that will make a business more scalable is automation. A lot has been written on automation recently, but the fact is we're in the early days of this technology. Right now, we need humans for 80% of an MSP's work while the remainder is automated. But this is changing, and automation will continue to improve and push the percentage that it governs higher.
Nevertheless, automation is already paying scalability dividends. Regular patching and updates, backup, and antivirus should be automated by now if they aren't already. Many troubleshooting tasks can be automated, such as self-healing and checking configurations. Very quickly, large chunks of time—which is ultimately the only resource that those in a service-based industry have to sell—are being released for use elsewhere. For the sake of scalability, that may mean allowing individual engineers to handle more customers per person. Or it may mean staff can be trained to move away from these simple tasks, improve their skills and insights, and ultimately increase their value to their customers. Either way, the business is more profitable.
That last point is perhaps the most important. As said at the outset, despite the usual preconceptions of the meaning of the word "scalability", implementing these principles doesn't have to mean a dramatic increase in customer numbers. What really matters is profitability. The goal of optimization through standardization and automation is to free up time to then re-dedicate to higher profit services or reinvestment into the business. Growing the customer base is simply another option, not necessarily the ultimate measure.
John Pagliuca is general manager of SolarWinds MSP. This article was originally published on Channel Pro Magazine on April 21, 2017.
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