I love managed services. I must do, because I've been preaching the idea for years, I even built my whole solution provider business around it. Now I spend my time advocating it globally. The business model is sound: deliver proactive IT services on a recurring basis via a defined contract. This model offers stability of income, insight into customer needs and future plans, and greater predictability of resources, among other things.
Often, solution providers think that when they embrace managed services, they have to entirely abandon break-fix business. Besides being unrealistic, it’s not strictly true.
The delivery of managed services and delivery of break-fix have very different economics, in fact when it comes to resource planning and motivation these models are polar opposites. This, of course, poses a significant challenge but it doesn't mean that moving solely to managed services is realistic or required.
To start with, some services may still be delivered in a transactional, on-demand basis. This is particularly true of project-based services, where an upgrade or replacement will be done one time rather than on a recurring cycle. Even if the project work is included in the managed service, it is a different kind of work to performing maintenance tasks, and so will be staffed and managed differently.
Additionally, the on-boarding process for new customers will likely always involve some kind of project work, and may often require “fix my problem” type initial engagements to stabilize the environment. Sometimes, an element of break-fix work will drive new managed services sales, encouraging customers to move away from transactional billings and onto more consistent managed services billing.
Just as product sales are an element of a solution provider’s mix of services, so break-fix work can be a core component of the business. What makes successful solution providers stand out is the fact that they understand the differences in the measurement and notifications of the different types of business.
Break-fix works to maximize the number of billable hours, while managed services looks to minimize the number of hours spent on each individual issue in favor of ticket closure rates. Break-fix and managed services both value utilization, but they differ in the way they both try and achieve that, with engineers focused on different goals.
A balance can certainly be achieved. As both bring different benefits to the business, the choice does not have to be one or the other exclusively. Some solution providers choose to be only MSPs because it can be easier to manage just the one business model, but this is not a requirement of being an MSP.
Understanding the financial model of each, and ensuring the proper management of the competing forces is the critical element to success. One does not have to make an either-or style section. Running only one model is often easier, but that does not mean it is the only path to success.