In my introductory post I outlined how and why so many VARs, SIs, and other channel partners are making the move to hosted Services – and the 7 steps commonly taken to get there. In this post I’ll outline setting core goals that I’ve seen partners often pursue.
Why Transform to a Workspace Services Provider?
What’s the Payoff?
Earlier last month, TechTarget published an article about boosting managed services margin in an increasingly competitive MSP market that is in jeopardy of becoming commoditized. Service providers who host email, dedicated servers, hosted networking etc. are feeling price-pressure from a market full of competitors willing to cut costs. And with that comes pressure on profitability.
At the same time, more customers are asking for true partnerships from their technology providers and shift away from simple transaction-oriented relationships. They would rather partner with a provider who truly understands their business and can assume a trusted role of supporting more technology-related activities so they can focus more energy on their core business. One of the highest-value hosted services is providing secure hosted workspaces, hosting apps, follow-me data, device management, and even entire hosted virtual desktops. But of course these can be part of a larger services portfolio.
The most common end-game goals for Service Providers is simple to describe but challenging to execute: How to
- Find new services that are increasingly higher-value and more profitable
- Provide a portfolio aligned with customer needs,
- Open new opportunities for future growth.
Goal #1: Focus on Core Service Value & Profitability
Your primary set of goals must focus on those service traits that systematically lead to higher-margins, and to a more scalable business:
- Replicatability – Going to market with a service with a standard basic product, and minimizing the expensive and time-consuming customization aspects. While some customers may ultimately want something all their own, you should open with an offer that has standard components. You’ll find that most customers won’t tend to deviate too far. This approach makes the offer easier to market, easier to estimate/cost, and ultimately decreases overall cost-of-sales.
- High value services – Anticipate what customers will need tomorrow while avoiding common and commoditized services. Ask what will give them the most relief so they can focus on their core business? The more you, as a service provider, are able to off-load from the customer, the more they’ll be willing to pay for it. Don’t just look at the “plumbing”, but at what their lines-of-business will find valuable. Remember: Although providing servers and networking are needed, the hosting of applications, data access, mobility etc. are far higher-value.
- Competitiveness – at the core of a competitive offering are traits such as uniqueness, price, delivery efficiency, focus, execution. Be brutally honest with yourself: If you can’t excel at 2 or more of these, reconsider how competitive you really are. As a litmus test, if you can’t charge 20% or more than your competition for your services, then you have to ask how much more differentiated or focused you really are.
Goal #2: Focus on a Portfolio Delivering a Tighter Customer Relationship
Three questions I often ask partners I work with are (a) is what share-of-wallet (or footprint) you have with each customer, (b) whether your relationships are transactional vs. partnered, and (c) whether ARPU (and value) is consistently growing at each customer.
The answers to these 3 core questions indicate whether the right portfolio is being brought to market. For example, a series of point products/services will tend to attract only a share of the customer’s wallet, be largely transactional, and generate a flat-line ARPU.
However, a portfolio of high-value IT services – each that builds on the others – will tend to make answers to the above questions more favorable. For example, an ideal portfolio might begin with data sharing, build to hosted apps, lead to mobility services, and culminate in providing entire desktop outsourcing services. All-the-while providing an increasingly tighter customer relationship, building ARPU, and climbing the value ladder.
Goal #3: Focus on Opportunities Providing Core Growth
Finally, good business is all about growth. Not just ARPU growth from installed-base (as above) but organic growth from net-new customer acquisitions.
You’ll need to architect a growth path between your current service portfolio, and where you’d like to be in 3-5 years.
Ask yourself how and where you can logically extend your services “up-stack” to provide increasingly more strategic value to the customer, rather than simple transactional services. That might take the form of shifting from server hosting, to data hosting, to application management, to application hosting. Or perhaps you move from application hosting, to device management & mobility management, to desktop hosting.
Whatever your path, start with your core strengths, and draw a logical trajectory toward serving more of your customer’s strategic needs.
My next installment: New business and recurring revenue models
Also Consider the Following Links:
- Transitioning to a Hosted Service Provider – Introduction
- [Blog] How big is the DaaS market
- [Blog] Differentiate or Die – Why MSPs need to change their game
- Citrix Service Provider Program
Next Installment: Part 2: Embrace Recurring Revenue Models