Survey: Disconnects in MSP Selling Approach

Simplicity VoIP is considering a move into the managed services sector to provide telecom support services to ease the workload on already overtaxed IT departments.  We agree with the position in this article that the approach should be gradual and flexible

LogicNow says managed service providers and IT departments aren't aligned on priorities, resulting in lost sales opportunities. The prescription, however, could prove problematic in the short term.

More than two-thirds of managed service providers (MSPs) want a strategic relationship with their customers, providing valuable services that essentially relieve the costs and burden of IT management. Conversely, only 13 percent of IT departments are looking for such relationships with their service providers.

These two data points are the core conclusions of managed services platform vendor LogicNow's Global IT Service Providers Harmony Report, which is based on a survey of 1,300 IT departments and nearly 700 IT service providers from eight countries. Rather than the relationship being "harmonious," LogicNow says there's a distinct "discord" between the two sides of the services equation.

From LogicNow's perspective, the disconnected data shows that MSPs are too eager to push their services on would-be customers rather than identifying IT department needs and aligning choice offerings in a gradual consumption model.

The prescription for gaining more business, LogicNow proposes, is to take on smaller engagements to start, demonstrate value and capabilities and gradually grow the relationship from a transactional one to a strategic engagement.

While demand for managed services will continue to grow over the next several years, LogicNow believes MSPs shouldn't be so eager to push strategic services - the outsourcing of key IT functions such as backup and security, for example - on their customers. The advice is a break from what vendors and channel advocates have advised for a decade, on the presumption that the market wants to shift more burden to third-party providers to gain economies of scale in staffing and resources.

LogicNow's General Manager Alistair Forbes believes taking a measured approach to IT services sales will result in longer and more productive customer engagements, although he acknowledges that there's a potential for extending sales cycles.

The "land and expand" sales approach means MSPs that identify customer needs and respond to limited and specific priorities will capture more accounts, but those sales wins will have smaller values until the strategic relationship unfolds. This could prove problematic for cash-strapped MSPs, as they will still need to carry the cost of developing and supporting strategic resources while servicing smaller engagements that generate lower cash flows.

In addition, treating each sales opportunity as a unique engagement that requires tailoring has the potential of slow sales. One MSP best practice is to package services in repeatable bundles to scale sales. Consultative engagements require more time to assess customer needs and craft unique proposals, which take time and could slow sales and revenue.

The LogicNow Global IT Service Providers Harmony Report presumes that MSPs' approach to the market is flawed. It doesn't address the possibility that the disconnect stems from how customers are viewing managed services. Other potential factors influencing IT departments' resistance to strategic MSP engagements include regulatory limitations, budget constraints, security concerns and preservation of internal jobs and functions.

An area where the LogicNow report says MSPs could improve customer relationships is in billing. The report found that IT departments dislike how service providers bill for individual, product-branded functions rather than bundles. LogicNow believes MSPs are hurting themselves by revealing discrete pricing for services, identifying products used for certain functions and limiting profitability to a cost-plus model. The report concludes that IT departments would rather have bundled billing.