The “M” in MSP…
Doesn’t stand for Monthly or subscription-friendly – although many technology vendors and distributors hope it will as they look to leverage their channel and partner ecosystems as they pivot to the cloud and other digital services that require a subscription-based business model.
Trust me, there is no doubt in my mind that managed services are the place to be these days and every IT service provider or value-added reseller (VAR) should have solid managed services capabilities.
If I were to spin-up a company today – I’d provide managed services, almost exclusively. Managed Cloud Services, Managed Security Services, Managed IoT Services and Managed Business Services.
With that said, the biggest strategic move I’d make would be to ensure that the “M” in my MSP stands for Monthly.
Having a business that is primarily monthly subscription-based is the ultimate business lever that provides stability, growth and value that can increase geometrically once you’ve committed and undertake and execute the necessary alterations to your business.
You have a transactional model that is currently paying dividends and business is pretty damn good right now – why fix what isn’t broken. Well, the numbers don’t lie and cloud based subscription and consumption is exploding and revenue streams are shifting from capital expenditures (CAPEX) to operational expenditures (OPEX) at a very rapid rate.
I’m sure your top line looks great, but how strong do all those legacy profit pools look these days? Have you done a 12 – 18 month look back to analyze where you are making the blended gross margin you desire, and which pools are drying up?
Probably not, but it is an exercise that’s worth doing - soon…
Moving to a hybrid business model that includes and preserves the core of your legacy business, while allowing for the growth of a subscription-friendly business model is key. Having grown-up in this business we understand the importance of not disrupting your run-rate business – but we also understand the need to institute subscription-based business capabilities and approaches to ensure your business will be financial healthy for the next decade or two.
The reality is that for most of us our business represents our most valuable asset that we’re looking to monetize at some point to ensure a happy and fruitful retirement. Well the only problem with that is the value of your business is decreasing every day if you don’t have a valuable and growing subscription element in your overall business mix.
The reality is that product sales will be worth $0 to most buyers within the next 12 – 24 months and professional services are also being discounted as buyers are gravitating to subscription-based models and the power of both profit stability and compounding.
Getting to the Ultimate Model
The approach will be very similar to what you prescribe to your prospects and clients – start with an assessment of your current monthly subscription business readiness. Where do you stand today verses where do you need to be effective and productive.
Next, once you have completed the assessment and know what issues you need to address – it’s time to commit to the journey.
The #1 item holding back partners from entering and exploiting the cloud is lack of commitment to make the changes necessary to create an impactful new business that is subscription-based.
Once you’ve truly committed to change and make the journey, the rest is actually pretty straight-forward. Create a strategy and business plan, alter your sales model and compensation plan, re-frame your marketing approach and ensure you have the right systems and processes to become a monthly digital athlete.
Foremost, keep in mind that you need to set-up an execution plan & cadence that ensures your constantly moving forward at a pace your people can handle.
Also, make sure you don’t pollute your core business by distracting the masses by getting everyone involved. Remember, most of your folk’s don’t want to change as they’re happy with the status quo and aren’t looking to alter their day-to-day in any way.
So keep everyone informed, but start with a small Tiger Team to get going and build-up some momentum and success. Nothing attracts a crowd, like a crowd and you can catch people’s attention with celebrating some wins.
Lastly, based on our experience the journey takes 6 – 8 months to reach a point where you are as comfortable dealing with monthly as you are with transactional initiatives and annual managed services contracts.
There is no easy path to get there – just a better way that includes assessing, planning and orchestrating. But rest assured that the blood, sweat and tears will all be worth it once you have a significant and growing monthly recurring revenue business.