By David Corey, VP of IT Services, ATS
Management advice from a $300 million, 3,000-employee technology solutions provider
With the technology explosion and the proliferation of VARs, MSPs, and other IT service providers has come an interesting shift in perception among customers about how they view working with the channel. When technology solutions first entered the business world, anyone with some perceived IT experience offering services to organizations seemed like a worthy enough partner to those within business organizations who were less familiar with, informed about, or trained in IT. To compound matters, the extremely fast pace of the unfolding IT landscape in a very short period of time made it difficult for many organizations to make intelligent decisions about which relationships might be right for them, especially in the long run.
As time went on and most organizations grew to have IT-dedicated departments of their own — headed by individuals who were much more experienced and informed about IT in general — the perception began to change regarding how outside providers, especially for certain services, were regarded. For example, service desk and other “break-fix” activities began to be looked upon as a commodity — a low-value necessity, identical in their offerings/results no matter the provider — that should be procured at the lowest price possible. This was especially true when procurement departments — without much consultation from the internal IT staff — were solely responsible for decision-making regarding outside IT providers and relationships.
DIGGING OUT OF THE COMMODITY ERA
While some in IT executive decision-making positions still view many managed services as a commodity, we’ve finally taken steps toward the beginning of an era where perceptions and opinions are slowly starting to change. Today, customers desire service providers that offer value, a trusted partnership, and insights into underlying causes for issues in the IT environment. What’s more, the market demands service providers that are committed to helping customers move their businesses forward. The importance of this shift cannot be overstated, especially as it relates to how service providers are positioning their businesses within the marketplace, approaching solutions to client challenges, and nurturing relationships as they grow.
As this new era takes hold, smart service providers will differentiate themselves and strive to grow beyond being looked at as a commodity, even if it means charging more for their services. Customers are finally beginning to understand that, when it comes to IT service providers, they get what they pay for — and that is a huge opportunity for growth. Service providers must now embrace the fact that those who offer high value as opposed to simply the lowest price will more often outshine competitors and win in the long run.
How do channel executives take advantage of this shift in thinking and poise themselves for growth as attitudes continue to change? First, they can understand where the old attitudes came from, specifically how they are evolving, and “retool” their companies and client relationships to take advantage of the changing perceptions in the industry.
LOW COST = LOW VALUE
As we stated above, the trend in the recent past has been for the procurement and supply chain departments within organizations to dominate the provider selection process. These departments lack a core focus of basic IT functionality and long-term goals; they are motivated primarily to gravitate toward the lowest price — and that hurts internal IT department development specifically and the entire organization’s growth more generally.
Unfortunately, in less-sophisticated organizations, some CIOs also follow this line of thinking, especially if they originate from the operations side of the business. They don’t understand the long-term implications — for both IT and the entire organization — of simply seeking to offload these (in their eyes) “commodity” services/tasks and get them done at the lowest price possible.
My organization experienced a striking example of this when we were approached to submit an estimate to a potential client after they had been working with — and already received an estimate from — a low-cost service provider. The estimate involved a price for 7,000 calls per month to the service desk. Upon probing the potential client for more information, we discovered they had 3,000 end users. We knew through our familiarity with benchmark data that the volume of calls for that level of end users should be nowhere near 7,000 calls — in fact, that figure was double what it should be. Upon further review, we found several systemic IT environment problems which resulted in the unnecessary high call levels. At the proposal stage, we presented our solution with supporting data showing the areas of improvement and reduction in call volume we could provide. In the end, the other MSP was eliminated from bidding on the opportunity because our strategic value and insights outweighed their low-cost model and offered the client what they truly needed, not just what they asked for.
ALL ABOUT THE END USER
The decision-making executives who are cost-driven rather than value-driven tend to have one fatal flaw in their thinking: they don’t consider the vital importance of the end user in the overall scenario. This is the key fundamental concept when it comes to selecting effective managed IT services for an organization, one that the cost-driven decision makers don’t fully understand: The decision and the resulting provider relationship have a profound effect on end-user productivity — and the value of end-user time is paramount. End-user successes and failures drive the success and failure of the entire operation on a very basic level.
This scenario clarifies the situation: If an end user has an IT problem and it takes several calls for the service desk to respond and become effective in solving the problem, there are serious ramifications in the end-user’s world — frustration, lack of engagement, low performance, and low productivity. This all builds to generally low morale as stories among employees are exchanged and validated about the ineffectiveness of the service desk and other managed services.
The end result of the above scenario is a constant turnover in staff, and that is significantly costly to the overall business as it leads to a continuing cycle of recruiting, rehiring, and retraining employees. The “commodity”- minded, cost-driven decision maker is blind to these daily acute and snowballing overall long-term effects; from their perspective, they are paying the service provider the same whether problems are solved quickly or in a less-than-effective/efficient fashion. On the surface, for these decision makers, it doesn’t matter in terms of cost. But in the wider view of the business, the effects are significant.
EXECUTIVE FOCUS ON CORE INITIATIVES
In the bigger picture and on a higher level, a challenging and/or problematic end-user scenario can build to have an effect on the wider business in a troubling way. The CIO and other top IT executives, as a result of being pulled into daily end-user problems, tend to focus too much of their time on these daily acute tasks and challenges and too little on the key department and business objectives on which their time should truly be focused. Especially as the IT faction of customer organizations increases in sophistication, top IT executives need to spend the majority of their time on the development of core competencies and applications, the strategic direction of the department and the organization, and, in short, the “secret sauce” that truly sets their business apart from their competition. If top IT executives can’t focus on and meet these types of high-level objectives, the department and the business stagnates, and the eventual ineffectiveness may result in possible cutting of resources for the department or worse.
HOW TO GET THERE
Now that the origins and development of changing attitudes and activities in today’s decision makers within customer organizations are more fully understood, how can managed services organizations, simply put, serve their clients better and poise themselves for growth? In order to make the leap from “commodity provider” to long-term problem-solving partner, a more holistic view of the customer relationship must be implemented and ingrained. There are several elements to making that shift, and it won’t happen overnight. But smart service providers will recognize that it’s never too early to start. Here are four key steps to take now:
First and foremost, a mental shift must take place in how you, as a managed services provider, approach the potential or established client relationship. In order to do that, it is helpful to first assess where your client currently falls on the “cost-driven” vs. “value-driven” continuum of how they view managed services. Once that is determined, some effort may be required on your part to educate your client on the type of relationship that benefits them most: one that takes a holistic view of their business first, over and above focusing on the daily, recurring tasks of short-term problem-solving.
This education process on your part may involve getting the decision maker to understand that while a low-cost, low-value provider might address daily problems, they may not be doing anything to help figure out why these problems are occurring in the first place and, therefore, help to eliminate the root causes. The reason for this is simple: Many low-cost providers are compensated through a model whereby they are paid per incident or per call; they have no motivation or incentive to discover and fix root problem causes, since the repetition of these problems means increased revenue for them.
Once the decision maker understands this, you can lay the groundwork for a different kind of relationship that will benefit you both, more profoundly and longer term. Explain to them that, as a higher-value provider, you will offer insights into why problems are occurring. You can do this through helping them leverage the compilation of data utilizing today’s analytics tools that will draw correlations and provide pathways not only to problem-solving, but also to actionable insights into root causes and trends — and eventually to the achievement of business objectives, both in the IT department and the overall organization.
Simply put, as a VAR, strive to make your client focus on not just procuring hardware at the lowest cost, but on a relationship that provides a holistic approach including installation, proper configuration, availability, high performance, continuity of maintenance, and ongoing insights into new trends in usage and challenges as their business scales. Convince your client that you’ll reliably take these concerns off of their hands; that relief allows them to focus on higher-level department and business objectives.
The same approach holds true if you are an MSP; strive to educate your client on the downside of simply procuring services at the lowest cost, from a provider who will “run their mess for less.” Again, educate your client on the value of a more holistic relationship, one that provides not only solutions to everyday problems, but also a continuity of ongoing, actionable insights into root causes and trends. Convince them, perhaps through case studies/examples of past successes with other clients, that this type of relationship will result in not only fewer recurring problems but, more importantly, positive business strategies moving forward.
Once you have convinced your client that a higher-value, holistic approach is best, how can you ensure your business is equipped to provide that type of relationship on a consistent basis? One of the most significant ways is to have the right type of talent on your staff that will make that relationship happen — effectively, efficiently, and consistently over time.
It’s our observation that low-cost providers tend to hire employees with a limited skillset that dictates a “scripted” approach to solving simple problems for the client. Anything over and above those simple problems requires an escalation by the employee out of their hands and into the hands of a higher-level individual — leading to delay and frustration for the end user whose problem remains unsolved for the time being.
Our approach is much different. We not only seek out and hire individuals with the right type and breadth of skills, we encourage and foster an environment where those individuals are empowered to use their skills freely within the client environment to “dig deep” into problems and provide solutions the first time, whenever possible. This not only lessens delays and frustration on the part of the client and end user — it increases job satisfaction and retention for our employees, who can do what they were meant to do: solve client problems in both the short and long term and help the end user, and the overall business, move forward.
Make a commitment to investing in the right talent. Your low-cost competitors won’t be doing the same. Recruit employees who understand and have experience in the most current best practices in the industry. Empower them to use their talents freely within the client environment to problem-solve and thus maintain job satisfaction. Once you have an “all-star” staff in place, commit to providing them with consistent training and skills development to keep them ahead of the curve when it comes to truly delivering on the type of relationship you’ve promised your clients—one that they deserve and can prosper through.
Once you have your “dream staff” in place, commit to becoming, staying, and being well-known as an expert in your specific industry. Continue to seek out, understand, and implement leading-edge best practices within your organization. This not only keeps your company at the top when it comes to quality and value, but also helps you continue to help your client determine whether the “shiny new object/technology of the day” is or is not the best fit for them at any given time. Help them understand that you have the best grasp on where the industry is heading and can help them map out a plan to take advantage of the latest innovations that may suit their particular needs and goals.
A commitment to continuing expert status will help you educate your customer and tailor solutions that are right for them, at the right time. That’s the way to truly add value to the relationship, and you must make a continuing effort and investment in order to maintain that status.
Finally, and most importantly, you must make a commitment to follow through on providing a more holistic approach to your client’s business. Fortunately, your clients’ attitudes are changing. Increasingly, they want more from your relationship. They want not only solutions, but also insights and predictive strategies for new challenges. They want a technology solutions provider to look at their business holistically. They want a partnership that will help them achieve their overall business objectives today and down the road.
The only way to reinforce and take advantage of the changing desires of your clients is to follow through on the steps above, on a day-to-day basis and as the relationship unfolds down the line. The advantages of being successful at this are twofold. Strong partner-ships yield more profitable transactions in the short term and help build a reputation as a high-value partner that delivers consistently on what it promises. In the long term, that reputation is invaluable as client personnel change jobs and move to new organizations; the tendency will be to maintain the established valued partner relationship and introduce it into their new place of business. Finally, great relationships lead to glowing referrals. And that means additional opportunities for new business and growth on a consistent basis.
If you don’t begin to follow the steps above now, your competition will, and you may be left behind. But if you do, you’ll be perfectly positioned to grow your business by leaps and bounds in the coming years.
DAVID COREY is responsible for the strategic alignment, solution delivery, and service management of ATS’ consulting, service desk management, client computing management, system performance management, and hardware solutions. A Six Sigma Black Belt, Corey spent more than 19 years at IBM in executive roles. He holds a bachelor’s degree in computer science from the University of Windsor and an MBA from Keller Graduate School of Management of DeVry University.