Selling month-by-month, fixed-fee managed services requires this managed services provider’s (MSP’s) vigilance in rooting out activities that threaten its profitability.
Kyle Scofield, IT director at Technology Seed, saw increased ransomware outbreaks among clients and subsequent profitability decreases, until his company developed and implemented a new security solution.
W. Marc Bernsau
The holy grail of managed services is being able to sell a comprehensive bundle of solutions and services at a predictable monthly cost. Unlike the unpredictable hardware expenses (and downtime costs) that break-fix clients experience, managed services clients want a consistent IT experience and a predictable monthly cost.
MSPs vary widely in how close they get to the flat-fee utopia. Some only guarantee a flat fee for software licensing and remote monitoring services, but charge hourly labor fees to address support issues, although oftentimes at a reduced cost compared with what they charge break-fix customers. Others include remote support in their fixed monthly fees, but charge for any services requiring on-site tech support.
Technology Seed has wrestled with all of these options in the past. But five years ago, the MSP made a bold move to differentiate itself with a “Cap Your Costs” managed services offering, where all support and services (besides true anomalies such as office moves) were sold at a fixed monthly rate. The MSP has experienced several consecutive years of double- digit growth since that time, but it hasn’t happened without having to address some difficult challenges along the way.
The First Key To Predictable Managed Services Costs — A Network Assessment
Fixed-Fee Backups Are A Must, Too
Ransomware Can Be A Fixed-Fee MSP’s Worst Nightmare
Some MSPs are finding success educating clients about avoiding phishing schemes and using advanced technologies such as next-gen firewalls to drive down ransomware outbreaks. Despite adopting these best practices, however, Technology Seed still felt the weight of ransomware attacks last year. “On multiple occasions, we had to respond to ransomware outbreaks, which took an average of four hours to resolve,” says Scofield. “In each case, we were able to get all of our customers’ data back without any of them having to pay the ransom, but it took a major toll on our staff.”
The typical ransomware chain of events is as follows:
Earlier this year, Technology Seed developed a way to better protect customers from ransomware. The way it works is that as soon as ransomware begins encrypting files on the network shares (step 2 above), the File Server Resource Manager (FSRM) (a free component on Windows Server 2012 R2) shuts down all shares, thereby ending the infection. “It takes less than 15 minutes to configure the FSRM to perform this function, and the time it saves after a ransomware attack is enormous,” says Scofield. “We still need to rebuild the infected machine, which takes about 10 minutes, but in some instances, it’s saved us from having to restore 30 TB of data on the network, which can easily eat up an entire day.”
Remember: The Customer Is Not Always Right
The policy also addresses clients who take IT matters into their own hands, such as plugging a wireless router into their network without consulting Technology Seed. It also addresses situations where clients fail to take the MSP’s technology recommendations. “Sometimes we may recommend a firewall upgrade, but the client doesn’t want to go with the specific brand we recommend. We’ll try to work with them and find comparable alternatives, but if they prefer to use a consumer-grade firewall, we have to explain why they can’t do that. If they insist on doing things their way, we can’t continue being their managed services provider.”
In the past two years, Scofield says, his company has had to part ways with a few customers that violated its behavior policy, one of which was in the top 10 percent of its largest contracts. “In some cases, the decision to cancel a contract led to an increase in our average profit margin per customer,” says Scofield. “Even if a troublesome customer didn’t have a financial benefit, we believe it shows our employees that they are more important than our bottom line, and that goes a long way in improving morale and retention.”
“Clients are not permitted to hang up on our staff or yell or scream at them. If it happens, they get one warning to correct the problem.”
Kyle Scofield, IT director, Technology Seed
Get Ready For Managed Cloud Services
Like its move to fixed-rate managed services five years ago, Technology Seed’s transition to a cloud service provider will likely bring several new challenges. But, many of the same principles that led the MSP to two consecutive years in the top 20 fastest-growing family-owned companies spot by Business NH Magazine will continue to drive Technology Seed’s future successes, too.
Read the full case study at BusinessSolutions
One of the ways you can differentiate a real managed services provider (MSP) from a VAR that is dabbling in selling services is by the tools they use to run their business. Every true MSP uses two kinds of software solutions: a PSA (professional services automation) and an RMM (remote monitoring and management). Technology Seed is an MSP that understands the value of these tools. It also understands that not all managed services tools are created equal, nor do they all have MSPs’ best interests in mind.
Last year, frustrations with its legacy RMM solution led the MSP to start shopping elsewhere. “One of the things we did not like about our previous RMM tool was that it did not integrate with any of the antivirus [AV] tools we wanted to use,” says Kyle Scofield, IT director, Technology Seed. “Plus, our legacy vendor charged $3 per agent per month, which was far too expensive.”
The RMM software also integrates with Technology Seed’s ConnectWise PSA, so that if any problems are detected, such as a missed backup, the RMM software automatically creates a ticket. “We also like that Ninja MSP hosts the software in their cloud, so we don’t have to worry about managing a server like we had to with our previous RMM vendor,” says Scofield. “Their product is browser-based, too, which allows us to view active agents via any internet-connected device. Plus, we can manage all of our customers from a single screen, which saves us four hours a week compared with our former RMM tool.”
Compared with some of the other vendors Technology Seed works with, Scofield says, Ninja MSP has been the most responsive to feedback and delivering on its promises. “They have an aggressive software development road map, and whenever they commit to making a feature upgrade, they’ve proven time and again that they will meet their projected deadline. Some other vendors make promises but don’t follow through until years after their original projected deadline. We currently have 3,500 seats being managed by Ninja RMM Software. We project it won’t be much longer until we completely phase out our legacy RMM and manage all of our clients with Ninja RMM Software.”