Business Tag

Pricing Strategies for MSPs

Establishing a pricing approach can be one of the most daunting decisions MSP executives make. Price too high and you will lose business, but if your price is too low you will compromise margins and risk your profitability and survival. Exacerbating matters is the fact that today’s pricing decisions have long-term ramifications. Bad pricing decisions will impact your business for a long time to come. Not only will you need to honor them over the duration of the current contract, but they will set expectations for future renewals. It is also important to note these expectations can carry from customer to customer through reference checking as well as basic word of mouth.

Based on these issues, it is important to have a strategy to from the basis for how you set prices and with a plan to evolve over time to meet your business needs. Here are a few things think about as you formulate your strategy:

Calculate & know the cost of each service you offer & never sell at a loss

Understanding the costs of your services sounds basic, but it is often misunderstood. To ensure you know your limits for the pricing exercise, you need to understand the ENTIRE cost of each service. This includes payroll, tools, outsourced labor, facilities, insurance, amortization of capital expenses, promotional expenses,  etc. It should also include an allocation to account for mistakes. This calculation is easier for businesses with a long established service business, but it can be daunting for a business new to services. Once established, this cost model needs to be reviewed and updated on a regular basis to account for changes in your processes, personnel, scale, skill and customer base to maintain its accuracy. Finally, NEVER sell a service below your cost.

Do not under price your services

This one goes without saying, the goal is to maximize the profitability and ROI on everything you do. Set your prices high and use a discounting strategy to make adjustments when necessary to win business or increase your footprint within a customer. Customers love discounts and they don’t like price increases, so it is easy to give a discount, but increases can be very difficult.

Create a concise discount program & apply it to all your customers

A standard discount program will make it easier for sales to produce quotes and for you finance team to approve deals. It can also be used to upsell customers to enhanced or new services by offering discounts for those actions. When creating a discount incentive, be sure to set a time limit and communicate the expected price once the discount program is over. Finally and most importantly, a standard discount program will allow you know your profitability limits in advance, so it will be less tempting to, “do whatever it takes,” to get a deal that ends up a money loser forever. It is critical for leadership to establish a clear discounting strategy so sales and finance understand what discounts can be offered, and when.

Some services are commodity

Research and understand the various services available from your competitors and their pricing. From there separate your services into two groups; those which are unique and those which are commodity. While both category of service should be priced based on the value they deliver and not your cost, your unique services can typically be priced with a higher margin than your commodity services because they have no competition.

Create a tiered discount structure

Establishing a tiered pricing model is a great way to incent customers to buy more of a service and to buy more services from you. Offering limited time promotional prices for new services or enhanced services can also be used to drive adoption of additional services.

Deliver a proposal that emphasizes the value delivered, not too focused on SOW & price

Always approach a prospective customer as their virtual CIO, understand the prospect’s business, its challenges and the value your services provide to solve those challenges. Really understanding the business needs of the prospect dramatically increases the value of your team in the eyes of the prospect and allows a value based pricing approach, even for your commodity services. This deep understanding of your customers’ businesses will pay off in longer term relationships and the ability to sell additional services as the customer’s business needs change.

Stay on top of market changes

The MSP market is very dynamic. This means new providers are entering the market all the time. You need to be aware of how their services will impact your pricing strategy and your relationship with your customers. The time to know a competitor is before you are quoting against them not while you are quoting against them.


There is no simple answer or one size fits all solution when it comes to pricing, but I hope we offered you a few things to consider as you build your own models that best fit your business and the businesses of you customers and prospects.



Should Big MSPs Continue to Partner?

In a previous post, I talk about how the added efficiency from the scale of a traditional NOC service, with its shared service model, decreases as an MSP grows, and in fact the lack of process and tool flexibility can actually impede a mature MSP’s growth. This naturally leads to the question, should a large mature MSP still partner and if so why? I believe the answer is absolutely yes, but the partner selection needs to focus on different criteria.

  • Dedicated Resources – Once an MSP has enough internal scale, the additional efficiency contributed from the scale of a shared NOC is very small. At this point, the MSP is better served by finding a partner that can offer a dedicated team that benefits from a shared facility, infrastructure and management and that is located in an economically advantaged geography. This arrangement provides the MSP with the consistency that comes from always working with the same individuals, but with little facility and HR overhead. Additionally, the members of the team assigned to a given MSP will become very familiar with that MSP’s customers and will deliver better service over time. Operating within a shared facility and infrastructure, the MSP will still benefit from shared cost on those items that will not effect day-to-day service. Finally, an economically advantaged geography provides highly trained resources at a fraction of the cost that is available locally.
  • Process & Tool Flexibility – When a VAR first embraces services and becomes an MSP, they will typically be weak on processes, but as they mature, they develop a deep understanding of what works for their customers and they may even acquire some large customers that have their own process requirements. At this point, the MSP needs a partner that allows the MSP to specify the process and tool selection and to perhaps set specific processes by customer.
  • Flexible Resource Pool – Having a dedicated team is great for consistency and building specific knowledge to support your practice areas. However, there are times when a skill set is required either on a one time case or a periodic frequency that does not justify a full time resource within you team. To meet these requirements, an MSP needs to identify a partner that has a pool of specialized talent that can be drawn upon to meet a specific need or simply augment the staff to meet a temporary workload increase.

By following these considerations, the large MSP will still benefit from improved service quality and reduced service delivery cost while still focusing their internal resources on high-value projects and closing new business.


Scale and Shifting Efficiency

Shared Services NOC a Perfect Beginning

When a VAR first decides it is time to begin to shift their business to the MSP model, they start moving customer by customer away from break-fix and over to a managed service that fits their needs. This is often a process that takes months or years to get all the customers moved to the new model. In the beginning the scale of the managed services part of the business is very small and, because the VAR is new to managed services, they need help in getting their new business up and running. At this point the shared services NOC is a great solution because the shared services provider has scale to operate efficiently with a wide breadth of capabilities and to do so 24/7. In addition, the VAR benefits from the process definition and advice they get from the provider.

The Efficiency Seesaw

An interesting shift takes place as the VAR’s MSP business grows. First, efficiency shifts. As the MSP side of the business grows the VAR’s scale approaches a point that the additional efficiency of provided by the shared NOC is minimal and the remaining efficiency gets lost in communications overhead. Add to that the lack of consistent service from individual to individual NOC engineer and you are actually operating at less efficency than what you could with your own team. Secondly, as the VAR gains experience in the MSP business, they will want to be able to better define their services, procedures and workflow than is possible with a shared NOC provider. It is at this point that the value of a shared NOC becomes negative and it is time to seek a new type of services partner.

What’s Next?

At this point, the VAR needs to make a choice to either build their own NOC and deliver their services internally or to find a different type of service provider that can bring many of the benefits of the shared NOC, but without the difficulties. In my next post I will describe what is involved in doing it internally, what this different type of provider looks like and explain why it still makes more business sense to continue to partner.


When Shared Services Break Down

Shared services offer a number of wonderful benefits for small VARs and MSPs including low-cost, efficiency, breadth of support and 24/7 operation to name a few. These are great features when your business is growing and you are new to offering services. However as you grow, your needs may shift some and the shared services model becomes less attractive.  In fact, some of the items that are most attractive about the model when you are new to selling services are the very things that make shared services so unattractive as your services business matures.  We will be discussing some of the drawbacks of shared services for mature MSPs and ultimately some solutions in upcoming posts.

Today’s topic is the fixed processes imposed by the shared services model NOC

To manage the environments for many end customers spread out across a hundreds or thousands MSPs, shared services providers must unify all their processes. This means they have one way of doing things and that way applies to all their MSPs.  This approach allows them to spread out the work across a large team; allowing any team member to do work for any MSP, since all the processes are consistent. This is fine or even preferable when you are starting your services business because you have not yet developed your own processes and your customers are likely smaller and willing to adapt or even unaware of the underlying processes. As you grow your team becomes more sophisticated and you begin to attract larger and more demanding customers. At this point you may want to specify things like what days to perform patching or how escalate alerts. In a shared services model, your provider is unable to give you his flexibility. Many will even try, but the end result will not be good, because every time they do a patch or alert escalation for one of your customers, it ill be an exception for their team and an opportunity for an error. This becomes even more problematic when you need different processes for a few big customers.

Our next post will talk about the efficiency sea-saw and delivery consistency.



Questions Organizations Ask Prospective MSPs

In talking to a number of IT departments and MSPs over years, I hear the same few questions come up over and over when the SMB is evaluating a perspective service provider. Here is a list of what I hear most often and some thoughts about how to respond:

Do you have proven experience?
The last thing an enterprise account wants is a service provider that is learning as they go. They need an MSP that has direct, long-standing experience delivering the services they need. That’s why it’s no surprise that in a recent survey, Enterprise Management Associates found “proven experience/depth of expertise” as the top factor organizations use to evaluate prospective MSPs.
Expect the prospect to ask you detailed, targeted questions. Ensure your answers speak to your deep technical and operational expertise. Be sure to provide specific examples of similar things you do for other clients. Additionally your prospects will consider whether you can meet their longer term needs. They may ask you about your capabilities within their emerging requirements, both technology expertise and operational scalability to ensure your team can handle their foreseeable expanded requirements.  While it is most important to find a fit that works now, the better an MSP can grow and adapt along with the organization’s business, the more value the customer will realize from the relationship in the long-term.

Your takeaway: In sales situations, sell your experience honestly, give specific examples. Oversell, and you may raise flags for the person sitting across the table.

Can I see your service datasheet?
Your service datasheet says a lot about your business, and it’s a great first step in assessing whether a you are the best match for your prospect. First, and most obviously, decision makers need to make sure the services outlined map to their needs. Next, the service datasheet provides insights into how organized and packaged your service offerings are. For example, the datasheet should provide clear definitions about what services and capabilities you provide, and, if different tiers are offered, it should be clear what is added as you move up each tier. This organization in your datasheet will provide confidence to your prospect that you have thought through your offerings and are delivering them consistently. Decision makers often attempt to spot service providers that are trying to do too much too fast. This can be seen as  a sign of organizational immaturity and can signal future delivery problems. By presenting a focused set of services specific to your market, you will convey that your team is equipped to deliver on their commitments.

Your takeaway: If you do not have a service datasheet, create one.  Be sure datasheet positions your capabilities with creditably.

Who will serve as our day-to-day contacts?
We’ve all had this experience: Vendor representatives come in during the sales process and amaze everyone with their savvy and expertise. After the contract’s signed, those people are never seen again, and you’re left with the junior team to manage your service.  I refer this to the bait and switch method of service sales. For an IT service provider, success is all about the people and customers are particularly disappointed when they are greeted by the “B” team as soon as they sign on. It is important to actually have your prospective customers meet and interview the actual members of your staff who will serve as their day-to-day contacts for account management, delivery management and technical support. Expect them to treat it as a job interview, your ensure your staff is prepared to help the customer gain an understanding of how they will work together. This process will go a long way to eliminate the buyer’s remorse caused by the bait and switch sales process.

Your takeaway: Be ready to have your operational staff participate in prospect discussions. Train them to help in the sales process. Nothing is more powerful in a presentation than a confident delivery expert talking about how they will be working to meet the customer’s needs.

What is the On Boarding Process?
This will be of critical importance to most customers. Depending on the type of service being delivered, migrating from their internal team to an external service can require a significant effort. For both the MSP and the customer, it’s critical to define respective roles and responsibilities. You should attack this issue upfront in the sales process. Highlight your on boarding process as a strength in your sales presentation. Present the prospect with a plan. Be sure the plan details time frame, responsibilities, cost and the SLA provided in the transition period. This will go a long way to setting a realistic expectation from the beginning and will truly aid your sales effort. Decision makers will look for vendors that approach this upfront process as part of building a long-term relationship, rather than a one-time transaction.

Your takeaway: Make the on boarding process a repeatable process that is one of your strengths. It as an investment in a long-term relationship.

How Strong is Your Business?
The act of researching and migrating to a service provider represents a significant investment, and the beginning of a partnership. Potential customers want a long term relationship so they can maximize their ROI. Decision makers will attempt to gauge, in as rigorous and objective a way as possible, your company’s long-term viability. They will probably want to see your financials to assess profits, operating cash flow, resource utilization, cash flow, and long-term debt. Another key indicator to viability is how long you have been in business and how many happy customers you have.  A long track record with lots of happy customers is not a  guarantee you will be able to serve them in the long term, but it is also very hard to beat.

Your takeaway: You can’t make this part up. Over time, you will have a good story to tell.

What do your internal processes look like?
Depending on the nature of the IT service required, these area will vary significantly for a given prospect. At a high level, it’s important a prospect is able to gauge your operational sophistication. For example, are all your processes documented? Do you leverage ITIL? What control mechanisms are in place? How much is automated? These are all areas where you should be prepared to discuss in detail as part of the sales process.

Your takeaway: Investments in developing good processes will payoff not only in operational efficiency and predictably, but sales as well.

Can we see the reports we will receive?

Reporting is what customers use to measure the work you perform for them. Reporting is also typically the only way you can show a customer all the detailed work you do for them day in, day out. Because of this importance, prospects will want to see your reporting capability and you should want to showcase it to them. Show them how to navigate the reports to find the information they are looking for, explain how reports generated as well as when and how they will receive them.

 Your takeaway: Reporting is the primary vehicle for demonstrating your value add to your customer on a regular basis, treating it as an important element of your overall service will lead to better customer satisfaction.

Can I Tour Your Facilities?

If the answer to this question is “no”, prospects will start looking elsewhere. By refusing this request, you are raising the possibility that you have something to hide. A prospect can learn a good deal from a tour of your facility, they can get a good reading for the people and the setup of the facility will help them gauge the efficiency of the organization.

Your takeaway: Here again, good organization can help sell and will project a sense of maturity and stability. Be prepared to show off your facility and be proud of it.

Can I Speak with Customer References?

Talking to an MSP’s customers is probably the most vital step of all. It’s a critical way to verify that the service provider’s answers are accurate and forthcoming. Does the customer attest to the MSP’s claims of being responsive to inquiries? Do the promised SLA correspond with the customer’s experience? Prospects will also examine length of the customer engagements. Here again, long track records are good to show.

Your takeaway: No surprises here. Happy customers are key to survival. Happy, referenceable customers are key to growth.

Do you outsource any parts of your service to other IT service providers?
In today’s global economy and given the powerful remote monitoring and managements available, it makes good business sense for an MSP to outsource part of their operations to an external provider. However, it is important for your prospect to understand this up front. What they don’t want is to encounter an issue and start seeing finger-pointing among various IT service providers. If you use external IT service providers be sure your prospects know you are solely accountable for their satisfaction.

Your takeaway: If you use other service providers, make sure you tell a clear story to prospects.

Can I see your contracts and service level agreements?
Early on, try to get decision makers to assess the agreements that are part of your service. They need to get clarification on what their obligations are. Items like, What if the client wants to terminate early? What are acceptable grounds for termination? Will a refund be provided? Also, decision makers need to review Service Level Agreements (SLA). It is important for them to understand what specific SLA commitments you are making, and what happens if service levels are missed? Here, beyond the specifics of the agreements, prospects can also infer a lot about how the service provider stands behind their people and obligations.

Your takeaway: Make sure your agreements are current, and accurately reflect the commitments you can deliver.

If you’re a seasoned MSP, you know better than anyone the common pitfalls organizations run into when they’re looking for vendors, and how they attempt to avoid a poorly prepared MSP.  Always think about the problem from the other side. How would you evaluate MSPs if you were the customer?


Grow your MSP business with data protection

Data protection services are a great mechanism to grow a managed service practice. Every SMB needs a viable data protection strategy, but few have it, so the available market is huge. Here are a few tips to help illustrate the benefits for your business:

  • Expand Your Customer Base—Data Protection is one of the key strategic services you can offer and the SMB market is wide open for grabs. Every SMB needs backup solutions to protect their valuable data and most struggle with cumbersome, ineffective and insecure solutions.  In addition, data protection is a strategic service that allows you to add value by providing one of the most sensitive and critical aspects of a company’s business.  You can help your customers understand the trade-offs between RPO and RTO and the importance of understanding how to build a business continuity plan.
  • Generate Additional (Recurring) Revenues From Your Existing Customers — For break/fix customers and customers you have provided professional services, data protection services allow a natural expansion of your relationship to a model of recurring revenue and value.  Many customers are looking for alternatives to traditional backup solutions and a managed service presents an attractive alternative.
  • Create Sticky Customers by Protecting and Storing Their Data — When you are protecting your customer’s data you have become an indispensable partner in their business. Hiring a new break fix VAR is easy; moving their data to a new data protection service provider is not. What’s more,  if your customer finally gets a data protection service that works well and meets his RPO and RTO objectives they will not want to leave you.
  • Evolve Your Customer Relationships — Selling a strategic service like data protection allows you to completely change your relationship with your customer from being “another” vendor selling hardware/software, to being his “virtual CIO” making strategic recommendations and delivering critical business systems. When developing a business continuity plan, you will gain deep and broad understanding of customer’s business. This allows you to deliver even more value down the road.
  • Ride the Wave of Growth— One of the beauties of any service tied to data is that data typically grows at a minimum of 20% year over year.  This means that your data protection service will grow 20% on average even if you don’t add new customers.  That is why it is important to create a business model that is able to capture the data growth.
  •  Increase Your Brand Value by Selling a Customized Offering — Promote the look and feel of your colors, your logo and your brand.  This includes all customer-facing UI components as well as reports.  This helps establish domain expertise for your company even if the majority of the technical expertise is coming from your service partner.
  •  Leverage Existing Infrastructure— If you have made an investment in infrastructure you can leverage that investment by pointing your customer’s data to your data center.  If you haven’t made that investment and don’t want to, you can point your customer data at your service provider partner and let them provide the hardware, software and operations staff, while you focus your energy on professional services engagements and sales.
  • It’s easy – An integrated console provides easy remote administration. Whether you want to be a master MSP managing other service providers or an MSP managing multiple customers, a centralized client management interface is crucial.  The web-based console provides a wide range of control over both backups and restores.  You can designate which functions are automated while still maintaining the ability to manage and monitor the entire backup and recovery process from anywhere and at any time.  In a disaster situation, you can restore files over the web or perform complete bare metal restores of desktops or servers.


Data protection services are one of the most strategic and broadly applicable services you can sell.  When selecting a technology platform for your service, be sure it has the flexibility to support your service the way you want to package, sell and deliver it. Beware of partners that require you to use their appliance or their datacenter. It is fine if they offer these as options, but you should always have the option of using you own. Also be sure the solution has the option of an on premise only configuration. This will allow you to sell your service to customers that have security concerns about storing their data in the cloud.

As customers look to move away from legacy backup solutions, your ability to provide a path forward for this ever growing space (both in terms of number of customers and data per customer) will make you the partner of choice for your small business customers.


At various points in the past couple years, we have had the opportunity to take a deep look at most of the platforms available today. Based on this review, we believe, Vembu StoreGrid best fits the overall objective of proving a rock solid solution with ample flexiblity to meet the needs of a wide range of customer, but while still providing a decent framework for building out your solution without a lot of additional work. In short, Vembu StoreGrid provides a world-class platform with tremendous flexibility. All of the solutions are fully brandable so you can present a single image to your customers and continue to build the value of your company.


10 Tips for Cloud Partner Selection

Cloud computing is evolving rapidly with new options and providers and services appearing on the scene daily. Many are also disappearing. VARs and MSPs choosing to leverage a cloud provider to deliver a service to your customer, you need a consistent process and criteria to select the right cloud provider and evaluate them going forward.

Here are a few things to consider as you create your selection criteria:

Reputation: Look into the provider’s history, who are their customers? What problems have they had in the past and most importantly, how do they react when they have a problem? Do they list a number of  testimonials on their site? If so, perhaps you can actually interview one of those clients without a formal introduction from the provider.

Longevity: The industry is experiencing a major consolidation. OpSource, NaviSite and TerraMark were all recently acquired. Additionally, business models are rapidly changing. None of this is necessarily a bad thing and could even be a good thing for you and your customers.  The point to understand is, if you build a service around this provider and sell that service to your customers will this provider’s service be available to you on an on going basis. Be sure the provider has the staying power and the contract terms ensure you will have access to the service you need even if their business model changes.

Security: Your customers will always have questions about security. Be sure you understand the security policies and practices of the perspective service providers and make sure they meet any special requirements your customers may need. In general, the provider should be a member of the Cloud Security Alliance, be SAS70 Level II audited and ISO 27000 certified. Beyond that, look for specific certifications to meet the specialized needs of your customers.

Flexibility: Flexibility comes in two parts: technical/operational and contractual. On the technical side, does the provider’s environment provide you with sufficient flexibility to create and support the services you want to sell. Are they making use of the tool sets that your team understands and do they integrate with your internal systems? Contractually, you need to be sure you can consume the service as you need it and scale up and scale down as needed without financial penalties.

Pricing: Be sure to understand their pricing model and how it will effect your ability to offer a competitive service to your customers. It is also important how the perspective vendor changes the price. Consider how often and with what notice. Realize that if they can change your cost with little or no notice, you may not be able to do the same to your customers.

Data Recovery: Be sure to understand the vendor’s disaster recovery and business continuity plan. Ask how long your customers will be without their service if they vendor suffers a major disaster.

Data Export: Understand how you can export any of your customers’ data and move it to another vendor in case you decide to switch vendors or if the vendor goes out of business. Be sure to ask how long it will take to export your data and the format in which it will be provided. Understand any costs related to the data export.

Failover: Well designed cloud platforms have built-in failover. Question a perspective cloud vendor about how their system works and ask to see a demo. Be sure to understand how the provider deals with local and wide-area failures and make sure their capabilities meet the needs of your customers.

Green Tech: Everyone in interested to  know how their business impacts the environment.  You should know that just because your perspective vendor is a cloud provider does not mean they are green. Ask the vendor if they are a member of The Green Grid. Find out about their energy planning process and find out if they participate in a carbon offset program. This is all good to understand so you can answer questions from your customers and use the information in your marketing.

Test it: Create a test with some internal resources. See how the service works. Was the implementation as easy as advertised? Test the vendor’s support and service organizations. Once you are satisfied with the results, then begin moving customers onto the new service.  Proceed slowly, moving a small number of customers and ensuring everything is working before moving more. This will give your new vendor an opportunity to learn how to best work with you and for your team to learn how to best work with the new vendor.

Hopefully these tips will help you develop a successful relationship with a new cloud vendor and avoid potential problem vendors.


Cloud Services for SMBs

The cloud has evolved to a point where I see no advantage to a new SMB investing in Exchange & SharePoint on premise solutions. Too many very good hosted solutions are available today to justify new investment in these systems. For existing SMBs with current on-premise systems, they should consider migrating to cloud based solutions as their maintenance contracts come up for renewal. Naturally, they need to look at the ROI of the migration, being sure to include the cost of the migration, but I am confident that in most cases the near term ROI in such a project will be excellent.

Recently, with the BPOS and AWS outages, a lot has been written about the availability and reliability of the cloud for these applications, this is where the SMB and their advisor need to be realistic about how the on-premise solutions they put together actually perform relative to modern cloud solutions. I argue that the best on-premise solution in an SMB will never approach the availability, security and reliability or performance of a well designed cloud implementation.

A newly formed SMB also needs to consider the alternatives to Exchange, SharePoint, etc. available today as well. For example, Gmail is a great way to get a hosted email solution going with almost no cost.

The cloud creates a lot of possibilities for SMBs: improved functionality, lower risk, less management overhead, lower cost to name a few. The channel has even greater opportunity to reshape their businesses to better serve their customers by leverage these unique cloud based solutions that deliver far better value and functionality compared to the traditional approach. The open minded and nimble VARs will find the right balance of cloud solutions for their customers and become the leaders in their markets, the others will be stuck in the past.



RMM Tools Vs Value

We often talk to MSPs who are in the midst of considering a new RMM tool. They are typically reviewing the features, assessing how the new tool will fit with their current processes and trying to calculate an ROI based on the cost of the tool and some hypothetical increase in future productivity. My first comment is always that this is also the perfect time to review how they deliver their service to their customers and try to identify additional efficiencies they can achieve. I suggest they do this is by taking a hard look at what services are provided in house and what services are delegated to a service vendor. As an example, do they identify a vendor to perform basic monitoring and alerting and focus their internal efforts on higher value activities such as remediation or even more specialized services like VoIP or security related services. Making this analysis at the same time as they consider the selection of a new RMM tool allows an MSP to consider if the new tool is really necessary and if so, how it will work with any new service vendors.

Then I segue into the real conversation. That being, MSPs spend far too much time worried about things, namely tools and technologies, and that these things really have little impact on the success of their business.  At the end of the day, the MSP business is not about what RMM tool they use or any other number of technical considerations. Their success is really about the unique value they deliver to their customers. That unique value comes from developing and maintaining a deep understanding of their customer’s business and thereby differentiating themselves from the competition. After all, any MSP can patch a customer’s server or keep the Exchange server running, but it takes a firsthand understanding of the customer’s business to make recommendations that allow the customer to best leverage technology to grow their business. This makes the MSP irreplaceable to their customer. The MSP will only have the time and focus to accomplish this if they delegate the routine activities to a partner. The quicker an MSP can transition from being technology driven to service driven the quicker they will achieve lasting success.


The Importance of SLAs

In reading a post over on one of my favorite blogs, Talkin’ Cloud, I saw a discussion that caught my attention. The post itself is titled, Top 11 Questions MSPs Ask About Cloud Partner Programs, but the discussion touched on Service Level Agreements (SLA). In particular the seeming lack of importance customers give the actual SLA service provides give them.

In my experience at NetEnrich and at OpSource prior to that, our customers would spend a lot of time on the Master Service Agreement (MSA) with many conversations between their legal team and our legal team and give and take on a number of points. Naturally, these are important conversations to have, but in this negotiation process the SLA was typically given a cursory read and accepted.

As a commenter pointed out, one can argue that the ultimate SLA is customer satisfaction and a vendor with low customer satisfaction will loose their customers. While I agree with this premise, I believe customers who do not question the SLA, miss a great opportunity to get a better idea of how the service vendor will deliver on customer satisfaction. I recommend not only reading and fully understanding of a perspective vendor’s SLA to insure it meets your needs, but also to always ask the vendor a number of pointed questions about their SLA and how they operate in a number of possible incidents and then carefully gauge their responses. This is the best way for a customer to set their expectations of how the vendor will respond to incident prior to engaging. It will also help to expose areas to negotiate on the SLA along with possible areas where you may need to augment the service to maintain that ultimate SLA with your internal or external customers.

A few things to consider in an SLA:


  • Evaluate the promised response time based on the severity of the incident. Does this response time fit your needs, if not is there a way you can work with internal resources to deal with it?
  • Look at the teeth in the SLA. This is what happens if the vendor does not meet their commitment under the SLA. Many vendors have great standards in their SLA, but have little or no teeth in the event they fall short.
  • Understand how breaches need to be reported. Here you need to understand how long you have to report the breach and what process needs to be followed.
  • Look for  what we call the No Harm, No Foul SLA. In this SLA, if your team does not report the breach, it did not happen. In many cases this type of SLA works fine, however, if you are relying on the service to support a series customers, then this may not work as well because some of your customers may see problems you did not see and they may be too busy or frustrated to report it to you. In this setting, you may want an SLA where the vendor is required to report to you any and all breaches.
  • Lastly, be sure you can live with the performance level defined in the SLA. If you can, then you will probably be happy when your vendor out performs it.

Let us know you thoughts and please ask questions.