Ten tips for mastering managed services in Australia

4. Seek help (there’s strength in numbers)

Safe peer forums are essential for your business and personal health, says eNerds’ Warner, who was president of the non-profit Entrepreneur’s Organisation last year. EO forums helped Warner focus on his business, reveal weaknesses in his approach and open doors. 

“I faltered at $3 million [revenue]. My EO forum helped me understand what to do: I took a hat off and got an experienced sales manager.” 

The business grew another $3 million in three years; it had taken the past 11 years to hit that figure the first time.

EO also introduced Warner to the burgeoning Sri Lanka IT scene. Warner has since launched eNerds’ first offshore presence, a network operations centre in Colombo. “It’s been a huge success, we’re really happy with the outcome. If you’re going to get to 20 percent EBIT, you need a hybrid model for offshoring.”

Other groups such as HTG and SMB IT Pro offer collegiate advice. Applegate took a year “off the grid” to do a “big lap” of Australia while the industry found its new level. Now he counsels MSPs: “We go very deep on the business. We help them with their leadership and business plans, and their life and legacy plans.”

5. Date lots of new vendors (and accept that some won’t keep up)

Applegate says the vendor relationship “has never been more important because you’re both closer to the customer”. Vendors must realise that while “there’s a place for both of you, the MSP is in the middle” of the customer relationship.

Klikon is building managed services that leverage technologies in the market, even where vendors aren’t yet supporting them with an MSP partnering model. They need to hurry up. 

“Our challenge is to get the vendor on board or take up part of the risk to go to market. A [consumption] roadmap is a must for us,” says Xistouris. “We’re happy to wear the risk in the interests of time and by being early adopters, but please catch up – we don’t want to be left holding the baby.”

Lenovo is one vendor recasting its channel program for the MSP market, says solutions group director Joe Screnci. In March, Lenovo launched its MSP program, which provides access to technologies including System X and storage, discounts, support and 120-day finance.

“MSPs have good opportunities across their desks but they can’t meet the cost of that investment,” Screnci says. “If you have to drop $100,000 of capital on the floor, that is a lot of cash flow, and one customer might not use all of it but you need that equipment to deliver the solution.” 

Lenovo has two staff to manage its program and a dozen around Australia training and talking to MSPs. 

6. Be the safe pair of hands (because others aren’t)

Fast-growing markets with low barriers to entry attract cowboys that need to be stamped out. 

“We’ve talked about that as an organisation and we have certification processes in place for our solutions,” says Sokol. Groups such as the US non-profit trade association CompTIA now setting up in Australia do a “decent job of education” and providing customers with confidence in their IT provider, he says.

Conetix’s Andrews says MSP industry growth reminds him of the early days of e-commerce on the web. “The cowboys come in and they have the gift of the gab and they charge a lot for nothing. We’re seeing a lot of it: they say, I can spin up a server for $40 and put 20 clients on it and try to make money – and they can’t bill or fix it. The guys who are very green, we try not to engage them very much.”

Writing in CRN last year, Ben Corbett from Adelaide-based LeetGeek – a previous winner of the CRN Fast50 – made a similar point. “I’ve seen overstretched IT engineers at MSP firms wrestling with a platform they don’t understand how to use. 

“We have inherited some environments supposedly managed by a fixed-fee MSP model and they were an absolute disgrace. One site had backups that had been failing for months and the customer hadn’t even been notified.”

7. Build, buy or hire? (The thorny question)

Fifteen years ago, MSPs had to build their own solutions and infrastructure. But is this still the best way? 

“That’s a philosophical argument,” says ConnectWise’s Sokol. He advises holding on to the helpdesk “because that builds relationships. Customers feel like it is part of their organisation.”

Speaking on a panel hosted by CRN editor Steven Kiernan at last year’s Microsoft Australian Partner Conference, Dave Stevens, managing director of Brennan IT, said: “The issue with running your own infrastructure right now around the cloud world is that the boat has almost sailed. 

“We do the numbers constantly on, ‘Is it more cost effective to own this stuff or is it more cost effective to, say, buy wholesale off Azure?’ Right now it’s more cost effective to own it, but it won’t be for long. If you don’t get it to scale, if you don’t get critical mass of revenue on it, then you’re never going to get a return,” said Stevens.

HTG’s Applegate says this is the “big debate” for MSPs. “What concerns me is building their own infrastructure has a big capital cost and an ongoing technology refresh cost. For a small MSP to play against the giants of Microsoft and AWS is nearly impossible.” 

Andrews specialises in providing infrastructure that small IT providers such as web developers can white label for their customers. “We’re the MSP of MSPs providing services to smaller telcos.

“Some of the smaller MSPs who can’t finance deals, we’re brokering in the middle on our infrastructure. We end up better than the bigger guys like AWS.”

Next: Disrupt yourself