Is your IT provider’s business model holding you back?

Would you expect the Chevy dealer to tell you that the new model Ford would be a better fit for your family's needs?  Is your local retailer going to tell you that Amazon has a much better price?

Would you expect your project-based, hourly IT provider to recommend that you move to a solution that would require less time to manage and no project to setup?  The answer is no, and in just the past week I've seen this in practice twice!

The reality is that the vast majority of IT providers are (still) based solely on billing time, selling hardware, and making recommendations that generate projects.  This is not a bad thing, to a point. However, it becomes a very bad thing when your business technology strategy is driven by the business model they have, not YOUR needs. Two examples from last week are below.

Example One:

A prospect is paying hourly for IT support from Company A. Company A installed Small Business Server 2011 in 2009. The prospect is happy because the server works most of the time. Company A is happy because the server is generating support hours.  The reality is that Company A should be moving their Clients to Office 365 Cloud and moving off the in-house server entirely. In fact, this is just what Microsoft recommends.

So why does Company A not make this recommendation? Because Company A is an hourly provider and doesn't make money off of cloud solutions. They want to bill the prospect hourly for patching servers, backing them up, and "working on them" when there is an issue.

Company A will then try to find a "better" cloud email solution. However, this is just reselling Microsoft Exchange at a higher price point than going directly to Office 365.

Example Two:

Company B has sold a prospect all the best network gear, servers, and workstations. The setup was expensive, but has never worked correctly. Now the prospect is having to call Company B constantly to get support (and that is exactly what Company B wanted).  This unreliable, hourly billing model becomes the prospects norm. Eventually, all the equipment is three years old and needs to be replaced, but Company B isn't sure that the proper backups are in place.

The hourly business model is built off, you guessed it, hours!  So if there are 2080 billable hours in a year how do these companies grow?  By employing more people and billing more hours.  Eventually this model doesn't scale and customers start complaining about response times. Hourly-based IT companies will unsuccessfully attempt to become a "managed services provider" but will still have a scale issue on the people side and a dependency on billing hours.

Written by: Edward Stringfellow

 


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