Don’t Get Caught in Your Vendor’s Business Model Transition
You cannot serve two masters. Some would say it’s Biblical, but I also think it is good business sense. I am seeing a LOT of companies jump on the “managed” business model bandwagon. Whether it’s managed IT, security, phones, or lawn care….okay, maybe not lawn care as much!
What is concerning is the “me-too” providers, attempting to transition to the managed service business model without the prerequisite experience and commitment. This cannot be copied from an established group, plugged into a pricing sheet, and sold without much DELIVERY experience.
I am not saying business models can’t grow, pivot, and change…it happens constantly! I am saying that YOU do not want to be part of their transformation. Technology is too critical in today’s businesses to mess around with. To keep this from happening, ask these simple questions to any group that is proposing managed services to you:
- What percentage of your current Clients are under the arrangement they are proposing to you? This will tell you how far along they are in their business model transition to managed services. Any group with less than 60% of their Clients under this arrangement is still “transitioning” and may struggle with certain aspects of service delivery.
- Do they offer other plans/models? It is a huge red flag when the group still offers as-needed, project, and other one-off support services. In a well-run managed provider it’s an all or nothing proposition, you cannot serve both managed and hourly Clients out of the same resource pool.
- Is the Agreement term less than 12 months? Established managed services providers would never do less than a 12-month agreement. Why? Because the mature providers understand that this model will require long-term planning and investment in the systems and people to deliver a best-in-class experience. Selling month-to-month agreements does not allow that to happen.
- If the answer to #2 is no, then what is the renewal rate of your Agreements? It should be more than 80% in a well-run group.
- What is your average Client size? Am I the smallest? Largest? Ideally, you want to be slightly above the average and never the largest! This will ensure you are taken care of well but not so large that they are constantly “figuring out” how to handle an account so large.
- How long have you been offering THIS service plan? Less than 24 months means they are still in the early days of aligning their business with this delivery model. Proceed with caution!
