It is relatively easy to grow, but to grow profitably is much more challenging, as we explored in this recent blog. A key determinant of whether you grow profitably is how well you manage your service margins.
Your margins are determined by two things: the prices you set and the cost of service delivery. You can increase revenues and grow your business by selling more managed services, but if you’re selling at too low a price or the costs associated with delivery are too high your margins will suffer and your growth will not be profitable.
Controlled, predictable service delivery cost
Partnering can have a positive impact on your bottom line by helping you to control the cost of service delivery. You benefit from your partner’s existing infrastructure and economies of scale and can scale for growth without capital investment thanks to a pay-as- you-grow model and predictable, controlled OPEX.
Removing the staffing risk
The issue of when to bring in new staff to handle anticipated growth in customer numbers or to support new services has always been a thorny one – especially as you must continue to maintain high levels of service to your existing customer base.
You can’t leave hiring until customers are ready to onboard, but you don’t want engineers sitting around waiting for new business to come in either.
Plus, when you hire additional staff your margins inevitably take a hit in the short term as even after new customers have been onboarded, it takes some months for them to become profitable.
Worse still, if the anticipated new customer revenues don’t actually materialise to offset the cost of the new technician(s) you have brought in, then these lower margins will persist – with a longer-term impact on your bottom line.
On the other hand, if you hesitate too long, you may actually lose new business by having to delay onboarding – or manage it by spreading existing resources too thinly, with the risk of upsetting existing customers by decreasing service levels.
Offering a scalable solution, with specialist resources on-demand, partnering for low-value but high-importance tasks like NOC and Service Desk offers a way out of this ‘hire or hold’ dilemma and delivers a number of benefits that can directly impact your bottom line:
- A pay-as-you-grow approach where the resourcing risk is borne by your partner: you control the cost of service delivery by increasing access to resources incrementally and in line with revenue growth.
- Reduced maintenance and staff training cost.
These benefits are typically recognised by our partner MSPs.
Ray Szpiech, Vice-President of Enterprise Networking & Security for SunTel Services says:
I know what my cost with Inbay is every month and regardless of how many calls come in. It enables me to manage my profitability and efficiency much better than if I was resourcing the Service Desk internally…Any way I can expand my MSP services but not take on significant variable cost is good. Partnering where you can control quality and meet your business objectives successfully is very desirable and I’ve been able to accomplish that by partnering with Inbay.
And Eric Rockwell, President of centrexIT has also experienced the benefits:
We don’t have to take on a huge payroll by employing new engineers. We simply increase the expenses with our partner as we grow. The new expense aligns with the new revenue so every new client we take on using Inbay’s services is profitable.
A predictable basis for pricing
The other impact on your margins, of course, is how you price your services.
You can control service delivery costs as much as you like, but if you have adopted a price-matching or undercutting model, the outlook for your bottom line is not good. An increasing number of MSPs realise that they must articulate the value delivered with their services, rather than just engage in a price race to the bottom.
A partner cannot determine your pricing model, but partnering for NOC and Service Desk can help by providing a clear, predictable cost of service delivery.
But it’s not all about dollars and cents
If you’re considering partnering for NOC and Service Desk delivery, your first consideration will probably be a financial one: how much does service delivery cost me in-house versus using a partner.
But benefits are not limited to ‘dollars and cents’.
My next blog summarises some of the ways in which our MSP partners have empowered their businesses by partnering for NOC and Service Desk.
In the meantime, for real-life examples, Read how other MSPs have benefitted from partnering with Inbay.
Contact us if you would like to find out how partnering for NOC and Service Desk can help your managed services business.