As a managed service provider (MSP), your competitive mindset should be focused as much on customer success and retention as it is on winning new business. After all, if you don’t offer your clients what they need, another competitor might swoop in and take away their business. As you strategize for greater success this year, don’t fall into the trap of making these three MSP mistakes that could drive down sales, or even worse—cost you clients.
1. Overlook your edge against big new competitors
It’s no secret that managed services is viewed as a high-margin business. As a result, new nontraditional competitors are invading the space in a big way. These big companies have deep pockets, along with plenty of IT expertise and customer loyalty, and they are continuing to move into managed services from the A/V, copier, and telephony segments. They are drawn by the promise of new recurring revenue streams, and they can be fierce when it comes to catching the attention of new customers because they have the size and scale to compete on price.
Although these new competitors might be able to out-price you, they may not be able to address the specialized needs of your clients’ IT environments. And they might not do well at integrating cloud with on-premises technologies to operate effectively in the hybrid environments customers prefer. In fact, they often fall short when it comes to addressing the full scope of a customer’s IT environment, and that’s where smart MSPs can show their competitive advantage. In addition, MSPs also have an edge in their ability to create trust with clients by developing personal relationships that stand the test of time. Building on the strength of these relationships is essential to client retention as larger competitors with big marketing budgets move into the managed services realm.
2. Cave in to the threat of commoditization
Today’s new and larger competitors know their biggest advantage is price. They commoditize their services and can force smaller MSPs into making tough business decisions. We all know the trend toward commoditization has had a drastic impact on services such as monitoring, bringing to light the need for MSPs to do two important things: 1) compete on value: MSPs should focus on the value-add that they offer, whether it’s customized services, customized pricing, customized attention, or something else that addresses clients’ pain points. The big players can be very rigid in their overall business models and typically are unable to give customers exactly what they want—and 2) MSPs today need to automate to drive greater operational efficiencies, and ultimately, greater profits. When you can create higher levels of efficiency and a standardized approach to delivering your services in higher volumes, you can compete on a more level playing field with the big providers. From stronger margins to higher prices, MSPs can build a better business if they rely on drag-and-drop MSP automation and other technologies that streamline processes and take the time and guesswork out of the workday.
3. Lose sight of the total package
Today’s MSP practices are equipped to offer cloud-based managed services along with on-premises and hybrid services. Application-level management is also a part of the mix. When you can present a total package—a complete portfolio of services to your prospects—it becomes clear that you can address any client need. Clients don’t want to work with too many providers. For ease and convenience, most would rather keep all of their business in one place. So keep your offerings fresh and cutting-edge and continue to invest in the people and solutions that will allow you to meet customers’ changing demands and today’s evolving market directions. As you pursue new clients, be sure that your quotes reflect your ability to serve them across the cloud, hybrid, and on-premises services as well as at the application level.
Whether you’re new to the MSP market or you’ve been competing in it for more than a decade, by now you know you will never cease to face new challenges. It’s up to you to study your competition, understand your edge, and be able to communicate it clearly to your prospects and customers. Remember, even if you’re up against an industry giant in the battle to win and retain customers, your competitive advantage is the value-add you bring and your ability to be nimble in addressing client needs.
Mike Cullen is vice president, sales and customer retention, SolarWinds MSP. Read more SolarWinds MSP blogs here.