Thursday, February 21, 2013

Understanding the True Business Value of PSA

We normally think of Professional Services Automation (PSA) software as a tool for tracking the time and cost of technical resources to ensure timely and accurate customer billing for IT services rendered. However, in our VPG session this week, James Foxall, CEO of Tigerpaw Software, a CRM and service management software provider, gave us all a lesson in how to think differently about PSA as a toolset and how to operationally integrate the tool into an MSP or CSP business to drive higher growth and profitability.


The session, titled "Nine Proven Tactics to Increase Profitability", was a grand tour of business best practices for how to better organize, optimize customer experience, manage cash flow and continuously improve efficiencies with any software tool - not just Tigerpaw. The presentation was pretty extensive - you would really have to view the entire session to reap the full benefit (a recorded session is available here).  So let me summarize my own take-aways here.

Take-away #1:  Think of technicians as attorneys. Their time equals your money (your cost of service delivery). So set minimum and rounded-up cost points (1o or 15 minute intervals) and track the utilization of technicians as a business resource. Build this cost basis into your business model and automate the collection of cost data and the invoicing of service fees.

Take-away #2:  Transition to recurring revenue. It will even out your cash flow tremendously. Imagine starting every month with guaranteed revenue coming in the door instead of playing catchup every month to cover ongoing labor and facilities expenses.  Even better, your customers will prefer, and even pay a premium for, a predictable opex approach to covering the cost of IT.

Take-away #3:  Base business decisions on accurate data. As you transform from a one-time revenue model (consulting fees, break-fix support, product sales) to a recurring revenue model (managed services fees, SaaS license revenues, hosting fees), a PSA tool will ensure accurate historical data. It can provide your true cost of service delivery (labor, facilities, licenses, overhead) on a per-customer and per-month basis with the touch of a button. This data will allow you to set monthly fees at the optimum level to balance cost, margin and a competitive selling price.

Take-away #4:  Sell the value of managed services. It's not the same as selling stand-alone consulting projects, IT products or break-fix services. It's a value sell and it requires consistent, quality contact with your customers and prospects.  This is where PSA leaves off and CRM begins. James demonstrated ways to take your service histories and customer interactions and build them into an automated email campaign that builds a quality sales pipeline of prospects and builds customer satisfaction and up-sell opportunities with existing clients.  If customer case studies are the most effective way to communicate the value of your services, then measure it and do more of what works and less of what doesn't work.

We see a lot of synergy between using a tool like Tigerpaw to manage a CSP business and our own CSP blueprints for pricing and packaging cloud services as well as enabling a sales team to sell their value and drive customer acquisition.  Let us know your thoughts or questions on this subject as well. If they were not fully answered or addressed by this VPG session, we will continue the subject in a future session.

Thursday, February 14, 2013

Workgroup Collaboration Meets Project Management

In yesterday's Virtual Peer Group session, Sean Crafts, the Chief Customer Officer at  Mavenlink, discussed many applications and benefits of utilizing project management software to manage the productivity of workgroups. Mavenlink is a top-rated app in the Google marketplace and is used by companies principally in the SMB segment but also has a number of large enterprise customers such as Oakley, Aflac, Shell and Kaiser Permanente. They have over 450,000 users located in 190 countries - so the product has broad market appeal.

So why is project management such a good fit for Cloud Service Providers?  From my perspective, there are 3 big reasons.  First, SaaS solutions like Mavenlink can be integrated with other cloud services that are used to run the business - from foundational collaboration and messaging services like the Google apps suite to hosted business apps like Intuit. Second, project management can be used to amplify the productivity of teams - in the case of Mavenlink, those teams can include internal members and external members like clients and suppliers. And third, project management can provide executive oversight for ensuring business goals are met  - including hard dollar business goals like collecting invoices on time and managing project costs against operating budgets.

CSPs can add value to a project management deployment by becoming proficient in the business integration of project management as well as the application and data integration. By business integration, I mean adapting the use of the tool to the workflow of the business. If you understand how your customer can benefit from project management, and you design, deliver and deploy a cloud service that realizes those benefits, then you have earned more than just a reseller commission. You can justify up-front consulting fees and ongoing management fees for this ingredient of your cloud solutions ecosystem. Many of Mavenlink's partners implement project management internally for just this reason - to become proficient with the business, application and data integration of the tool.

Who pays for project management? For Mavenlink, the key industries involve professional services firms - marketing and design firms, legal, financial, IT and engineering and business consulting as well as education and public sector clients. Why? These are organizations with users who are typically tracking time and expenses, customer deliverables and collecting payments. Collaboration with external contractors and clients is especially important to the customer profile.

What happens when workgroup collaboration meets project management? The CSP can tie the softer benefits of workgroup productivity to the more tangible benefits of time, cost and revenue management. This can not only be a source of one-time and recurring revenue for a CSP, but also adds value to the critical role of trusted advisor  - and that often leads to longer-term relationships and more customer referrals.

Tuesday, February 5, 2013

Virtual Infrastructure: Commodity Service or Value Enhancer?

As you integrate cloud technologies into your managed IT services practice, you will most likely find yourself evaluating virtual infrastructure as a foundation technology for your portfolio. You will find it relatively easy to position the classic benefits of cloud computing to your customers - you know them - zero capital outlay, predictable operating expenses, infinite scalability, continuous availability, access from anywhere, at any time, and so on.

Virtual infrastructure is a foundation technology because new applications can be readily built on top of flexible IT resources and you can wrap your own managed and professional services around them. What customer segment would not benefit from an on-demand resource that allows them to host all of their business applications as well as their website presence, virtualize their storage systems and desktops and, at the same time, provide an offsite backup and disaster recovery capability for their entire IT environment? The value proposition is too compelling to ignore and the recurring revenue possibilities for your business are too lucrative to leave on the table.

But is virtual infrastructure a commodity service or is it a value enhancer for a Cloud Solutions Provider (CSP) business? That’s entirely up to you and how you position the technology, how you integrate it with other services, and how you price and package it as part of a managed IT solution for your customers.

Like everything else, there is a right way and a wrong way to leverage cloud technology as a service provider. Lets start with the wrong way. If you simply refer your customers to a commodity public cloud service, turn the billing relationship over to the public cloud provider, settle for the breadcrumbs of a referral commission and fail to add value as a trusted IT advisor, then you have missed a significant opportunity to grow recurring revenue and deliver added value to your customer.

Recently, we had a guest speaker from Artisan Infrastructure address our Virtual Peer Group (VPG) to talk about this issue.  Here is what they had to say about enabling CSPs to profit from their virtual infrastructure platform.  

* They are a 100% wholesale provider - they never compete for business with their channel
* They offer a cost-plus model - the CSP sets the final customer price - not Artisan
* The CSP owns the customer billing relationship - allowing the CSP to bundle services
* They have created an ecosystem of technology partners - so the CSP can integrate solutions
* They support CSPs who are new to virtual infrastructure management, or highly experienced

We think the Artisan model is the right way to leverage cloud technology. It’s a model that allows a CSP to add value, set their own prices for bundled solutions and own the total customer relationship. Just think of the opportunities available to your company, as a trusted advisor, in designing a virtual solution, managing your customer’s cloud migration, optimizing the cost, performance and user experience of their solution and implementing an appropriate security and business continuity policy for their online environment. Then after deployment, you can remotely monitor and manage this virtual environment for a monthly fee - all without the threat of competition from the infrastructure provider.  

As you consider technology building blocks for your CSP business, think about how you can add value during the design, deployment and delivery phases and look for technology partners who enable you to profit from your role as a trusted advisor. It’s the difference between acting as a reseller of commodity cloud services and an integrator of tailored cloud solutions.