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A Surefire Way to Kill Your Managed Services Profit Margins


Jun, 14

A Surefire Way to Kill Your Managed Services Profit Margins

Most IT service providers — whether they’re just starting to sell cloud and managed services or far down that path — would agree that increasing recurring revenue sales is a top priority. Recurring revenue allows an IT service provider to run a more stable business and to be more strategic about hiring and training employees. It also makes for a less stressful work environment for employees by reducing the number of IT emergencies with preventative maintenance projects.

In an attempt to make the transition to the managed services sales and pricing model, one of the key steps many service providers leave out is a network assessment. While it’s true that doing an assessment can lengthen the sales cycle, skipping the assessment can cause much bigger headaches down the road — especially for service providers that attempt to provide a flat monthly fee to manage a network they know little to nothing about.

Mark Winter, Vice President, RapidFire Tools, Inc., recently wrote an excellent article on this topic, titled: Leveraging Network Assessment To Increase Revenues. In the article, Winter lays out five guidelines geared toward helping service providers make the transition more smoothly. Here’s a summary and comment on the first tip:

Lead With A Free Assessment. IT services providers can leverage a sophisticated yet non-invasive network assessments as a powerful bargaining token to open a dialog with a new company. Assessment results are often jaw-dropping for the end-user, even if the system in question does not exhibit a major failing. Reports typically spotlight pages worth of inefficiencies that, once addressed, can ratchet-up security, fine-tune access policies, and enhance productivity. For example, general network assessments frequently reveal caveats including users who are no longer on the system yet still have access (e.g., former employees); computers with fragmented hard drives or saturated memory; and conflicting user policies. Similarly, a security assessment can scan tens of thousands of ports across a client’s IP address range and identify specific points of entry that are vulnerable to hacking. With the right tools, comprehensive data can be generated in an afternoon’s visit.

Uncovering the key findings mentioned above is an essential part of having a consultative discussion, which is another critical component to selling managed and cloud services. Without having a good understanding of prospects’ business pain points, you really don’t know what their business needs are. Without an assessment, you’re relegated to guessing what prospects need and that game plan is a risk you and they can’t afford to make.


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