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MSPs: How to Increase Revenues Without Increasing Costs

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Increasing revenue without spending more is a tall challenge within your managed services business. But there are three potential ways to make that dream a reality. Here's a quick guide to get your started.

My tips include...

1. Employee productivity must grow, not just the employees

Employee productivity is the key to increase revenue. However, in managed services business, employees are often assigned with repeated activities that kill their productivity and creativity. Instead, they should be offered challenging tasks that improve their skills and learn new technologies.

How to measure productivity? Simply put you should strive to generate revenue that's roughly twice your employee payroll. Or put more simply: Good productivity = Your total employee payroll x 2

To achieve higher employee productivity:
  • Automate repeated activities of the employees. This helps them gain more time that can be effectively used for other productive activities.
  • Motivate the employees to engage with customers and educate the latter via webinars and whitepapers. Share some proven best-practices with the customers.
  • Explain to your staff the importance of selling what your customers don’t have such as back-up, disaster recovery, helpdesk, ITIL, antivirus, etc.
  • Use Remote Control tools to reduce staff truck rolls. Reduced on-site expenses to increase your savings.
2. Intelligent and Integrated Tools

Take extra care when deciding on your business automation tools. The more intelligent and integrated they are, the easier it is to handle them.
  • Choose intelligent tools with active development; not the age old dying technology. Fish out the information on the future development of the tools from the vendor’s website or road map.
  • The tools must require a minimum learning curve, must be easy to work with, provide useful reports, have adequate help materials on using the tools, provide quick and quality support, etc.
  • The tool should integrate with various third party tools. This helps you offer a wide range of services without much hassle.
3. Remote Infrastructure Management, make the most out of it

Why do it yourself when you can offload? Choose a Remote Infrastructure Management (RIM) partner for all non-engaging jobs. Offloading your day-to-day monitoring and management activities makes your employees spend more time on strategic activities.

Here's a sample calculation: The cost of setting up an operations support team in Florida vs. outsourcing...



Some details about the chart and the calculations...
  • Total number of devices to be managed is 500 and the number of operations support personnel required is 5.
  • At an average salary of $55,000 per operations person per year, you would be shelling out $275,000 on salaries for five operations members. There are a number of India-based IT service provider organizations waiting to do this for you for say $10 per device per month. And at $10 per device per month you would be able to get almost similar job done by a partner for $60,000 per year. Moreover, if you have multi-year contracts the difference becomes high when you include salary increments every year.
By outsourcing your NOC activities, all your evening and overnight support calls are answered. The RIM partner offers 24x7 active helpdesk. All your customers are satisfied.

I wonder: Have you taken the steps above or are you pursuing other automation steps to lift revenues without increasing costs?

Dev Anand is the product manager of MSP Solutions at ManageEngine. He is the author of the well received book "How to Set Up a Managed Services Business." Monthly guest blogs such as this one are part of MSPmentor's annual platinum sponsorship.

Discuss this Blog Entry 2

on Jan 19, 2011
I've done the math between outsourcing the backend and what my payroll is for that function and outsourcing costs more than my internal staff. Same for HD outsourcing, that one is even a bigger price hike over my staff today. An established MSP is going to have a hard time justifying outsourcing these functions if they've largely automated the RMM functions. That said, if I was starting a brand new MSP business, I'd outsource it all from the beginning. Being established, I cannot take the revenue hit that outsourcing would entail.
Brian Dosal (not verified)
on Jan 18, 2011
Great post! What companies in India are solid providers focused on the MSP market and know our toolsets?
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