Over the years in the MSP industry there has been a growing trend towards one-size-fits-all service agreements. This makes sense as standardization has been the driving point for all things MSP. And standardization is where we begin to optimize and automate which has a positive impact on service delivery efficiencies and operating margins.
But, in this blog I’m going to discuss the benefits of multi-tiered service agreements and how to structure so they are equally profitable. We will also discuss how this will lead to an expanded customer target demographic that will turn into additional sales revenue.
First of all, the typical one-size-fits-all is an all-you-can-eat service agreement. Meaning that the only choice the client has is an agreement providing for unlimited support for all things IT. This almost always includes unlimited help desk/service desk support, and sometimes on-site as well.
This all-you-can-eat service agreement is the preferred lead-in option for most MSPs during the sales process. It is considered to be the most profitable and offers the highest value prop for the client. It’s no wonder the industry has such a strong affinity for this business model.
However, not all businesses have the same IT support needs or require unlimited support plans. This is especially true as it applies to desktop support. As more platforms move to the cloud this takes some complexity off the desktop. And end-users today are more technically proficient in taking care of basic needs. When presented with an all-you-can-eat IT support plan these businesses may feel like it’s over-kill.
For example, a small professional engineering firm of 30 employees may have engineers that are technically competent enough to trouble-shoot their own desktop issues. Perfect for an MSP service plan offering BDR and managed security, plus pay-as-you-go helpdesk services for escalation. As this client grows and expands, you will be in position to grow with them and possibly upgrade to an all-you-can-eat service plan.
There are many other types of small businesses that are competent at managing their own desktop, but don’t have the skills in-house to ensure good data and cyber security. In situations like this the MSP would be more competitive if offering a more basic offering.
Defining the Edges
A good multi-tiered service agreement is all about defining the edges. This means that everyone including MSP staff and clients knows and understands what’s been sold, what’s being delivered, and what’s getting invoiced.
It begins with defining a base MSP service level that all clients must adopt. This could be a combination of services such as a BDR, cyber security, and NOC services. All additional services would be pay-as-you-go.
The next service level would include everything in the base service, as defined above, plus an incremental delivery of services such as unlimited help desk. An additional service level would be built upon the preceding but offer no more than 3 MSP service level agreements.
It is important to be specific about what is included, and what is not included. For example, it may be advisable to spell out limited support for specific software application upgrades, or the time required to do so. Or what in included in moves-adds-changes, and what is not. If attacked by ransom-ware, spell out remediation efforts and who pays for what.
The more specific, the less chances are of a misunderstanding down the road. While some of these issues may be talked about in meetings, it means nothing unless they are documented as part of the Agreement.
Communicate Clearly and Often
We often times have the mistaken delusion that if the client signs the Agreement, then everyone knows what’s going on, right? The problem is that while the client may have signed your Agreement, the client’s team may not have such a good understanding of the services your MSP is delivering.
The best practice is to communicate the scope and edges of this Agreement during the client on-boarding process. Communicate again anytime there is a change of client contacts. This will mitigate misunderstandings and disagreements when done proactively.
The worst time to attempt to communicate is during a crisis, when everyone is burning a lot of time and stress is high.
Expand your Target Market
From a sales perspective, this multi-tiered agreement approach opens up the playbook for your sales team and can substantially increase their target demographic. This approach can provide for a more affordable entry-level service for small businesses, and also better serve mid-market clients seeking to off-load basic IT services.
Another advantage of multi-tiered service agreements is that it gives your prospects a choice. It is only natural for buyers to seek out multiple proposals. And we never really know the prospect’s true pains or needs until after their decision. If you don’t provide an option, then someone else will.
If you’re not currently offering multi-tiered MSP service agreements, then hopefully this blog will provide you some food for thought.
If you do, then take this opportunity to review the edges of your Agreements to ensure they can be clearly and easily communicated and understood by everyone.