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Managed Services in 2014: Pricing and Positioning - Dave Sobel

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Managed Services in 2014 has grown and changed. Cloud and mobility change the model from strictly device management to a complex eco-system of management. Through analysis of the latest market data, Dave Sobel, GFI MAX’s Director of Partner Community, will show proven techniques for building a pipeline of interested customers ready to invest in their IT and deliver annuity revenue at higher margin. Discussion will include go-to-market techniques and pricing models for a variety of managed services, from traditional to backup to mobile.

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ANZ Conference 2014 Managed Services in 2014: Pricing and Positioning Dave Sobel, Director of Partner Community, GFI MAX
Who? Dave Sobel Director of Partner Community » Joined GFI in 2013, putting the GFI community into the executive team of MAX » 2 years prior leading partner and community growth in vendor channel » 10 years experience as CEO of MSP, focused on Washington DC metro » 20 years experience in IT channel and consulting » Microsoft MVP for Virtualization » Author, Virtualization: Defined » CompTIA Community Chair and Executive Council » MSP Mentor 250 member, SMB 150 » Contributing writer: Channel Insider, CRN, Tech Target, MSP Mentor » Former HTG facilitator, member @djdaveet www.davesobel.com
State of the Market
» Fastest path to revenue has become critical to staying in business for SMBs with cost control still paramount. Source: Techaisle Global SMB Surveys, 2013
Source: Service Leadership Newsletter, July 2013
Global 2013 SMB IT Spend will be US$438 Billion. Source: Techaisle Global SMB Market Sizing, 2013
Clients becoming more aware of cloud services Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 474 U.S. Businesses (aka end users)
Customer demand for cloud solutions Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings
Customer demand for cloud solutions Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings
The Math Problem
Let’s look at the revenue first 3000 2500 2000 1500 1000 500 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 On premise Revenue Cloud Revenue  The average deal size for an on-premise opportunity is $40.5K  The average deal size for a Cloud opportunity is $21.5K  Simply replacing on-premise opportunities with Cloud opportunities will impact your business if you do NOTHING else ….Standing still is probably not an option…  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed
But gross margin is really the game  The average margin for an on-premise opportunity is 24%  The average margin for a Cloud opportunity is 23%  The basic margin is roughly the same, but the total $s are still less AGAIN, if you do NOTHING else ….Standing still is probably not an option… 700 600 500 400 300 200 100 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 On premise Margin Cloud Margin  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed  Calculates margin using average margin listed
If you can grow your business by 15%  Cloud is fast-growing market segment  If you can transform your business and grow at 15% greater pace than your current on-premise business BUT…this is still not the total story… 700 600 500 400 300 200 100 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 On premise Margin Cloud Margin  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed and grow new customer acquisition by 15% per year  Calculates margin using average margin listed
If your transformation yields Best-in-Class Margins This is where the cloud business becomes compelling…  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed and grow new customer acquisition by 15% per year  Calculates margin using BIC margin (Y1=24%, Yr2=40%, YR3+ = $54%)
And some Solution Providers are experiencing 50+% growth … and here is what that model looks like!!!  This does not include additional services or business opportunities as a result of offering Cloud solutions 900 800 700 600 500 400 300 200 100 0 Year 1 Year 2 Year 3 Year 4 On premise Margin BIC Cloud Margin  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed and grow new customer acquisition by 50% per year  Calculates margin using BIC margin (Y1=24%, Yr2=40%, YR3+ = $54%)
Pricing Models
Value Pricing Model • Aka “All You Can Eat” • Price based on the entire package • Price based on business benefits • Calculate downtime pricing for that customer, and pricing is below that. • Single flat fee • Can include Remote, Onsite, Lab/Bench, or all • Pricing is custom and can be more complicated to calculate
Per Device Pricing Model • Simple pricing based on device counts • Per Server, per desktop, per network, per printer, etc • Can lead to selling on price not value • More complicated in mobile world
Many parts to mobile ecosystem 3G/4G e.g., Verizon, AT&T, O2, Vodaphone Device+OS e.g., Apple, Samsung, Google WiFi Carriers, corporate or public networks
Per User Pricing Model • Priced base on people • Can be type (Knowledge worker versus kiosk worker) or can be flat • Eases problem with mobile and services
Tiered Pricing, aka Gold/Silver/Bronze • Different services in different tiers • “Middle” option easier in sales process • Key to success is single SLA across tiers
The Pick 5 Model • Combine a la carte with Tier • Three or more successively higher priced categories with option to assemble a service • Pick 5 from: • Phone Support • Remote Support • Patch Management • Managed Security • License Management • Case Management • Backup Management • Monitoring
A la carte Pricing • Pick and choose from menu of services • Many decisions • Hardest to sell and maintain profitability
Monitoring Only • Monitoring and Alerting only • Appeals to groups with in house IT • Easy parallel service with break/fix offerings
The By Vendor Model • Manage by the number of vendors managed • Microsoft, Dell, IBM, AV, etc • Count the relationships, and bill based on that. • Drives out complexity • Confusing for immature MSPs
Drivers to cloud Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 415 U.S. IT or Business executives (aka end users) using cloud solutions
More platforms = More complexity
More mobile devices than computers
Areas of focus in mobile strategy Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility. Base: 502 U.S. IT and business executives
1.0 Position: Outsourced CIO 2.0 Sell: What they want now 3.0 Goal: Managing User Experience
Position: Outsourced CIO 1.0
Top technologies SMBs view as most complex to understand Source: Techaisle
Ways of surviving economic downturn Source: Microsoft SMB Insight Report
» Relationship » Differentiation
Network Assessment
Network Assessment Prospect Assess Engage
Why clients use an MSP Source: Techaisle, 2012. Base: 140 respondent organizations that used more than one vendor for their cloud business applications.
Local matters
Local matters
Personalized Remote Support
Sell: What they want now 2.0
Top solutions SMBs need
Global 2013 SMB IT Spend will be US$438 Billion. Source: Techaisle Global SMB Market Sizing, 2013
Clients becoming more aware of cloud services Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 474 U.S. Businesses (aka end users)
Customer demand for cloud solutions Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings
Customer demand for cloud solutions Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings
Drivers to cloud Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 415 U.S. IT or Business executives (aka end users) using cloud solutions
Goal: Managing User Experience 3.0
More platforms = More complexity
More mobile devices than computers
Many parts to mobile ecosystem 3G/4G e.g., Verizon, AT&T, O2, Vodaphone Device+OS e.g., Apple, Samsung, Google WiFi Carriers, corporate or public networks Private Cloud Systems running on Eucalyptus or Openstack On-premise systems Public Cloud E.g. Salesforce, Dropbox, or AWS-hosted system Internet Communications E.g. Lync, Skype. Or native function Mobile web Standard website functionality 3rd Party app Procured through standard app store Peripherals E.g. Keyboards or health monitors Custom app Built internally or outsourced
Areas of focus in mobile strategy Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility. Base: 502 U.S. IT and business executives
Difficulties of mobility adoption Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S. End user companies
Mobile security a major issue for companies Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S. End user companies
Challenges in supporting mobility Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 490 U.S. End user companies with some mobility adoption
Manage by User, not just device
Manage by User, not just device
Device provisioning methods Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S. IT and business executives
1.0 Position: Outsourced CIO 2.0 Sell: What they want now 3.0 Goal: Managing User Experience
Source: Service Leadership Newsletter, July 2013
Contact info Dave Sobel Director of Partner Community dave.sobel@gfi.com Office: 1-919-379-6469 Mobile: 1-703-582-3600 Dave Sobel Director of Partner Community

More Related Content

Managed Services in 2014: Pricing and Positioning - Dave Sobel

  • 1. ANZ Conference 2014 Managed Services in 2014: Pricing and Positioning Dave Sobel, Director of Partner Community, GFI MAX
  • 2. Who? Dave Sobel Director of Partner Community » Joined GFI in 2013, putting the GFI community into the executive team of MAX » 2 years prior leading partner and community growth in vendor channel » 10 years experience as CEO of MSP, focused on Washington DC metro » 20 years experience in IT channel and consulting » Microsoft MVP for Virtualization » Author, Virtualization: Defined » CompTIA Community Chair and Executive Council » MSP Mentor 250 member, SMB 150 » Contributing writer: Channel Insider, CRN, Tech Target, MSP Mentor » Former HTG facilitator, member @djdaveet www.davesobel.com
  • 3. State of the Market
  • 4. » Fastest path to revenue has become critical to staying in business for SMBs with cost control still paramount. Source: Techaisle Global SMB Surveys, 2013
  • 5. Source: Service Leadership Newsletter, July 2013
  • 6. Global 2013 SMB IT Spend will be US$438 Billion. Source: Techaisle Global SMB Market Sizing, 2013
  • 7. Clients becoming more aware of cloud services Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 474 U.S. Businesses (aka end users)
  • 8. Customer demand for cloud solutions Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings
  • 9. Customer demand for cloud solutions Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings
  • 11. Let’s look at the revenue first 3000 2500 2000 1500 1000 500 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 On premise Revenue Cloud Revenue  The average deal size for an on-premise opportunity is $40.5K  The average deal size for a Cloud opportunity is $21.5K  Simply replacing on-premise opportunities with Cloud opportunities will impact your business if you do NOTHING else ….Standing still is probably not an option…  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed
  • 12. But gross margin is really the game  The average margin for an on-premise opportunity is 24%  The average margin for a Cloud opportunity is 23%  The basic margin is roughly the same, but the total $s are still less AGAIN, if you do NOTHING else ….Standing still is probably not an option… 700 600 500 400 300 200 100 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 On premise Margin Cloud Margin  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed  Calculates margin using average margin listed
  • 13. If you can grow your business by 15%  Cloud is fast-growing market segment  If you can transform your business and grow at 15% greater pace than your current on-premise business BUT…this is still not the total story… 700 600 500 400 300 200 100 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 On premise Margin Cloud Margin  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed and grow new customer acquisition by 15% per year  Calculates margin using average margin listed
  • 14. If your transformation yields Best-in-Class Margins This is where the cloud business becomes compelling…  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed and grow new customer acquisition by 15% per year  Calculates margin using BIC margin (Y1=24%, Yr2=40%, YR3+ = $54%)
  • 15. And some Solution Providers are experiencing 50+% growth … and here is what that model looks like!!!  This does not include additional services or business opportunities as a result of offering Cloud solutions 900 800 700 600 500 400 300 200 100 0 Year 1 Year 2 Year 3 Year 4 On premise Margin BIC Cloud Margin  Graph represents cumulative revenue over 7 years  Calculates 10 deals per year at average deal sizes listed and grow new customer acquisition by 50% per year  Calculates margin using BIC margin (Y1=24%, Yr2=40%, YR3+ = $54%)
  • 17. Value Pricing Model • Aka “All You Can Eat” • Price based on the entire package • Price based on business benefits • Calculate downtime pricing for that customer, and pricing is below that. • Single flat fee • Can include Remote, Onsite, Lab/Bench, or all • Pricing is custom and can be more complicated to calculate
  • 18. Per Device Pricing Model • Simple pricing based on device counts • Per Server, per desktop, per network, per printer, etc • Can lead to selling on price not value • More complicated in mobile world
  • 19. Many parts to mobile ecosystem 3G/4G e.g., Verizon, AT&T, O2, Vodaphone Device+OS e.g., Apple, Samsung, Google WiFi Carriers, corporate or public networks
  • 20. Per User Pricing Model • Priced base on people • Can be type (Knowledge worker versus kiosk worker) or can be flat • Eases problem with mobile and services
  • 21. Tiered Pricing, aka Gold/Silver/Bronze • Different services in different tiers • “Middle” option easier in sales process • Key to success is single SLA across tiers
  • 22. The Pick 5 Model • Combine a la carte with Tier • Three or more successively higher priced categories with option to assemble a service • Pick 5 from: • Phone Support • Remote Support • Patch Management • Managed Security • License Management • Case Management • Backup Management • Monitoring
  • 23. A la carte Pricing • Pick and choose from menu of services • Many decisions • Hardest to sell and maintain profitability
  • 24. Monitoring Only • Monitoring and Alerting only • Appeals to groups with in house IT • Easy parallel service with break/fix offerings
  • 25. The By Vendor Model • Manage by the number of vendors managed • Microsoft, Dell, IBM, AV, etc • Count the relationships, and bill based on that. • Drives out complexity • Confusing for immature MSPs
  • 26. Drivers to cloud Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 415 U.S. IT or Business executives (aka end users) using cloud solutions
  • 27. More platforms = More complexity
  • 28. More mobile devices than computers
  • 29. Areas of focus in mobile strategy Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility. Base: 502 U.S. IT and business executives
  • 30. 1.0 Position: Outsourced CIO 2.0 Sell: What they want now 3.0 Goal: Managing User Experience
  • 32. Top technologies SMBs view as most complex to understand Source: Techaisle
  • 33. Ways of surviving economic downturn Source: Microsoft SMB Insight Report
  • 34. » Relationship » Differentiation
  • 37. Why clients use an MSP Source: Techaisle, 2012. Base: 140 respondent organizations that used more than one vendor for their cloud business applications.
  • 41. Sell: What they want now 2.0
  • 43. Global 2013 SMB IT Spend will be US$438 Billion. Source: Techaisle Global SMB Market Sizing, 2013
  • 44. Clients becoming more aware of cloud services Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 474 U.S. Businesses (aka end users)
  • 45. Customer demand for cloud solutions Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings
  • 46. Customer demand for cloud solutions Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings
  • 47. Drivers to cloud Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 415 U.S. IT or Business executives (aka end users) using cloud solutions
  • 48. Goal: Managing User Experience 3.0
  • 49. More platforms = More complexity
  • 50. More mobile devices than computers
  • 51. Many parts to mobile ecosystem 3G/4G e.g., Verizon, AT&T, O2, Vodaphone Device+OS e.g., Apple, Samsung, Google WiFi Carriers, corporate or public networks Private Cloud Systems running on Eucalyptus or Openstack On-premise systems Public Cloud E.g. Salesforce, Dropbox, or AWS-hosted system Internet Communications E.g. Lync, Skype. Or native function Mobile web Standard website functionality 3rd Party app Procured through standard app store Peripherals E.g. Keyboards or health monitors Custom app Built internally or outsourced
  • 52. Areas of focus in mobile strategy Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility. Base: 502 U.S. IT and business executives
  • 53. Difficulties of mobility adoption Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S. End user companies
  • 54. Mobile security a major issue for companies Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S. End user companies
  • 55. Challenges in supporting mobility Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 490 U.S. End user companies with some mobility adoption
  • 56. Manage by User, not just device
  • 57. Manage by User, not just device
  • 58. Device provisioning methods Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S. IT and business executives
  • 59. 1.0 Position: Outsourced CIO 2.0 Sell: What they want now 3.0 Goal: Managing User Experience
  • 60. Source: Service Leadership Newsletter, July 2013
  • 61. Contact info Dave Sobel Director of Partner Community dave.sobel@gfi.com Office: 1-919-379-6469 Mobile: 1-703-582-3600 Dave Sobel Director of Partner Community

Editor's Notes

  1. Change this to be your own bio.
  2. You’re not going to dwell on the product – come to the booth for that.
  3. -- Walk through global opportunities -- Note none of them are technology driven – all business driven
  4. - Point out that this includes projections, so looking to the future shows MSPs as the growth areas.
  5. Technology areas where there is growth – mobile and cloud leading the way, but MSP also a growing area.
  6. Cloud awareness is dramatically higher.
  7. Cloud is driven by mobility, and common reasons to use cloud services.
  8. Cloud is driven by mobility, and common reasons to use cloud services.
  9. 11
  10. 12
  11. Read below for the details to present on this slide: Key points for presenter to make: The good news is that the Cloud is driving NEW business. Whether you believe this new business is growing at 2%, 5%, or 100%, customers are asking questions about the Cloud, THIS IS YOUR OPPORTUNITY. How often do customers simply pick up the phone to call you and ask you to come talk to them about a new opportunity? Many cloud SPs are expecting exponential growth in the cloud The economy is better AND this is a growth area. Can’t you see growing your business by 15%?
  12. Read below for the details to present on this slide: Key points for presenter to make: Now, assume that you were able to achieve that relatively modest growth. You also need to focus on the cost and/or margin side of the equation. Many SPs that are successful in the cloud ARE seeing significant improvements in their overall gross margin – upwards of 50+% margins. Why? Packaged service offerings Use of appropriate resources for simpler, less complex deployments Use of inside sales to close deals more quickly
  13. Read below for the details to present on this slide: Key points for presenter to make: Many SPs are seeing significant growth based on the fact that cloud is a hot topic in the market. The sales cycles tend to be slightly shorter; the customers are spending again; in general customers are shopping… Some Best-in-class SPs are seeing 50% + margins The cloud really DOES have the potential to RESHAPE your business. The opportunity is there. We are still at the beginning of this transition. There is opportunity…but not if you stick your head in the sand 
  14. Note how the mobile ecosystem is larger than just devices– lots to manage and lots to monitor.
  15. Why using the cloud?
  16. The days of only focusing on desktops and laptops are over. Windows is now the minority.
  17. We have crossed the inflection point – there are now more smartphones and tablets than there are desktops and notebooks. The death of the PC is in consumer – but there is little expected growth anywhere.
  18. The why of mobile
  19. Three major themes of MSP opportunity
  20. Note managed services is more and more understood – opportunity to highlight whole technology platform , but there is still need to teach managed servcies
  21. Note focus of end customers is around reducing staff and IT costs, overwhelmingly.
  22. The first is about the relationship, using the building to be an outsource CIO. The second is about proving your differentiation, and how you can help in addressing these business needs.
  23. Initial sales engagement remains the network assessment. This is why we offer a new service provider license to help
  24. Why the MSP? Lots of reasons to use a local provider.
  25. And they want a local provider – 31% say it’s critical, and 50% say important.
  26. And they want a local provider – 31% say it’s critical, and 50% say important.
  27. This is why we have personalized remote support – ability to interact, face to face, with people they know, but do so at scale.
  28. Growing business skills remains second area of focus for 2014.
  29. Things they need that you have.
  30. Technology areas where there is growth – mobile and cloud leading the way, but MSP also a growing area.
  31. Cloud awareness is dramatically higher.
  32. Cloud is driven by mobility, and common reasons to use cloud services.
  33. Cloud is driven by mobility, and common reasons to use cloud services.
  34. Why using the cloud?
  35. The days of only focusing on desktops and laptops are over. Windows is now the minority.
  36. We have crossed the inflection point – there are now more smartphones and tablets than there are desktops and notebooks. The death of the PC is in consumer – but there is little expected growth anywhere.
  37. Note how the mobile ecosystem is larger than just devices– lots to manage and lots to monitor.
  38. The why of mobile
  39. The opportunities for the MSP.
  40. And highlight security – why we have MDM
  41. Areas for consulting
  42. BYOD is here.
  43. Bring these three themes together, and the MSP who matures…
  44. … is more profitable. As measured against maturity, the more mature, the more profitable.
  45. Change this to be your own bio.