Why IT Services Must Follow the Software Model

Posted by Bill Ruffalo on Mar 10, 2014 8:30:00 AM

saas-business-modelThere’s a great revolution going on in the world of software. It’s called Software as a Service, or “SaaS” for short. Whether or not you’ve heard of “SaaS”, you’re sure to know of companies that use it (Salesforce, Adobe and HubSpot…to name a few). In fact, SaaS has become so popular that almost all software vendors are adopting this model.

 

 

 

 

 

Below are some of the common characteristics of SaaS Software:

  1. Hosted in the cloud
  2. Paid for in Monthly Recurring Revenue (MRR)
  3. Automatic updates: new features and bug fixes are pushed to all users automatically
  4. No downloading and installation
  5. Multi-tenant, redundant infrastructure

 

Why Is SaaS So Successful

In “traditional” software, you purchase a license and then download the software onto your own device. That is where the software lives, and if any updates are made, the buyer is responsible for installing the update, and sometimes at an additional fee. So, why are these new SaaS features so beneficial?

  1. Hosted in the cloud – As long as you have access to the Internet (which is almost 100% of the time these days), you can access your software. And with the number of personal devices multiplying (smartphones, tablets, laptops, desktops) people want access to their programs across all of their devices.
  2. Paid for in Monthly Recurring Revenue (MRR) – Software vendors have more predictable income and end users have more predictable costs. This makes budget planning on both sides much easier.
  3. Automatic updates: new features and bug fixes are pushed automatically – The user is never running out of date software.
  4. No downloading and installation – Installations can lead to compatibility issues and take time for the user to complete.
  5. Multi-tenant, redundant infrastructure – Helps ensure the software is always secure and available. Vendors also have greater insight into how their software is being used and can use that feedback to provide better updates, products and services.

The SaaS model provides many benefits for both vendors and buyers, which is why it has been so wildly adopted. However, these benefits don’t apply to software only. Adopting a “SaaS-like” model can be very beneficial to IT service providers as well.

 

What IT Service Providers Can Learn From SaaS Companies

In the same way companies purchase and utilize software programs, many companies need IT services to help them with the hardware side of the equation. These companies don’t have the resources to take care of all their IT needs in-house, and therefore contract these services out to providers. However, with the SaaS model becoming so prevalent, buyers have come to expect a similar structure in many of their technology solutions. They want to:

  • Pay monthly – more predictable costs
  • Have access anytime, anywhere – work more efficiently
  • Receive automatic updates
  • Experience no downtime

Many IT service providers are still stuck using a break-fix model. They wait for something to break, then are there to fix it. However, this model is outdated, just like the old way of installing software locally on your device. Adopting a managed services approach has benefits for both your business and for your clients.

 

Why Your Clients Prefer Managed Services

Managed services have many similar characteristics to SaaS solutions. In a managed services model, Managed Services Providers (MSPs) are hired to constantly keep an eye on a client’s information systems. By using Remote Monitoring and Management (RMM) systems, MSPs can monitor all of their clients’ information systems through one location. This allows them to be proactive in fixing potential issues, instead of waiting around for something to break then being there to fix it. Clients almost always pay monthly for these services, which allows them to budget more easily as a business.

MSPs also give clients a sense of security that someone is monitoring their systems 24/7 to make sure no issues arise – and if they do, to hopefully take care of them on the spot or before they even happen.

Additionally, MSPs frequently provide information security services to make sure their clients are protected from malware and viruses, while also staying on top of security compliance standards, like HIPAA (visit our HIPAA Resource Center). If new viruses are discovered or compliance standards change, it much easier to deploy appropriate updates across your clients’ systems remotely, versus visiting their physical locations and making the updates there. This allows end users to receive updates automatically, which is a big plus for them.

 

Why Becoming an MSP is Better for Your Business

In order to succeed in the break-fix model, you need your clients to fail. That, my friends, is a true paradox.

If you want to build sound business relationships, you should be enabling your clients’ success, in this case, by eliminating IT issues before they ever arise. MSPs can provide better quality service because they consistently monitor their clients’ systems and can stop problems before they happen. If you only interact with your clients when their systems are broken, they’re most likely to be angry when they speak to you. Even if you provide the best service and the issue is not your fault, it will be tough to build positive relationships with them if they’re always upset when they speak with you. This is step 1 in providing better IT services, and growing your business.

Step 2 is making sure you have consistent revenue (ideally, consistently growing as well)! MSPs are more successful in growing their business because they can predict how much money they’re going to make. Because most of your business costs are monthly or fixed (like rent, employee salaries etc.) you want your revenues to be consistent so you can plan for those costs.

In the break-fix model, you rely on random issues to arise in order to earn business, which makes it nearly impossible to predict how much your business is going to make. Predicting your revenues and predicting your costs are crucial steps in growing your business. This is one of the reasons why SaaS has grown in popularity so quickly, and one of the reasons why IT should follow suit.

 

Conclusion

IT Service Providers can have trouble moving away from the break-fix model, because it’s how they’ve done business for the past decade. However, there’s a lot these service providers can learn from the software industry. SaaS solutions have become so popular because they make sense in terms of business, practicality and efficiency. Managed Services have all of these same benefits and it’s time that IT Service Providers adopt a proactive, managed approach, instead of simply waiting around for their clients’ systems to break.

 

The Managed Services Sales Imperative

 


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Topics: Business Management & Growth, Business & Revenue Growth