As an MSP, it’s critical to always provide your clients with the highest level of service. But hey, not everyone knows how to perform basic upgrades or connect to a new printer, so part of your commitment to your client’s success means helping them with these simple technical tasks. Chances are that you’re paying your technicians good money, but it’s incredibly impractical to have your high level technical expertise working on such low level issues. When their value is being sucked into menial tasks day after day, it’s time to reevaluate your model.
Unfortunately, this scenario is inevitable for many MSPs due to the software and staff model they’re using, the constant piling up and queuing of tickets, or maybe just the random nature in which issues arise. To maximize the value of both your platform and your employees, you need to consider the costs of having top tier talent working on level one issues, and potentially consider an alternative model.
The Costs of IT
There is no regularity when it comes to IT demands. On Monday you may have 100 tickets, and on Tuesday you may have 10. On Wednesday you may need 20 employees, and on Thursday you may only need 12. Along with this irregularity comes the variable costs associated with tickets and employees. Sure, an employee comes with a fixed dollar amount, but that cost, and the following cost of ticket resolution can be higher than what one could pay for outsourcing their ticket resolution. In relation to managed services, an MSP's costs can include:
- Employee administration (i.e. hiring, retaining, and training employees)
With all these variable demands of IT, it’s important for MSPs to try to achieve stability with a fixed cost model, because in nearly all cases, your end client contracts are also fixed. When analyzed on a contract by contract, month to month basis, you’re going to see a hit on your margins when those higher cost engineers are dedicating their valuable time to low level issues. The higher your variable costs, the less predictable your profits will be on your contracts. That being said, a fixed-cost model also helps you maintain your margins, plan for predictability and growth, and makes your organization more attractive for marketing and acquisition.
Let's look at an example
Using Salary.com, let’s take a look at the difference in salary between a Network Engineer I and a Network Engineer III for 4 geographic markets. You can see that there’s roughly a $30,000 difference between their respective wages.
If you’re paying your Level 3 Engineer roughly $45 per hour to be fixing Level 1 issues that are only worth about $30 per hour, you can see how it’s a poor use of that expensive employee’s time. You’re basically wasting $15 an hour of productivity that could be put towards tasks you haven’t had time for, which can lead to more profitability. Likewise for your employee, if they find themselves getting constantly caught up in these mundane tasks, they will feel less fulfilled with their work, which can lead to an MSP's biggest nightmare: turnover.
So What Alternative Does an MSP Have?
A common scenario for MSPs looks like this: You need your top tier technicians performing rewarding work that is billable, but they’re stuck changing passwords and managing server patches each month because you can’t keep up with ticket resolution. Leveraging an outsourced model helps alleviate this challenge substantially. By offloading the monotonous Level 1 and Level 2 issues, it leaves room for the more challenging and rewarding work for the higher-level staff you want to retain.
With this alternative option, your technical team will spend less time on tickets, meaning that you’ll be able to reallocate that time into the field to increase billable hours, and in turn, increase your revenue.
Transitioning to a Fixed Cost, Outsource Model
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Ask any MSP and they’ll typically say that their biggest struggle is balancing the day-to-day projects along with their long term goals. When you adopt an outsourced model, you allow your top tier engineers to focus on complex, revenue-driving activities, and to deliver amazing customer service. It’s an extremely cost effective solution because fixed costs offer predictability, so you’ll know what you’ll be paying for the year without the worry of “what if an issue arises that eats up my technician’s time.”
It’s true that managing daily tasks is important, but so is bettering your organization. Whether it’s by adopting a more operational and cost-efficient model, or executing on the marketing plan you “haven’t had time for,” an outsourced model WILL improve your business, so take Shia’s advice and JUST DO IT!
- If Your Technicians Aren’t Project Managers, You’re Doing It Wrong!
- Why Every MSP Should Be Practicing ‘Smart Sourcing’
- 8 Ways to Reduce Your Technician Turnover Rate
What other MSP pitfalls can you avoid?