There's a lot of talk about the cloud these days. It's obviously a big topic and is changing the IT channel drastically. There's many different theories on what the cloud will become and what the best way is to prepare for it, but ultimately, MSPs must be ready for change and be prepared to take advantage of the opportunities presented.
On this episode of MSPradio, we chat with Tim Brewer, a former MSP owner who now works with MSPs, vendors and technology companies to help them change their business model and leadership strategies. Tim tells us a little about what's going on in the cloud market and how MSPs can be ready for change.
Tune in this week and subscribe to our podcast on iTunes.
Nate: All right, welcome back folks to another episode of MSP Radio. I am your host Nate Teplow and today we are actually live at the Navigate 2014 conference. It’s Continuum’s first ever user conference and we are really excited. We’ve had a great turnout so far and had a great feedback from our partners. So we are excited to be here and I’ve got an awesome guest with me right now. He very nice it took some time out of his day here to speak with us here on MSP Radio.
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So today’s guest his name is Tim Brewer, he works frequently with MSPs. He actually used it on his own MSP and he sold out a few years back. Now frequently works with MSPs, vendors and helps them transform that business both in terms of adopting new technologies and adopting new leadership strategies. So Tim Brewer, welcome to MSP Radio!
Tim: It’s fantastic to be here!
Nate: Yeah, we are happy to have you on the show. I am that I was able to bump into you at the conference and I think this will be a great episode for our listeners here.
We’re going to be talking about cloud computing, the new cloud technologies kind of coming into the mix here and how MSPs can transform their business model to adopt this new era of cloud computing.
Nate: Great. So let’s start off. Can you tell us a little bit about your experience and some of the work you do with businesses now?
Tim: Yes. So obviously I am from Australia and so it’s great actually to be here in person in Boston.
Nate: Yeah, you came along way to Boston to see us.
Tim: It’s the first time in Boston and I did live in the US last year. And we grew a service provider in purse Australia to about 50 staff and sold it to a publicly listed company. We had a great time doing it. We screwed up a ton and the show would go on a long time if I could go through all the funny things that we did and the errors we made.
And then I worked with that company for three years and in the end of 2012 had the opportunity to come and spend some time in the states so I pulled my whole family over and kids and we lived in the US for a whole year for a year off and over that year I did contract work for a number of different companies. I was just trying to take a breather from being buried inside a company operationally and had a great year, learned a ton of stuff and I go back a ton to the MSP community to speak a little bit which is really great. Build a huge group of friends in the US and still this year moved back home but still get the travel to the US quite a lot.
Tim: So I had a couple of trips this year so it’s a pleasure being here.
Probably the biggest thing I think in the managed services industry is the need for us to stop and ask the question, “Are we creating unique value for the people we are targeting?” I think we don’t ask that. I think we’ve grown up in an industry that had Microsoft putting out software and all the marketing, all the product work was already done for us and then we get hardware from HP or Dell and all of the marketing and benefits and all that stuff was done for us.
I think as a result, our industry is very lean, very undernourished in the area of value creation, product development. And I think for me, this big shift to cloud is really about the guys owning that back in their company and understanding how to create value for the target audience that they are selling their products to.
Nate: Yeah, absolutely, it’s a big shift in the market that’s taking place now and actually just to pull from some of the keynotes this morning, we have Peter Isler who is a two-time winner of America’s Cup. He is a sailor and then we had our CEO, Michael George, great business background in building businesses.
And one of the issues they brought up about MSPs is when they kind of look, using the sailing analogy is the kind of focus on their boat and look at all of the gadgets and tools there but you have to look out, I think it’s Peter Isler that said, “Take a bird’s eye view of your boat and look out on the horizon and see these changes coming,” and I think the cloud as a computing technology is the same situation.
Tim: Yeah, absolutely and the historic shift and one that the statistics tell us I think it was mentioned today, there’s going to be a lot of people left behind in that and there has been whole numbers of people talking about is going to be 30% of the current MSP group that’s not here in five years, is going to be more than that.
I think the reality is there’s always going to be some kind of change in an industry but I think that’s going to accelerate if people can’t keep up and people can change their model. And we are definitely… This is some practical ways that I think MSPs can combat that and get prepared for that. But I think fundamentally they’ve got to realize that that shift and that change is coming and be motivated enough to do something about it.
The cool thing about the guy that spoke this morning is his first America’s Cup was actually in Perth Western Australia which is my hometown. So he was playing on that card this morning. I really resisted not shouting out, “Don’t forget, we won it that’s why you were over there competing for it,” which is really good.
Nate: Yeah, cool.
So what are some of the recent trends that you’ve noticed and some of the things that helping businesses now when it comes to the cloud market and adopting those cloud technologies?
Tim: I kind of break it out into a couple of different things but I think the first thing that I see MSPs… And this translates across any industry, it’s a fundamental… Creating value and value is the product that you sell. So the first thing is understanding your target markets.
MSPs often make this mistake that they want to sell to everyone. So they are trying to sell the services to anyone that will have them come and talk to them about PCs. I really think that’s the wrong way to go in. You can’t continue to sell your product like that when it comes to cloud services. Because it’s not going to be a fit for everyone and your services aren’t going to be a fit for everyone and your processes are going to be a fit for everyone.
To use an analogy, it’s like trying to sell and Audi to someone who just wants to drive a Chrysler or what’s a cheap car in the US? You know, a Camry…
Nate: Yeah something like that, yeah.
Tim: Your Toyota is okay. But see a Camry, a cheap Camry you are trying to sell an Audi and the challenge was that is they are ever going to see the value in that Audi or how its price or how the service play comes into effect, all of the way they wrap that up focuses on a very specific set of preferences within a specific client. In fact, they are so happy just saying, “We are only going to own a fraction of the marketplace.” They are not going out trying to sell to everyone because if they did their brand would just be trash because people would be driving around in these Audis that they are forced bought going, “All I really wanted was a Camry, this is too expensive. The servicing is too expensive, I don’t care they come out and service my car and clean it, I didn’t want that. All I wanted was a car that got me from A to B.”
I think that like two service providers, the most match your providers I see out there are very, very specific about who, what their service is and the type of people that they are selling their service to. And so the way that they provide their support, the way they sell bundled services particular cloud services, all plays to that target.
Nate: Yeah, absolutely.
Tim: The most mature ones know how to say “no.” This person would go and they would buy the Audi but I can just say, “It’s not right,” and it would be a huge tragedy if we sell them the wrong thing.
Nate: Yeah, that’s a great point. I think a lot of MSPs, they feel like they are giving up an opportunity if they don’t be everything to everyone. You don’t want… If you are a car dealership, you don’t want to sell Lamborghinis and the Toyota Camry’s. They are different target markets and if you want to sell Lamborghinis, I don’t think a lot of MSPs, the way they think of it is like, “Well what about all of the people who want to buy cameras?” But you just can’t do all of that in one business so it’s much better to be targeted and focused than to try to be everything to everyone.
Tim: What they don’t realize in that is it really is like a target. Value creation comes with your ability to hit that target and if you sell all those different things you can’t have all the features of an Audi in a Camry and all of the features of a Camry in an Audi. It comes down to the next point and then we talk about how to create products with value targeting that preference.
So speaking to the top clients is what you want to do and that’s brainy thing. If you are in the cell phone industry, if you are a product development manager, that’s your land, that’s where you live, you totally compete with that. But in our industry, the MSP industry I don’t see a lot of skill around that so that is something we need to improve on.
The second thing is around complexity. So the more things that we choose to do then it creates this great amount of complexity. Now you can buy cloud services by the hour across all the range of different things you are doing and it’s like going from selling hardware and alley rights to selling managed services and telephony bills; like the complexity is increasing significantly.
And so I use the kind of concept around product DNA. It’s when you’re constructing firstly having a target max reduces in complexity. But then as you’re constructing the product, building in components so that you can… If you got three levels of service and let’s take 24 hour support for example, I mean some guys who have 24 hour… They have three different types of 24 hour support that they offer. Don’t have that! Have one type.
Now you might give it for free to your platinum clients and you might charge $500 a month for your middle range clients and you might not allow your cheap clients to even have it. But don’t go and create all this variation because the more complexity you have it becomes like an infinite number of things that can go wrong, it’s more costly and ultimately lead to not being able to deliver the value you promised that you originally committed to the client when you sold them on your service.
Nate: Yeah. I think your client creates in of complex problems for you. The more complexity you create in your own company is just going to make things more difficult for you.
Nate: Cool. So what are some ways you are seeing cloud computing affect the channel both in terms of opportunities and trends. What are some of the trends you’ve seen in the marketplace?
Tim: It’s affected the channel in a number of different ways. Firstly obviously everyone knows this, it’s affected hardware sales and it affected the way hardware vendors go about what they are doing. But then I think the opportunity is being able to find good SAAS partners or cloud partners that enable you to get the job done without you having to deal with all the underlying infrastructure for example. Back in the day we had our own data centers in Australia, and we went from that to kind of, “Let’s outsource the data centers stuff.” We put our data gear in data centers and it’s kind of that shift again.
It’s complex; we have to go down to the data center, we have to put hardware in it, there is really high-security. You don’t need to worry about the data center. You can be offering infrastructure as a service to your clients and reduce all of that complexity again by leveraging other people’s skills. You see that with other companies like yours that enable you to leverage their service desk and so you can scale out without needing to add all of the kind of burdensome infrastructure and knowledge that you need to have and capabilities, you can acquire the capabilities from elsewhere using services.
I think the cloud software as a service and the Internet have really given us a pretty cool opportunity to do that.
One of the downsides to that is that it’s a reduction in margin for an MSP. So generally for an MSP to be successful with mixing and needing to be large to be successful… So to make the same kind of money for the revenue, they’ve got to kind of grow what they are doing and do without skills like selling which is again, like product development, it’s something we did not see a whole lot of in the channel, they would be a technical guy doing their thing.
So I think the real opportunity is to learn. If you are a technical, ex-technical CEO, come out of engineering is to go and spend some time learning how to manage and lead a sales team and how to build out the sales organization because you can scale very, very quickly with a good sales and marketing organization, leveraging everyone else’s services that you are selling, having them build a massive engineering team. But the secret to getting that right is to be able to be good at sales and marketing. So that’s an area, a huge opportunity for learning and it’s a shame we don’t see more sales and marketing oriented discussion of these types of events because I think that is going to be a huge part of the future of the channel and of the MSPs.
Nate: Yeah absolutely. I mean everyone who most people who start an MSP, they have the technical background, they have the expertise and they are focused on hiring people with more technical expertise but you also need the other side of selling and marketing that business and their services.
We’ve got to take a quick commercial break here again we are talking with Tim Brewer. He’s come all the way from Australia to be with us here at Navigate 2014. But taking a quick commercial break here and we will continue talking with Tim after the break about the cloud opportunity for MSPs and how to transform your business. So see you all in a few minutes!
Nate: Hey folks, welcome back from our commercial break. You are here on MSP Radio. I’m your host Nate Teplow and we are talking with Tim Brewer at the Navigate 2014 Continuum’s inaugural user conference. And we are talking about cloud trends in the marketplace, how they are affecting the channel and what MSPs can do to transform the business model to be ready for the cloud and to adopt this new model of doing business.
So Tim, during the commercial break you were telling me a little bit about net delivered client value and I was hoping you could touch on that again for our audience and explain a little bit further.
Tim: Yeah, absolutely, absolutely. So we talked before about this concept of target market. If you imagine that being an artery bull’s-eye and when you are pulling up your bow and you aim at that bull’s-eye, the net delivered client value. It’s like the aiming that you do to ensure that you hit that target as accurately as possible. And the better you hit that target, the more you create and we’ve all been in that situation where someone questioned the value that either we provide or that our service provides and that has a number of ways that comes out that is really, really important you focus on that value creation.
The way we do that is through concept around net delivered client value. And that is quite insinuates that there is things that increase the value and there is things that decrease the value. And so a couple of those levers I guess that you could pull to get that aim right are things like in fact, we will start with salespeople. Salespeople say, “Yeah, I know what those things are, the attractors and detractors.” I will say, “Well look, features in products, products need more features.” So the stuff we offer, we need more features in our managed service contracts, more complexity, more features in our managed services need to be cheap as possible so they kind of say the dollar value detracts, the more we charge for the product, it detracts from value and we need more features to increase the value. But that is really shortsighted.
And when I speak to salespeople I always challenge them on this that there is so much more to creating value. So go now to some of that increase value right? So there is features and benefits definitely and you need to look at the features that the things your product is solving for your clients.
There’s other things like the service value. So come back to the Audi example. If you and I went to the Audi dealership, and am not really sure what it’s like here in America but I understand Australia. The Audi dealership, they have these amazing service where they will come out, service your car wherever you are at at your office and wash your car and it’s fantastic and that’s service value.
Not all car manufacturers do that. You’ve got to take it in and take your time. The service value is really important. And then the MSPs generally, the model of an MSP is very focused on creating service value which is not just product value.
So if you are selling hardware laptop networking, etc. There are some other things about it. There some things like image value. So you will know really high profile MSPs not just in the industry but in their community and people will purchase of them because of who they are as image they have in the community just like some people will pay $25,000 for a watch. It does the same job as my [RipCo 17:38] watch, it is the time. Cars get from A to B, some People drive Lamborghinis. Arguably you can get there faster but most of the increased value is being created and so in turn the dollars they can charge comes from image.
So image is another thing you can wrap around your product to create value.
The other thing is personal interaction. So as you are creating your support processes, don’t have everything be automated. Have just the occasional thing be a phone call, like in the situation this is a personal phone call and that’s the thing that [inaudible 18:11]. So there is real support.
Now the things that detract is not just all those, though there is for things that attract and for things that detract. The first we talked about was how much you charge the second thing is time. So if you sell something to someone and it takes months to set up, it detracts from value because you are taking away from their time.
Another thing is energy. And so if it keeps them up in the night worrying about the product or they are worried about whether or not you are engineer will, because he was late last week, that’s detracting from your service. And the last thing is sidekick cost. Which is if you had an issue, maybe you have lost a backup where the client has got in the local business paper that there was this tragic loss of data and you end up with a sidekick cost attached to your services and you need to be able to be real about the stuff and address it.
And so getting those, putting those levers right and working out what the clients says is valuable is the most important thing in hitting that target.
So not only do you have to understand who you are targeting, you need to understand their preferences and target your product, your service to those preferences. Copying the guide down the road and how he does managed services or maybe some speaker how they do manage services, he’s creating unique value that I definitely have seen people create unique value from delivering a net delivered client value when some of those do great client value.
More than that, the challenge is then create superior value against everyone else in the marketplace. And if you can do that then you win all day long.
Tim: You get to choose your clients, you get to choose your charging context of that value, you’re going to be very, very successful business.
Nate: Yeah and I think an important point to make is that it’s okay to say no and it’s almost better to say no to some clients, that they don’t fit this target that you are creating the value for, it’s okay to say no because it is going to be better for your business in the long run.
Tim: Of course drag, the question of value, or how you want to… I was talking to a guy just yesterday he saying, “One of my clients came to me and wanted me to discount my deal by like 10%.” And am like, “Why did he want to discount the bill?” And he said he actually told him, “I don’t see the value in it.”
Tim: Nate, something is wrong.
Tim: There was a few key things we discussed but this whole concept, I think maybe they are not… They may have been the right time for you when you picked them up six or seven years ago but maybe they are not the right target anymore and you need to go to them and say, “Look, we are not going to be renewing your contract at the end.” And it’s like, “Oh my goodness are you kidding?”
Look, if they are questioning value now, they will never be happy if they don’t actually like value. You can’t be superior if you don’t focus on value.
Nate: Yeah. I think every MSP out there knows those clients that just are constantly bugging you and they are dragging you down and not just because it adds to your revenue doesn’t mean it adds to your profits and it’s okay to fire your client sometimes.
Tim: Yeah, yeah.
Nate: Go ahead.
Tim: No, I have this too, reinforced saying great point. But the first year I was in managed services I just bought into the company and we had our largest clients, about 60% of our revenue, let us know that they’re going out to tender. I had never done this before and it’s kind of… The best way I can explain it, now I know what was going on but then I was just like, “This is kind of weird.” We were co-located right next to their office and we knew them all. And I remember getting to the tender meeting and just being hijacked by one of these staff with all these issues and am like, “Guys to me but the public tender panel of people who have never met us and we should have let them go but we didn’t.” We fought for the contract. We lost it anyway.
The client, the next provider doubled the price not a little bit more, it’s like a six stuff contract, light doubled the price in three months in, they failed to be able to take on the account, they insourced. It was then triple what we were going to charge them.
Tim: If I had big enough set of whatever’s, right but then I would’ve said, “You know what, for whatever reason we are not providing value for them anymore,” and it might not be us, “We need to let go.” And as is happened we had three months to replace 60% of our revenue and we did it. We replaced all 60% of revenue in three months. But it would have been really good to not spend three months worrying about a tender we could have left and had six months worth of revenue coming and had gone and found other clients.
That was a real lesson for me just kind of refused to sell things to people that aren’t providing value and trying to be the one to fill that out.
Nate: Yeah, sometimes you just got to take that leap and standing still in one place, it ultimately is going to get you anywhere and if you can’t jump around to new places and new opportunities then you are missing out.
Tim: Yeah, yeah.
Nate: All right, so we are just talking about this net delivered client value and what it is and if I am an MSP and I’m just kind of identified my value, what I’m good at, what I want to go after, what are some of the things, the activities I need to do to translate my business into this valuable asset to the clients?
Tim: Yeah. So we’ve all see the situation where someone says, “Oh, let’s just sell a product. Let’s set backup.” And then we’ve gone and all of a sudden we are selling back up. We haven’t really thought about the promise that we’ve just made.
So what I think is best and what I encourage people to do is write a list of all the key activities they do. So if you say you do 24 seven support you need to write it, 24/7 support literally just list out all of the different things you do in your business to keep the promise and the promise is what you created with this value proposition on the net delivered client value.
And then if you write out all the key activities, then you get a really clear idea of what is going on. We are all in situations where we are delivering something and going, “Hang on a minute, we don’t know how to do that; we haven’t been trained in it, we don’t have someone that has the capability or certification.” And that happens from not consistently ensuring that we can deliver on the promise. And the problem is if you can deliver on the promise you are actually falling into one of those situations where you have lost trust and can’t deliver that value.
And backup is a funny one; Kind of we are into new cool gadgets as IT people and we’ve got to resist the urge just because it is new and cool doesn’t mean we can deliver on all the key activities to make the promise of selling it. And we should have salespeople in our organization that have the attitude that we are going to sell what we know or organization, the promise that our organization can deliver rather than, “Oh, the engineer will worry about that.” That whole process is going.
University of software company, a good software company go and do that. There are product managers in their which we talked about before going, “Hey, what is the promise that we are delivering? How does this get billed and how does this get delivered?” And doing it and providing consulting and support. And so you have; say you do consulting and you don’t have that capability, then you are in big trouble.
Tim: You’ve got to deliver that. So going through and just literally writing down all the things that we promised in our managed service contract or in whatever it is and then you’ve got all these key activities that you need to then go and ask a question when I’m going to go build this business or fit out my current business to deliver on this new superior value proposition, I need to make sure that I can come down the list of activities really simply and go, “Yep, I have a process, I have a team to get to deliver 24 seven support,” and that’s classic.
I mean I’ve had, I pretty sure I’ve been in situations where I get the call and so, “Okay, you said sales guy said that you guys can definitely look after me 24/7. I called the support line at 6 PM [busy tone] I get the message, “Sorry, haven’t called during our business hours,” that is not the way to deliver superior value.
Nate: You’ve got to follow through on the promises you make as a business. Yeah. So we are coming up to the end of our program here. I wanted to ask you one last question, just what you think every MSP should be doing these days? I know the market is crazy. I know there is many different areas that you can fit in as an MSP but what is kind of the one underlining think that every MSP should be doing and their business?
Tim: Yeah, that’s a really, really good question. MSPs should be choosing great partners. So in the world of cloud, biggest realization is you’re not going to be able to do it on your own unless you are Amazon or Microsoft or Google. You are not going to be able to do that if you’re on cloud infrastructure. There is some guys that have had it in for years but I don’t see many people now starting to build out their own infrastructure.
If you have had it in for years, if you’ve got good plans and you can make money then good but at the moment I think with this be that the whole industry is moving, it’s about picking the right partners.
Picking the right partners is a really difficult one in channel particularly with [inaudible 27:01] as a service because you really give a lot to SAAS provider if you are giving all of the client, the client business you’ve really got the trust that they’re going to do the right thing with the product not just now but in the future. And the second thing is they’re going to look after you and that there is not going to come a time when the company is in the US and abroad that have said, “You know what, we offer this trail,” and they’ve decided, “You know what now that the client is all hours, we just going to reduce that trust by half.” And so it’s really, really important that people think through how they build out the right team of partners that have supporting their business so that the scaffolding is strong so that they build a part that won’t topple over.
So partnerships is really, really important. In fact, probably the most important thing.
Nate: Yeah, I think that is great advice.
Well Tim, Tim Brewer, thank you for chatting with us here on MSP Radio.
Tim: It’s been a total pleasure, Thank you for having me.
Nate: I am glad we run into you at the conference year. I hope you are enjoying yourself and yeah, thank you for joining us.
Tim: It has been a pleasure man, have a great day!
Nate: Great, thank you, you too. And all the listeners out there, thank you for tuning into MSP Radio this week. I hope you enjoyed our episode with Tim Brewer.
Don’t forget to subscribe to our podcast on iTunes. Also available via the Stitcher app for android users. Follow us on twitter using the handle at follow continuum and you can let us know what you think of the show with the hashtag MSP Radio. So thank you for tuning in this week and we will see you next week on MSP Radio.