Published on May 15, 2023
Embracing digital transformation to reshape your growth strategy
The growth of a Managed Service Provider (MSP) usually follows a distinct pattern. It starts with a modest number of customer accounts and a high ratio of support agents, essentially over-servicing the customer to make sure they stay happy and have no reason to go elsewhere. Most of the tasks and processes remain manual and laborious but, in recognition of the error-prone nature of working in this way, the team is dedicated to fixing any problems immediately and demonstrating fast response times.
The story of a small high growth MSP
The small MSP will typically run disparate internal systems and applications to serve those customers, and although this means effort is often duplicated, it’s not operating at full capacity, so the situation is manageable, although far from efficient. The objective is to serve the customer in any way they can, which may include a high level of customisation to serve specific customer needs. This may even develop into a deep understanding of one or a small number of industry sectors.
However, as the MSP grows and acquires more customers, it quickly becomes apparent that over-servicing each one will start to put the engineering and support teams under significant pressure, which will negatively impact their performance. Maintaining the standard of service established with early customers would require a significantly sized engineering operation that would have to grow exponentially in line with customer demand. This operating model is simply not affordable or sustainable.
Further, as the burden increases on the team, so too does the number of errors, as the processes were never designed to handle this volume of throughput. As the new business team celebrates its success in finding new clients, the engineering team struggles with the challenges of onboarding and supporting them with systems and tooling that are unlikely to be leading-edge technologies, some of which may be homegrown. This can cause a division in the organisation between the commercial and engineering departments, with one accusing the other of holding it back.
The distinct lack of best practices and adherence to industry standards, such as ITIL, further exacerbates the problem. The danger is that while the commercially successful MSP is experiencing the growing pains of success, some of those early customers who benefited by being looked after so well will start to see a change in the quality of service. More outages, poor communication, stretched resolution times and slow response levels could mean that some of those early clients start to look elsewhere.
Now the commercial team needs to work harder to find new business to make up for any churn. A big part of the problem is the lack of interoperability of the internal systems, with data sitting in multiple systems that lack integration, so agents don’t know where to go for a single version of the truth. It’s at this point when an MSP will be forced to consider how it can improve productivity, service delivery and ultimately, the customer experience.
Changing ways of working by streamlining processes and automating tasks have huge benefits for tech service providers. According to research from MIT, digitally mature organisations are 26% more profitable than their less mature peers. Yet, while MSPs make it their business to advise clients on their digital strategies, it’s clear they also need to adopt the same practices in-house, if they haven’t started already. By this stage in the life cycle of our fast-growing MSP, its likely to be in a strong financial position and may even have secured funding from investors. This will allow it to review the situation and begin implementing initiatives to help transform the old operating model into something more sustainable and cost-effective that it can build on for the future.
How can digital transformation ease the burden?
There are many operational and financial performance benefits to digital transformation for companies in all industry sectors and especially for tech service providers. Perhaps the most significant improvement is the ability to stay ahead of the competition. By embracing new technologies and implementing more efficient automated processes, service providers can differentiate themselves, offering clients better and more innovative services with an unmatched customer experience.
This can also help MSPs to increase their revenue streams, by expanding service offerings to generate additional sources of revenue. For example, this can include everything from cloud computing services to managed security services, as well as solutions designed for customers within different vertical sectors. Improving efficiency by adopting a scalable and integrated operating model that embraces service automation helps reduce costs while improving service levels, resulting in high levels of client satisfaction. Moreover, this is the pathway to sustained profitability for the long term, because as the business continues to grow its customer base it no longer has to exponentially increase costs to serve them.
Transformation initiatives are often matched to growth strategies and reflect the ambitions of an MSP to acquire new customers organically or by acquiring other service providers. More generally, we have seen the investment in digital transformation increase across all industries in recent years for this very reason. For example, market and consumer analyst firm Statista says that in 2020 global spending on digital transformation was more than $1.3 trillion and predicts the industry will be worth more than $3.3 trillion by 2025.
Tips on how to approach transformation
Getting to grips with digital transformation can be a daunting task. However, with the right approach and strategy, it is possible to get it right the first time. Here are some steps that MSPs can take to implement digital transformation and create a blueprint for success in the process:
- Assess your current state: The first step is to assess your current state. This includes looking at your technology stack, business processes, and service offerings. Identify areas where you can improve and prioritise these areas based on their impact on your business.
- Define your goals: Once you have assessed your current state, you need to define your goals. This includes identifying what technologies you want to implement and how they will improve your service offerings and business processes.
- Create a roadmap: With your goals in mind, create a roadmap that includes timelines, milestones, and key performance indicators (KPIs) to measure progress.
- Implement your plan: When implementing your plan, you may need to find a partner to work with that is experienced in the MSP sector. You may also need to hire and assign resources to the project and invest in new technologies. It's important to monitor progress and adjust your plan as needed.
- Continuously improve: Transformation is a never-ending process of continuous improvement, so remember to factor this into your cultural and organisational development. It will be important to help staff develop existing and new skills, as well as create defined career paths for them. Working with your transformation partner, continually identify specific areas of the business to improve, with streamlined and automated processes that embrace best practice methods.
Get to value quickly
Executing a transformation plan requires dedicated time and resources, but how do you manage it? You can go it alone, taking full responsibility for the outcome as well as all the risk, or you can find help from a specialist partner that knows your industry and can help de-risk the project. In either case, it is important to demonstrate value to your customers and back to the business in terms of increased performance as quickly as possible. Once this is done, you can then continue to improve operations from there.
Digital maturity allows tech service providers to quickly adapt and respond to changes in the market. Your digital capability can redefine your operations and efficiencies to give you that competitive edge. When assessing digital maturity, consider the needs of all who are connected to your business, internal and external stakeholders, customers and third parties, and then develop a strategy that has growth and collaboration at its core.
How business customers drive the need for change
Savvy business customers frequently assess MSPs on their level of digital maturity before buying from them. Customers put a significant focus on the quality of the customer experience they can expect to receive. This may include assessing things like Service Level Agreements, service desk response times, time to issue resolution, processes and procedures relating to service outages, the quality of the customer portal, clarity of the billing, the provisioning process, access to individuals with specific skillsets and much more.
The technological capabilities of an MSP can be better understood by prospecting customers by examining its portfolio of services, customer reviews, and success stories. However, customers want to work with MSPs that also use the latest technology, tools, and software solutions to run their business internally. It’s simply not enough to offer the latest products and services. Internal factors are so important that they are considered of equal importance to understanding an MSP's pricing structure and value proposition.
Overall, MSPs that demonstrate a high level of expertise, technological capability, excellent customer service, strong security measures and innovative solutions are going to be more attractive to businesses that want to get the best service for their money.
Get in touch with POPX for more information on how to create a blueprint for your MSP's digital transformation success.
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