Landing co-managed IT contracts can have massive benefits – the revenue amounts can be larger, profitability can be higher, contracts could be longer, the work can be more strategic and exciting. But if you’re wanting to catch these bigger whales, you need to change the way you fish. You’re swimming with the big boys now.
While MSPs provided 34% of IT functions for medium-sized businesses in 2020 in a co-managed environment, Big Red Media projects that number to skyrocket to 81% by 2030. The reason is simple: your co-managed clients do not have money or the desire to hire (or keep) technology staff, but they have money for technology services.
That’s where you come in
As belts tighten in the current economy, position yourself as the MSP that can step in and handle what needs to be handled. That could be a help desk, network security or server maintenance. Co-managed providers can fill in the gaps that companies need filled. For many MSPs, that will be services you already provide – but now you run the ship along with their internal IT team.
Some benefits of selling co-managed services include:
- Get more money: Running an MSP is not a charity. Co-managed services often mean more profit and longer contract terms than other work. Essentially, you can get paid more for doing less.
- Happy(er) clients: Co-managed services can relieve customers of a lot of work, overhead and management. Having an outsourced IT team backing them up puts you in a position where you are needed, and the relief that they get to know “it’s just taken care of” is invaluable. Plus, when your customers see the benefits of co-managed services, they will more likely refer you to colleagues. (There’s nothing better than word-of-mouth leads!)
- Get your foot in the door: Co-managed services can open up new markets within your current expertise, allowing you to work with larger organizations that may have internal IT teams in place. This can help expand your reach, grow your client base and increase revenues without you having to jump into new verticals or territories, or scrape the bottom of the barrel for leads.
- Increased expertise: By working alongside clients’ IT teams, you can gain valuable insight into your clients’ unique needs and challenges. This can help to develop new skills and expertise that can be applied to other client engagements in the future.
$62,000 In Co-Managed MRR In 4 Months
Direct IT CEO David Javaheri is one of those smart MSPs who went fishing for more co-managed revenue during the last quarter of 2022. The results were almost immediate as he closed $62,000 in MRR in just four months (although he’ll humble-brag that most of those sales were condensed into just three months).
That’s not to say that MSPs can just “turn on a co-managed switch” and watch the sales flow. Javaheri launched an aggressive marketing campaign, spending more than $2,000 weekly on LinkedIn to drive potential customers. He then took an aggressive sales approach, immediately contacting anyone who responded to an outreach e-mail or downloaded a co-managed asset.
Javaheri’s advice to other MSPs is simple: go with the flow. If a client wants help desk services but not server maintenance, just give them what they want. Most MSPs will already offer the service suite that customers want to co-manage, so work with them on the solutions they want and adjust the price. Thanks to his efforts, Direct IT closed about 15 new clients with a closing ratio of 53%.
Read more: 10 questions that make or break successful marketing of co-managed IT services.
“I made a ‘not to do list,’” Javaheri says. “I did not want to deal with any tech issues, any headaches. I pay people lots of money to do that. I just focused on my next sales presentation.”
Your “Not To Do” List for Selling Co-Managed Services
- Fish For Tuna When You Have Whales Next To You.
The best place to start when you are looking to add more co-managed clients is directly within your current vertical. Look for larger businesses in your niche since you already understand the business workflows, pain points, language and tech. Instead of a single dentist’s office, look for a dental practice with multiple locations, thousands of patients and private equity funding. They have IT budgets and must protect more against risk.
- Do Not Stay Stuck On Using The Same Contract Terms As You Do With Your Smaller Clients.
You may need to adjust your contracts for co-managed clients, and often this is to your benefit! Offer longer contracts that include rate adjustments for inflation. This provides protection against sudden changes and underscores the depth of services you’ll provide to new co-managed clients. It is not unreasonable to sign contracts that extend several years.
- Do Not Think The IT Person Will Always Be Your “In.”
Start the business relationship with the CEO, not the IT person. The CEO’s priorities (reduce risk, increase efficiency) will differ from the IT person’s, and it’s the CEO who ultimately writes the check. Often, the IT person can be on the defense too, thinking you may be “out for their job.” Their concerns over job security or someone coming in who reveals what they do not know could sabotage your efforts.
- Do Not Talk Tech.
Speak to the CEO in business and financial terms. Leave the technical discussion for when you speak with the IT manager. Also, create a deck that explains the business benefits of your services for the CEO that can be FedExed if the technology lead attempts to block your access.
- Do Not Take Just Any Client.
Pick your clients carefully. Delivering co-managed services requires collaboration and mutual respect. Not all clients offer that. Run away if the situation feels off, because it rarely gets better once the work starts.
Fish On! CEOs Bite The Hook
CEOs will look to bring in an MSP for a few reasons. It could be to cut costs/overhead, to boost assurance in IT stability and security by having an experienced outsourced team, to handle “specialized” needs like cyber security and compliance or just to combat the staffing difficulty of recruiting, hiring and keeping top IT talent.
Co-managed services allow larger companies’ CEOs to keep control of their technology environments while leveraging MSPs for needed areas. Bringing in an MSP would cost less, provide better service and offer more resources than spending that money on internal technology talent.
While co-managed services will continue to grow, position your company now to take advantage of this wave. As recession fears mount, opportunities will only grow, and that means it’s fishing season for profits.
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