The relentless pursuit of MORE is an addiction afflicting a lot of business owners. MORE and BIG are often incorrectly associated with success. If you get MORE leads, MORE clients, and MORE recurring revenue, many are impressed.
However, MORE can also mean more stress, more employees, more moving parts, more ways for things to go wrong, more costs, and more long days and weekends worked. But another, possibly smarter, strategy is to figure out how to do MORE of the good things (revenue and profits) with LESS and FEWER.
That’s why a lot of MSPs are moving upstream to sell co-managed IT — it provides bigger, more reliable, and more profitable MRR with fewer clients.
For starters, co-managed IT contracts represent bigger MRR dollars mostly because you’re dealing with larger organizations that have an IT department (usually 70-plus users, often into the thousands). It’s very common for contracts to exceed seven figures — and it’s good business, too.
Unlike small businesses, these companies are typically more professional, knowledgeable buyers who have IT budgets and are willing to invest in cybersecurity and IT to lower risks and keep the organization humming along. The contracts tend to be for a longer term as well, frequently being sold on three-year terms.
The trend of co-managed IT is growing exponentially, driven by the ever-increasing threats of cybercrime, regulatory compliance, and the labor shortage that is not going away anytime soon. Many companies simply don’t want the cost or distraction of building an internal IT team and are outsourcing as a means for lower costs and getting a more reliable and experienced bench of engineers and experts.
What IS Co-Managed IT Exactly?
Simply, co-managed IT is any type of IT service you deliver to a company with an internal IT department where you are “co-managing” IT for that organization. In some cases, the MSP is only supporting the servers.
In other scenarios, the company doesn’t want you to touch the servers but only deliver help desk support. Some MSPs are simply selling and subleasing the tools for managing tickets, RMM, etc. In talking to dozens of MSPs who deliver these services, many have said that they have to be packaged, priced, and delivered on a case-by-case basis, with each client needing something slightly different. Over time (and IF you do a great job), that scope of work is likely to expand as the organization discovers they can rely on you for many aspects of IT, such as budgeting, documentation, security, compliance, and more.
Further, growing companies will constantly have greater needs and dependence on IT, which means they are likely to have projects they will hire you to complete.
What Drives The Sale: Psychographics And Characteristics Common Among Buyers
Because this sale requires buy-in not only from the C-suite but also the IT leader, and because you don’t want the IT leader to feel as though you are attempting to replace them or not respecting their position (you WILL have to work with them, after all), you will need to have different marketing materials, approaches, and sales presentations.
Selling To The C-Suite
In some cases, the CEO knows their IT leader or team is inadequate and is frustrated with projects not getting done, employees complaining about problems, etc. They are likely to have a sense that their IT lead is not keeping them secure and compliant (or might KNOW they aren’t). They may want to meet with you privately to discuss replacing their entire IT department or the leader to solve this.
In this case, you’re essentially selling full managed services as you would to any other small business without an IT department.
However, sometimes the CEO (or C-suite) likes their internal IT person or department but understands their limitations in knowledge or time restraints in getting everything done. Whatever the case, here are the common fears and frustrations CEOs have that will bring you in.
Why CEOs Opt For Co-Managed IT:
• Fear of a single point of failure. Many CEOs feel as though their IT department holds all the keys to a kingdom they don’t understand. If the IT leader or key people leave for better, higher-paying jobs (or due to personal issues, illness, etc.), the CEO knows they’re in for a world of hurt — especially if the relationship is contentious. In some cases, they might have an IT leader who is arrogant and KNOWS they have power over the C-suite, smugly believing they’ll never get fired. Trust me when I say no CEO is going to tolerate that kind of behavior and incur that kind of risk.
• Fear of a cyberattack and lack of confidence in their current IT person or team to handle it or adequately protect them. The more successful the organization, the more they understand and fear risk. A small dental office consisting of the doc and his wife, who works part time as the office manager, might not care about HIPAA, security, etc. But a larger dental practice with multiple locations, multiple doctors and hygienists, and a large support staff is not going to risk everything they built to a cyberevent.
• Frustration with the IT leader or team. They might be looking to replace one or more people due to incompetence — or they might simply want to remove some of the responsibilities of their current IT leader or team so they can focus on critical projects lagging behind. If a company is growing fast, it’s often quicker to outsource certain aspects of the business than find, onboard, and get new employees up to speed.
• Lower costs. As you know, it’s cheaper to have a fractional IT team than to staff a full IT department. That’s particularly true when talking about situations where more advanced and sophisticated knowledge of cybersecurity and compliance is needed but the organization can’t support the salary of a chief compliance officer, CISO, etc. It’s simply too much for any one person to know, much less support.
• The uncertainty and difficulty of finding IT staff. Further, many CEOs don’t know how to interview IT staff to know if they’re good, bad, or something in-between. I often hear MSPs wanting to outsource the appointment-setting process in their business, mostly because they feel as though they don’t know what they’re doing — where to find the people to make the calls, how to interview them, how to compensate them, how to manage them, etc. They would MUCH rather outsource. That’s exactly how many CEOs feel when it comes to finding and building an IT team, which gives you an advantage in selling it.
When selling to the C-suite, you should focus on the above fears and needs, making a BUSINESS case to the owner. Many MSPs make the mistake of “geeking out” in the sales meeting, talking far too much about the tech and not nearly enough about the business case for co-managed IT.
Ultimately, it’s the C-suite that needs to approve the budget, so it’s critical for you to have this discussion in order to successfully make the sale.
Selling To The IT Lead
Unlike the CEO, the IT lead is not necessarily motivated to make decisions based on what’s best for the company. They have PERSONAL motives you need to be aware of. Of course, some may be very loyal to the company and mature enough to realize when they are in over their heads and need help, but even then, their ultimate loyalty is to preserving their paycheck, reputation, and ego.
That doesn’t make them bad people; it makes them human. But if you attempt to win over the IT lead by brute force and an “I know better than you” attitude, you’re going to have a tough time making the relationship work — and you DO need it to work in order to have an enjoyable and productive relationship where you can do your best work and truly serve the client.
A good IT prospect knows they need help to fill in the gaps where they are out of their depth and for things they don’t like to do. A bad IT prospect is not good at their job, wants to protect their turf, and therefore wants to run and control everything, making bad decisions and not allowing you to truly help them.
This is an unproductive situation that should be avoided at all costs because if you somehow are able to land the contract, the IT lead will blame you for everything and attempt to throw tacks under your tires to make you look bad and win back control.
What will cause an IT lead to reach out to you? Many of the same frustrations and motives YOU have as an MSP, so keep that in mind. You’re “kindred spirits,” and I would play on that connection. Here are a few:
• Crushed with work. Like you, many are overwhelmed with too many demands, needs, projects, and “to-dos” and not enough time to do it all. A good IT prospect is one who wants to get certain projects and tasks that they don’t like to do or admittedly aren’t good at off their plate. In many cases, they may feel some of the work is beneath them (below their pay grade). When selling, you can use this to your advantage; it IS true that a higher-skilled tech shouldn’t be working on lower-level tasks and projects. It’s a waste of the company’s money.
• Lone dogs. Many IT leaders gain confidence from co-managed IT relationships because they no longer feel like they are in it “alone” and have to bear the burden of all decisions (and the consequences that come from making a bad one). They like the idea of having someone who “gets” them to bounce ideas off of and hash out challenging situations.
• Fear of a major IT failure or cyberattack happening under their watch. All IT professionals have this in common: They get zero “attaboys” from management and their peers when things are working … but if ONE hiccup happens, ONE mistake, people are lined up at their door with pitchforks in hand, ready to blame them. So, the worst possible scenario would be their company suffering a serious breach under their watch. They realize it would potentially get them fired, leaving a big smudge on their résumé.
• Dealing with end users. Often, IT departments are underfunded and don’t get sufficient resources (people, money, equipment, software) to do a good job, so they’re strapped with old technology that takes a lot of time to support and maintain and creates problems. Then, they have end users screwing everything up, not following their protocols, and creating more work. If you can assist in “managing” the end users to take the stress and burden off their backs, many IT leaders will welcome that reprieve.
• No tools (monitoring, remote support, etc.) and no budget or time to get them and set them all up. Following on from the previous, many IT departments won’t have ticketing systems, RMM tools, documentation tools, etc. As an MSP, you can install your professional-grade tools to give them the added visibility and control over their environment they wouldn’t be able to buy, set up, and configure on their own. This is a BIG benefit you bring … plus, you can give them “cool” tech toys to play with.
Who Should You Approach First?
In the marketing campaigns I give my clients, we approach BOTH the C-level and the IT lead with different campaigns (which have different copy and offers) simultaneously. This is important for starting off on the right foot with the IT leader of the organization.
That’s because you never want the IT leader to feel as though you’re going over their head. If you do, they may see you as a threat and/or may be insulted if you didn’t approach them first. However, the CEO truly has the decision-making power. If you approach the IT lead, you risk getting blocked from ever meeting with or talking to the CEO. The IT lead may not have the authority to say “yes” to a co-managed contract, but they ALL have the power to say “no” and keep you locked out.
This approach to prospecting is best summarized in a book called “The Power to Get In” by Michael Boyland. It is, by far, the best book I’ve read on the subject.
Additional marketing approaches could take the form of talking to C-level organizations or even IT councils and groups in your area about the concept of outsourcing part of their IT needs to a local, trusted MSP. Your website should also list this as a service you offer (obviously), with case studies and testimonials from clients you are delivering co-managed IT for. And, of course, building and maintaining a prospect list of companies with IT departments is a must for marketing.
Want to learn more about how MSPs are selling co-managed IT? Take part in our new survey at MSPSuccessMagazine.com/co-managed