Build Your Own
Financial
- Investment $3M -$6M
- Negative Cash Flow for XX (capital)
- Cash Flow – Ongoing Salaries vs Receivables
- Tools, Licenses, Updates, Resources (Up-front and ongoing)
- Qualifications / Certifications
Staff, Train & Manage
- Multiple Service Delivery Disciplines
- Ongoing Training
- Multiple Shifts (24/7)
- Sales Support Staff
- Sales Staff
Create
- Service Delivery Processes
- Statement of Work
- Marketing
- Collateral
- Sales Job Descriptions
- Compensation Plans
- Contracts
- Service “Credit” Approach
- Costs Models
- Pricing
- Billing Process
- Accounting Approach
- Renewal Management
- Cancellation Reserves
- Account Management Process
- Risk Reserves
- Security Policies
Buy an Existing Practice
Financial
- Investment $6M- $10M
- ROI
- Cash Flow – Ongoing Salaries vs Receivables
- Tools, Licenses, Updates, Resources (Up-front and ongoing)
- Qualifications / Certifications
- Contract Financial Risk Analysis
Staff, Train & Manage
- Multiple Service Delivery Disciplines
- Ongoing Training
- Turnover
- Multiple Shifts (24/7)
- Sales Support Staff
- Sales Staff
Create/Refine
- Service Delivery Processes
- Statement of Work
- Marketing
- Collateral
- Sales Job Descriptions
- Compensation Plans
- Operational Support
Today, up-front costs to build a successful Managed Services Practice have been lowered because many former buy “tools” are now offered as-a-service. However, it still can cost millions to establish a NOC (And, yes, I realize that it has been done a lot “cheaper” with just a single workstation and a couple of engineers. These usually fail.).Everyone underestimates the resources (skills and effort) to build a Managed Services Practice from the ground up. The focus needed from management and technical resources is constant. This is just the way it is as there is constantly new technology being created that need management.
Oh, and if you buy a successful practice – with a NOC – it will cost even more.
If you set up for practice with an as-a-service solution, you usually must pay up front for a full year, in advance. Unless you have a large enough initial contract, you will underutilize your resources. Then you have to allocate those resources to maximize their effectiveness and keep them happy.
Whether you build or buy, until your Managed Services business is large enough, you also may not have the “right” level of resource available. Therefore, you may find yourself overpaying a resource for a specific task (e.g.: a level 3 performing a level 2 task) or a lower-level resource trying to do a higher-level task (which will either result in longer repair times and/or delivery issues). Then there is the obvious need to staff 24 x 7 x 365, for which you will need a minimum of 12 professionals to keep “eyes on the glass.”
Project or hardware sales contracts are straightforward, and warranties and indemnification are passed from OEM to customer. On the other hand, Managed Services agreements require you to address warranties, indemnification, insurance, confidentially, data protection, service credits, usage, etc. These agreements require knowledgeable business operations and legal counsel and will likely need to be customized for larger customers.
Think you are ready to build or buy? Don’t make up your mind until you have read my next post, in which I will focus on what it would take to “cobble” together or leverage a managed services practice.
Reach out to David McGillivray and his team at info@intergridms.com to learn more about InterGrid’s JetStream line of Managed Services currently offered to Comstor VARs.
