The people you work with outside your organization can have a huge impact on how quickly your business grows. Strategic alliances are those people who fill in your skills gaps and partnerships are vendors with whom you work closely. This article looks at how your Managed Service Provider (MSP) business can benefit from both.
Forging a strategic alliance
It’s not unusual to see the owners of IT businesses trying to do everything within their business, and typically achieving very little as a result. Sometimes you need to ask yourself a simple question, “As an IT business owner, when should I ask for help?”.
Continuing on that theme, one of the things we’ve observed from the most successful MSPs is their laser-like focus on a core competency within their business—knowing what they are good at and sticking to it.
For most smaller IT companies this core competency is IT infrastructure: servers, workstations, and networks. The result is that they are viewed as experts in their field, delivering high quality work in a timely fashion.
Complement your core competency with a strategic alliance
On the other hand, you are probably familiar with the phrase, “Jack of all trades, and master of none”. We’ve seen this plenty of times. An IT company is approached by a prospect or client to do work that falls outside their core competency (it could be web design, data cabling, or bespoke development), yet they are afraid to say no to that work. Often there’s a fear of pushing that client away, or they’re not confident when the next opportunity will come along.
So they take on this work and try to complete it as best they can. As this work is outside their normal field of expertise, the result is often that the work is challenging to complete, takes longer than it really should, and is often completed to lower standards than the client deserves.
A far better approach would be to stick to your core competency, and build a strategic alliance with experts in other competencies complementary to your own.
Benefits of a strategic alliance
By building such trusted relationships, the next time you’re approached for work outside your core competency by a client or prospective client, you can do one of two things:
- you can refer that client directly to your trusted strategic alliance partner
- or, if the task is a smaller part of a larger job that you are managing, you can sub-contract the work to that strategic alliance partner to complete under your direction.
The result in both cases is that you’re delivering the quality of service to your client that they truly deserve.
The client is getting the expertise they require in every field, and you’re enhancing your reputation—not just as an expert in your core competency, but as a very well connected company which doesn’t pretend to know everything and instead knows when to involve a trusted and reliable third party that will be of benefit to the client.
The more strategic alliances you build with like-minded companies, the more partners you’ll have out there who’ll be looking for work on your behalf. For example, the next time your data cabling partner is approached to install a server and 20 wall ports, guess who they’ll be calling to sub-contract the server installation? A strategic alliance can help you find clients you wouldn’t have otherwise met.
Who to partner with?
Here are some examples of strategic alliances MSPs might consider:
- Web Site Design
- Search Engine Optimization (SEO)
- Data Cabling
- Database Development
- Software Development
- IT Leasing and Finance
- IT Training
- Telecoms and Voice-over-IP
We’re not suggesting for a minute that building such strategic alliances precludes you from working in other areas to build your experience. We know many MSPs who are comfortable taking on VoIP clients with less than 10 handsets or data cabling work for the odd additional socket, but they contract out large VoIP rollouts or projects to flood a new office with data points.
Jobs that you can take in stride and deliver in a timely fashion are fine, but any work you have a gut feeling will be outside your range of ability to serve your client properly should trigger a call to someone for whom that work IS a core competency.
How to structure a strategic alliance
Once you’ve found a partner you’d like to forge a relationship with, you need to know how to structure a strategic alliance.
Whatever form the relationship takes, it is prudent to sign a Non-Disclosure Agreement (NDA) or Confidentiality Agreement. This document would state that as the partner is going to become privy to information about your business and your clients businesses, that they won’t share this information.
Next you need to define whether the relationship is one where you will refer business directly to your partner to work on under their own name or whether they will be sub-contracting for you—providing a service to your client under your business name.
If you will be engaging the strategic partner on a sub-contract basis (a good example might be engaging a fellow IT company to help you on a server rollout project) then you need to define the terms of the relationship upfront.
In addition to the NDA you’ve already had signed, a Consultancy Agreement is often commonplace. Such a contract would reiterate the terms of the NDA and also include statements that the sub-contractor would agree to not engage with your client directly. In other words, the client remains yours.
Additionally, you need to be upfront about your expectations of the relationship. These might include:
- A project scope Defining the work to be delivered and the standards your business expects. Consider server naming conventions, equipment labelling, quality of work, etc.
- Financial expectations The payment, either fixed-fee or hourly rate, you agree to make to the sub-contractor, when you expect to receive a bill from them (e.g., at the end of a project, weekly, monthly), and when and how you will pay that bill (e.g., monthly, by electronic transfer).
- Professional standardsThe sub-contractor is representing you to the client. You may wish them to dress a certain way, perhaps wearing a logo emblazoned shirt that you provide to them. You may also state that the sub-contractor alerts you upon arrival at a client site and before they leave.
- Referral relationshipsIf the relationship is referral based, then you need to decide upfront whether the relationship will yield mutual referrals. In other words, will you be passing work back and forth so that you both benefit.
In many cases, mutual referrals are a natural fit. For example, a data cabling company might be approached by clients wanting data cabling and a server installation—they undertake the data cabling and refer the server installation to you.
But there are also cases where a strategic alliance partner is unlikely to be able to refer work back to you. A telecoms company which provides leased lines might be a good partner for you, but they are unlikely to do so on an exclusive basis as they typically work with dozens of MSPs. In this scenario you may wish to broach the subject of a referral incentive—a financial payment made to you by the strategic alliance partner to reward you for bringing them work.
Any financial incentive for referrals should be agreed upon upfront and in writing to save confusion post referral. It should define when a referral fee is paid, how the progress of referrals is reported back to you, and how you go about invoicing the partner for successful referrals.
I should also stress that your primary concern is to your client. You’re ideally looking for a partner who is the best fit for your client base AND provides a referral payment.
If it came down to it, I’d prefer to work with the best fit for my client base, even if they didn’t provide referrals, rather than work with a partner just because they have a strong referral incentive program.
By setting expectations and agreements upfront, you are projecting your professional standards and creating a framework for both partners to work towards. You’ll soon find that engaging in a strategic alliance can help you both grow your business and increase your profits.
How to effectively build your MSP partnership with vendors
Building alliances with fellow professionals is one thing, but how is your relationship with your IT vendors? Nearly every IT company partners with a wide variety of vendors for everything from hardware to antivirus and RMM to PSA tools.
For the majority of IT companies, this partnership is viewed in very simple terms. The vendor offers a product and the IT company sells that product to their clients.
Most vendors also offer pre-sales support—partner consulting, not-for-resale (NFR) licensing, marketing collateral, and occasionally market development funds (MDF)— and post-sales support through technical support, training, and account management.
A one-sided relationship?
The challenge with this relationship is that it can feel rather one-sided. If the vendor doesn’t provide NFRs, they’re accused of being greedy. If they don’t provide MDF, they’re accused of being short-sighted. If they don’t provide training, they’re not enabling the IT company to support their clients effectively post-sale, and so on.
What’s more, when the vendor does provide all these things, they are often surprised to find their partner IT companies don’t use them. Training webinars are poorly attended. NFRs are downloaded, but not installed. Technical support isn’t used.
From the vendors’ perspective, if they provide all of these things and the IT company doesn’t use them, then why should they bother?
Speak to the IT companies and they will often tell you that they don’t use these services because they don’t have time, and they feel it’s pointless trying to build a deeper relationship with the vendor because they don’t sell a lot of that vendor’s products and/or services and probably aren’t that important to the vendor.
And so it is. The relationship between vendors and IT companies is an almost begrudging one from both sides.
But it doesn’t have to be that way.
Regardless of the size of your IT business or your sales volume of a vendor’s product or service, you can forge a mutually beneficial relationship with your vendors.
More than a vendor—a partner
You should look at the relationship with your vendor as a partnership. Take time to look for opportunities to help the vendor, rather than asking what the they can do for you.
For instance, have you ever asked your vendor account manager what targets they are measured on? Sure, for many it’s sales or revenue, but dig deeper and you’ll find that it’s often about the number of partners enrolled in their partner program, the number of your engineers who are certified in the vendor qualification, the number of attendees at training webinars, and so on. By committing a certain number of your engineers will attend training and by recommending the vendor to your peers, you show the vendor that you’re willing to help them grow their business too.
If the vendor is all about sales (and don’t assume this until you’ve actually asked them), inquire about the sales level they’d like you to achieve. Agree on a target, and then make a commitment to reach that target within a timeframe. You’ll both gain a focus on selling the product, and you’ll be showing the vendor you’re serious about partnering with their company.
So why would you bother doing all this? Put simply, the rewards are worth it in terms of your business growth.
I’ve personally worked with vendors who were willing to offer large product pricing breaks based on growth targets—something usually reserved for much larger partners.
A beneficial relationship for your business
By looking to help your vendor, you appear on their radar. When an end-user lead comes in, who are they going to pass that lead to? Well, if you’re on the vendor’s list of favored partners, then there’s a good chance that it will be you.
And there are other opportunities too. So it doesn’t matter what size your IT company is and it doesn’t matter how big the vendor is. If you demonstrate a commitment to helping the vendor, they will help you—it’s a win-win situation that will have countless positive effects on your business.