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The importance of vendor management for MSPs

While the term “Managed Services” is subjective as relates to the IT industry, I like to favor the following definition. To me, an SMB managed IT service is one where an IT company provides to their client for a flat monthly fee:

  • Unlimited “All You Can Eat” Technical Support
  • 24x7x365 Monitoring and Maintenance
  • Vendor Management

In this blog post I’d like to focus on the vendor management aspect of managed services, as while it is often overlooked, mastering it can be the difference between operating a profitable managed service contract and one that sucks your time, energy and profit away.

Vendors, vendors everywhere

As an MSP, when you win a new managed service client – they are rarely a “green field” site. That is to say, they typically have incumbent IT vendors providing services of their own that you are expected to manage on behalf of the client. These services could be:

  • Antivirus
  • Email Security
  • Off-Site Backup and Disaster Recovery
  • Broadband Internet
  • Hardware Maintenance
  • Telecomms
  • Web Hosting

Your role as managed service provider (MSP) is to manage these vendors to ensure the client receives the service they need and deserve.

In addition to documenting your internal systems and processes, and teaching your staff how to obtain support and account management from each of these vendors, you often need to train your engineers how to provide first line support to the product, understand emergency support escalation procedures, and keep up to date on any technological changes in the vendor’s product.

As a smaller MSP, initially this may not be a challenge. In fact, building relationships with new vendors and learning new technologies may help broaden your experience.

But as you win more managed service clients, and acquire an ever-growing range of vendors and vendor products to manage, things become very different. Imagine trying to manage 60 clients each with three or four different vendor products. This becomes a huge undertaking, and despite all the time you and and your staff take trying to manage the clients, the vendors eat into your profit.

Offer your own portfolio

The solution is to build your own portfolio of preferred products and vendors, and put in place a structured approach for helping your client migrate to these products.

The benefits of moving your clients to your own preferred vendors and products are three-fold.

  1. Working with one preferred vendor for a product enables your company to build both a deeper relationship with that vendor, which can help you negotiate price breaks and special deals on your way to becoming that vendors favorite client.
  2. It helps you deliver a much more efficient service to your clients. When your engineers only need to deal with one vendor technical support team, your finance team only needs to deal with one account manager, and when you only need to write up one escalation procedure for your company Operations Manual, then supporting your client becomes much more efficient and profitable.
  3. More often than not, when promoting a vendor that you know and trust, you can generate a referral fee or a recurring revenue stream from re-selling the vendor’s product. I must stress, though, that choosing a vendor based purely on a favorable referral fee is a false economy—you must find a vendor who rewards you for new business, but also has a strong product and is a good company to work with.

Anything less is selling your client short—and after all, you’re putting your own company’s name to the vendor recommendation, so you want to be represented well.

The challenge is worth it

While migrating your clients IT services to your preferred vendor might be a challenging task, it is worth the effort. When your clients are working with your preferred vendors, you will be able to deliver a faster and stronger service, and you’ll in turn become more profitable.

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