IT and Business Insights for SMB Solution Providers

A Surprising Number of IT Firms Still Cling to a Break-Fix Model

Here’s why they should transition to managed services. By Robin Robins

In a world where more and more businesses are moving to an “as-a-service” model or subscription-based deliverables instead of one-off purchases, it’s shocking to see how many IT firms still have not fully embraced a managed services model in their business.

Based on a survey we conducted last year of 1,500 IT services CEOs whose companies had revenues ranging from under $1 million to $5 million plus, a shocking 51 percent of those surveyed do not have a single managed IT services client, and 24 percent have 10 or fewer clients on a managed services contract, with the rest of their clients being time-and-materials, break-fix, or project-based.

This is surprising for a number of reasons, including the fact that the managed IT services model benefits not only the client, but also the MSP, increasing the financial stability, operational efficiency, and valuation of those selling it over the “call us when you need us” model.

Fear is the Biggest Issue

So why are so many lagging behind the managed services bandwagon?

The most common reason can be attributed to fear—specifically, fear of changing how they’ve done business for years, fear of losing clients, and fear of how to price and package the services properly. Of course, none of these fears are founded in anything but their own personal head trash. As a general rule of thumb, when we get IT services clients to at least offer managed services to their current customers, roughly 10 to 30 percent instantly say “yes.” That usually bolsters our clients’ confidence and gives them a good sampling of customers to “get their feet wet” in delivering managed services without imploding the entire business.

Eventually, over the next 12 to 18 months, they end up transitioning all of them. If any clients are lost, they’re almost always low-money accounts. Further, sales and profitability skyrocket, more than making up for the clients lost, which means they are now making more money servicing fewer clients. What can be bad about that?

One of my clients, Charles Swihart, CEO of Preactive IT Solutions, for example, transitioned his break-fix shop servicing 981 clients to managed services, intentionally losing 90 percent of his clients over a three-year period to replace them with managed IT services clients. That transition has grown his top-line revenue by 61 percent, more than tripled bottom-line profits, and has allowed him to run a more stable, lucrative business, freeing him to take care of his four special-needs kids.

Benefits to End Customers

So the benefits to the MSP are clear, but what’s in it for the client?

Based on hundreds of interviews I’ve conducted with the end clients of my MSP members (and being a buyer myself), I can say the overwhelming majority buy managed services because they want someone to take a proactive role in keeping their network up and running and protect them from hackers, ransomware, data loss, and unplanned downtime. And let’s face it, computer networks—and the data they hold—cannot simply exist problem-free without some level of proactive maintenance and support. Multiple reports have indicated that malware and cyberattacks are on the rise, with far more significant negative repercussions and damage to the business.

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