Managed Services in 2014 has grown and changed. Cloud and mobility change the model from strictly device management to a complex eco-system of management. Through analysis of the latest market data, Dave Sobel, GFI MAX’s Director of Partner Community, will show proven techniques for building a pipeline of interested customers ready to invest in their IT and deliver annuity revenue at higher margin. Discussion will include go-to-market techniques and pricing models for a variety of managed services, from traditional to backup to mobile.

1. ANZ Conference 2014
Managed Services in 2014: Pricing and Positioning
Dave Sobel,
Director of Partner Community, GFI MAX

2. Who?
Dave Sobel
Director of Partner Community
» Joined GFI in 2013, putting the GFI community into the
executive team of MAX
» 2 years prior leading partner and community growth in
vendor channel
» 10 years experience as CEO of MSP, focused on Washington
DC metro
» 20 years experience in IT channel and consulting
» Microsoft MVP for Virtualization
» Author, Virtualization: Defined
» CompTIA Community Chair and Executive Council
» MSP Mentor 250 member, SMB 150
» Contributing writer: Channel Insider, CRN, Tech Target, MSP
Mentor
» Former HTG facilitator, member
@djdaveet
www.davesobel.com

3. State of the Market

4. » Fastest path to revenue
has become critical to
staying in business for
SMBs with cost control still
paramount. Source: Techaisle Global SMB
Surveys, 2013

5. Source: Service Leadership Newsletter, July 2013

6. Global
2013 SMB
IT Spend
will be
US$438
Billion.
Source: Techaisle Global SMB Market
Sizing, 2013

7. Clients becoming more aware of cloud services
Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 474 U.S. Businesses (aka end users)

8. Customer demand for cloud solutions
Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings

9. Customer demand for cloud solutions
Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel firms with Cloud offerings

10. The Math Problem

11. Let’s look at the revenue first
3000
2500
2000
1500
1000
500
0
Year
1
Year
2
Year
3
Year
4
Year
5
Year
6
Year
7
On premise Revenue
Cloud Revenue
 The average deal size for an
on-premise opportunity is
$40.5K
 The average deal size for a
Cloud opportunity is $21.5K
 Simply replacing on-premise
opportunities with Cloud
opportunities will impact your
business
if you do NOTHING else
….Standing still is probably
not an option…  Graph represents cumulative revenue over 7 years
 Calculates 10 deals per year at average deal sizes listed

12. But gross margin is really the game
 The average margin for an on-premise
opportunity is 24%
 The average margin for a Cloud
opportunity is 23%
 The basic margin is roughly
the same, but the total $s are
still less
AGAIN, if you do NOTHING else
….Standing still is probably not an
option…
700
600
500
400
300
200
100
0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
On premise Margin
Cloud Margin
 Graph represents cumulative revenue over 7 years
 Calculates 10 deals per year at average deal sizes listed
 Calculates margin using average margin listed

13. If you can grow your business by 15%
 Cloud is fast-growing
market segment
 If you can transform
your business and grow
at 15% greater pace than
your current on-premise
business
BUT…this is still not the
total story…
700
600
500
400
300
200
100
0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
On premise Margin
Cloud Margin
 Graph represents cumulative revenue over 7 years
 Calculates 10 deals per year at average deal sizes listed and grow new
customer acquisition by 15% per year
 Calculates margin using average margin listed

14. If your transformation yields Best-in-Class Margins
This is where the cloud business
becomes compelling…
 Graph represents cumulative revenue over 7 years
 Calculates 10 deals per year at average deal sizes listed and grow new
customer acquisition by 15% per year
 Calculates margin using BIC margin (Y1=24%, Yr2=40%, YR3+ = $54%)

15. And some Solution Providers are experiencing
50+% growth
… and here is what that model
looks like!!!
 This does not include additional
services or business opportunities
as a result of offering Cloud
solutions
900
800
700
600
500
400
300
200
100
0
Year 1 Year 2 Year 3 Year 4
On premise Margin
BIC Cloud Margin
 Graph represents cumulative revenue over 7 years
 Calculates 10 deals per year at average deal sizes listed and grow new customer
acquisition by 50% per year
 Calculates margin using BIC margin (Y1=24%, Yr2=40%, YR3+ = $54%)

16. Pricing Models

17. Value Pricing Model
• Aka “All You Can Eat”
• Price based on the entire package
• Price based on business benefits
• Calculate downtime pricing for that customer, and
pricing is below that.
• Single flat fee
• Can include Remote, Onsite, Lab/Bench, or all
• Pricing is custom and can be more complicated to
calculate

18. Per Device Pricing Model
• Simple pricing based on device counts
• Per Server, per desktop, per network, per
printer, etc
• Can lead to selling on price not value
• More complicated in mobile world

19. Many parts to mobile ecosystem
3G/4G
e.g., Verizon, AT&T,
O2, Vodaphone
Device+OS
e.g., Apple, Samsung,
Google
WiFi
Carriers, corporate or
public networks

20. Per User Pricing Model
• Priced base on people
• Can be type (Knowledge worker versus kiosk
worker) or can be flat
• Eases problem with mobile and services

21. Tiered Pricing, aka Gold/Silver/Bronze
• Different services in different tiers
• “Middle” option easier in sales process
• Key to success is single SLA across tiers

22. The Pick 5 Model
• Combine a la carte with Tier
• Three or more successively higher priced categories with option to
assemble a service
• Pick 5 from:
• Phone Support
• Remote Support
• Patch Management
• Managed Security
• License Management
• Case Management
• Backup Management
• Monitoring

23. A la carte Pricing
• Pick and choose from menu of services
• Many decisions
• Hardest to sell and maintain profitability

24. Monitoring Only
• Monitoring and Alerting only
• Appeals to groups with in house IT
• Easy parallel service with break/fix offerings

25. The By Vendor Model
• Manage by the number of vendors managed
• Microsoft, Dell, IBM, AV, etc
• Count the relationships, and bill based on
that.
• Drives out complexity
• Confusing for immature MSPs

26. Drivers to cloud
Source: CompTIA’s 3rd Annual
Trends in Cloud Computing study.
Base: 415 U.S. IT or Business
executives (aka end users) using
cloud solutions

27. More platforms = More complexity

28. More mobile devices than computers

29. Areas of focus in mobile strategy
Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility. Base: 502 U.S. IT and business executives

30. 1.0 Position: Outsourced CIO
2.0 Sell: What they want now
3.0 Goal: Managing User Experience

31. Position:
Outsourced CIO
1.0

32. Top technologies SMBs view as most complex to understand
Source: Techaisle

33. Ways of surviving economic downturn
Source: Microsoft SMB Insight Report

34. » Relationship
» Differentiation

35. Network Assessment

36. Network Assessment
Prospect Assess Engage

37. Why clients use an MSP
Source: Techaisle, 2012. Base: 140 respondent organizations that used more than
one vendor for their cloud business applications.

38. Local matters

39. Local matters

40. Personalized Remote Support

41. Sell: What they
want now
2.0

42. Top solutions SMBs need

43. Global 2013
SMB IT
Spend will be
US$438
Billion.
Source: Techaisle Global SMB Market Sizing, 2013

44. Clients becoming more aware of cloud services
Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 474 U.S.
Businesses (aka end users)

45. Customer demand for cloud
solutions
Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel
firms with Cloud offerings

46. Customer demand for cloud
solutions
Source: CompTIA’s 4th Annual Trends in Cloud Computing Base: 400 U.S IT channel
firms with Cloud offerings

47. Drivers to cloud
Source: CompTIA’s 3rd Annual Trends in Cloud Computing study. Base: 415 U.S. IT
or Business executives (aka end users) using cloud solutions

48. Goal: Managing
User Experience
3.0

49. More platforms = More complexity

50. More mobile devices than computers

51. Many parts to mobile ecosystem
3G/4G
e.g., Verizon,
AT&T, O2,
Vodaphone
Device+OS
e.g., Apple,
Samsung, Google
WiFi
Carriers, corporate
or public networks
Private Cloud
Systems running on
Eucalyptus or
Openstack
On-premise
systems
Public Cloud
E.g. Salesforce,
Dropbox, or AWS-hosted
system
Internet
Communications
E.g. Lync, Skype. Or
native function
Mobile web
Standard website
functionality
3rd Party app
Procured through
standard app store
Peripherals
E.g. Keyboards or
health monitors
Custom app
Built internally or
outsourced

52. Areas of focus in mobile strategy
Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility. Base: 502 U.S. IT and
business executives

53. Difficulties of mobility adoption
Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S.
End user companies

54. Mobile security a major issue for
companies
Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S.
End user companies

55. Challenges in supporting mobility
Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 490 U.S.
End user companies with some mobility adoption

56. Manage by User, not just device

57. Manage by User, not just device

58. Device provisioning methods
Source: CompTIA’s 2nd Annual Trends in Enterprise Mobility study. Base: 502 U.S.
IT and business executives

59. 1.0 Position: Outsourced CIO
2.0 Sell: What they want now
3.0 Goal: Managing User Experience

60. Source: Service Leadership Newsletter, July 2013

61. Contact info
Dave Sobel
Director of Partner Community
dave.sobel@gfi.com
Office: 1-919-379-6469
Mobile: 1-703-582-3600
Dave Sobel
Director of
Partner Community