The next step of the journey from break-fix to managed services, operational planning, encompasses the critical details for implementing and supporting your services, such as:
- SLA (service level agreement) – What are your customers getting when they buy your service And what guarantees come with it?
- Contract term – What’s the duration of the contract? And what happens if a customer wants to cancel early?
- Payment terms – How will they pay for the service?
- Service delivery and support—Who does what, how will your customers be billed, and what procedures should your customer follow if something goes wrong?
SLA Tips and Advice
Creating a standard SLA helps set some ground rules and expectations for your customers, and as a legal best practice, you should consult an attorney to assist with the creation of this legally binding document. Once it’s created, it can be used as a reference point for either party.
In the SLA, you should be clear about payment details such as your rates, payment due dates, and extra fees for late payments. Your SLA should also highlight performance standards and general reporting metrics. You could include, for instance, that your response time will be in X hours, but you should also highlight any leeway in your response time. If a customer is happy with a two-hour response window, there’s no sense in guaranteeing that you’ll be there in one hour. You should also highlight uptime and availability or when services are available. For example, some SLAs guarantee a specific uptime percentage, such as 95.5%, and they list how far in advance clients will be notified before any planned outages for maintenance/upgrades.
If you’re offering a core service like business continuity or backup and disaster recovery (BDR), you’ll also need to include details about RPO (recovery point objective) and RTO (recovery time objective) in your SLA. RPO entails how frequently backups will occur — i.e., the maximum acceptable amount of time between backups, whereas RPO determines whether your customer’s data is backed up every minute, hour, night, or week.
RTO determines how long it will take to recover the data and restore. Typically, the shorter time frame to recover, the more expensive it is. Depending on your internal resources, it could take several days for the data to be fully restored from their backups. If the information is business critical, the more important it is to have short RPO/RTO.
Contract Terms: Fixed or Month-to-Month?
Contract terms are typically structured as a fixed term (with early termination fees or other penalties built in) or month-to-month (cancel any time). Fixed term contracts may also be evergreen (auto-renew unless canceled, and the renewal can trigger another term or shift to month-to-month). While the financial security of a fixed term contract may be attractive for you, be sensitive to market competition and realize that many managed services are shifting to month-to-month. MSPs need to offer contract terms that are competitive in the market and make sure they can deliver a quality service.
Payment Terms: Fixed-Fee or Utility-Based Pricing?
The Holy Grail of managed services is charging customers a fixed amount every month, but this isn’t always possible. For many cloud-based services, you can apply a usage-based model like utility companies use where customers are billed only for services used. While there are financial advantages to locking in a monthly commitment, you’ll need to be sensitive to the market. MSPs should always structure payments to match their vendor or distributor contracts to avoid cash flow issues.
Establish Your Service Delivery and Support Model
In this phase of the planning process, you need to answer the following questions:
- What are the roles for you, your vendor/distributor partners, and your customer in the service delivery and support process?
- How are service level issues and quality assurance handled?
MSPs need to understand “who does what” to get their customer up and running. For example, they may need to collect vital information from the customer, migrate data or install hardware and software at the client site. The vendor may play a hands-on role at the start of service or leave it up to the MSP. Additionally, the customer may need to prepare data or provide access to their IT environment. The bottom line is that you need to understand the moving parts, hold your partners accountable for their role, and set the right expectation with your customer to prevent frustration.
Once the service is deployed, your customer needs to have a clear understanding of what to do if it doesn’t work correctly. MSPs often take the initial call as part of their agreement and work with the hardware/software vendor to resolve any issues. No matter which model you choose, document all operational steps to ensure your customer is satisfied, and if there’s ever any issues make sure to close the loop afterward by explaining how the problem was solved and how you’re helping to prevent the same problems from repeating in the future.
How Will Your Customers Be Billed For Your New Service?
Another critical checkpoint you’ll want to address is how the billing process works for the new service. For example, will the service vendor bill your company, and then you’ll bill the end client? Or, will the service vendor bill the end client and then send you a residual check once they receive payment? Two other points to keep in mind here are your current and long-term goals.
For example, maybe right now you’re selling just one or two managed IT services, but what about two years from now when you’re selling a half dozen services (or more)? Will the billing program you’re setting up now still work for you then? If for example, your customer receives a different invoice from each service vendor, will that work for you and them? Or, would it be better to figure out a way the customer could receive a single invoice that grows incrementally as their business needs grow and you provide more services over time?
Consider the value a services aggregator can deliver in making the billing process easier for you. Monthly billing and payments to providers can be complicated. Inefficient processes can add operational costs, and impact customer service, cash flow, and profitability.
Watch Out for IT Services Attrition
You could follow every recommended step up to this point and roll out a profitable new IT service, but if you don’t set up a regular review period, the program will erode over time. Maintaining your new managed service won’t be nearly as time-consuming as setting it up was. However, you should be meeting with your vendor and customer quarterly and doing a recap of the program to ensure all the established guidelines and processes are still being followed. If you discover that a policy or procedure has changed, you can then determine whether the change was a good thing or not and take the appropriate action. What you don’t want to happen is to find out a year after the fact that your customer wasn’t satisfied with the service and doesn’t plan to renew, and now it’s too late to address their concerns. And, while the operations team should lead these reviews, be sure to include the sales team — these conversations often lead to new opportunities.
Before finalizing all the other details of the operation plan for your new IT services program, set a date for a quarterly business review. This will allow you to get back together again and ensure everything you’re planning now comes to fruition in a way that works best for you and your customers. After all, this is a partnership, so it’s vital that the processes, procedures, and the service meet everyone’s needs.