There are probably as many “How to Choose a Managed Service Provider” guides online as there are MSPs. Do you really desire to consume another piece of self-promotional “content”? I’m going to assume that the answer is “No.” Well, my goal is to NOT add to all that “content noise” but to help you cut through it.
Typical “How to Choose and MSP” guides are
- Too focused on IT, instead of the business
- Too tactical, looking at certifications and singular technology capabilities
- Too self-serving, written to drive you to the MSP’s particular solution
As a former CIO, I bought many IT services. As president of a company, I buy services and solutions across our entire business. More important, in my role at Waident, I am the first point of contact for any potential new client. My job is to determine if we want to work with a potential client just as they are discerning if they like us. My experience has shaped Waident’s approach to hiring, service delivery, and sales and marketing. We don’t have time for BS and the clients who choose us don’t have time for it either. Our clients are pragmatic business people and they want pragmatic answers to their questions and proven solutions to their problems.
I’m starting a blog series for pragmatic executives, particularly financial executives, that think strategically about IT, investments, and risk. I will outline why the important areas, questions, and criteria a CFO can use to assess MSPs in each. If you’re looking for how to identify a low-cost Microsoft partner to support your Word users, this is not a series that will be useful for you.
This series is written to help you select an MSP based on its ability to deliver business performance, not simply control IT costs. It will help you identify an MSP that adds strategic value to your organization by keeping your
- People productive
- Enterprise running
- Data safe
Here are six areas that I believe CFOs should evaluate when assessing an MSP’s ability to deliver strategic value:
- Risk-Company strength
- Strategic Alignment-POV on IT
- Process-Approach to IT
- Expertise-Required capabilities
- ROI-Relevant results for the investment made
- Trust-Relationship and ease of doing business
Let’s begin with Risk.
Risk: How does the MSP demonstrate financial strength, long-term viability, and resources to support us over time?
Why is it important?
As CFO, this question probably makes perfect sense to you.
One of your key responsibilities is understanding and mitigating risk to your own company’s operating viability. Vendors lacking financial strength, operating with weak risk management practices, and run by an unseasoned leadership team that is untested by crisis can become an operational anchor around your neck. This is particularly true for a vendor managing the IT that enables your core business processes from onboarding to sales to billing to inventory.
You need to know that your MSP is not just a “partner” because their marketing materials say so, but because they have the strength and viability to actually come through when you need them most.
Key areas to look at when assessing financial strength, long-term viability, and resources
This is incredibly important. Your MSP should be managed by a team of businesspeople, NOT IT nerds. Ensure that the leadership team is not just composed of lone wolves or a single charismatic savant founder. IT is as complex as business and moves even faster. To stay on top of trends and an array of technology permutations, you need a team of strategic problem-solvers with an ethos of collaboration and knowledge sharing. Your MSP should demonstrate that it has a track record of separating trends from fads and helping clients bridge from technology to technology without losing time over market hype.
You can tell a ton about a company, its management savvy, and its values by what it measures. Understand how leadership monitors/manages the company’s strategic performance, financial viability, service performance, and cultural health. Avoid MSPs that have no KPIs, focus just on tech, pursue metrics overly focused on the short-term or objectives inconsistent with yours.
- Who is on the leadership team?
- What is their level of business acumen?
- How long have they operated together as a team?
- Are they both book smart and street smart?
- What KPIs do they use to manage the company?
As a CFO, you understand the importance of organizational structures for liability protection and tax strategies. It is also important to assess the impact of real-life events that can impact ownership structure and operating viability. Deaths, divorces, retirements, and partner fallouts are just a few life events that can have an outsized impact on smaller IT firms and their clients. In addition, liquidity events, whether it is share buybacks or the complete sale of the company can severely impact financial strength and client service delivery.
- What is the ownership structure of the MSP?
- Who owns the company?
- Who controls the company?
- What happens if the shareholders have an internal falling out or a principal goes through a divorce?
- What is leadership’s exit strategy?
Partnering with a young, fast-growing company with a new fangled business model and lots of press coverage can be exciting. But, it’s important to understand the risks. Young companies often have untested management teams. Fast growth, as all CFOs know, can create cash-flow, recruiting, and execution problems under the best economic times. Problems can be exacerbated when a new leadership team has not weathered a crisis together, has over-extended itself financially, or has over-committed itself to a market or strategic direction.
- How long have they been in business?
- Are you betting on an upstart?
- Has the company demonstrated an ability to weather the ups and downs of the economic cycle?
- How does the company demonstrate that it is a learning organization and getting stronger as the result of challenges and mistakes?
We don’t need to explain this to you. CFOs know.
- What are the company’s revenues?
- Are revenues growing? If so, at what rate and why?
- Are they growing at the industry rate?
- Are they growing because of a great sales team or because of happy clients?
- Are they growing too fast to execute, onboard, and serve clients?
- Does the company have adequate working capital and a strong balance sheet?
- Add your personal favorites.
In a service company, the employees are the product. Make sure that your MSP can attract and retain the best talent. More importantly, that they put that talent into serving you, not sales and marketing. As you compare MSPs of various sizes ascertain how many of its employees are actually going to work with and benefit you. Look beneath the “Best Places to Work” accolades that are often the result of great marketing submissions rather than real cultural strengths and approaches.
- How many employees do they have?
- What is their functional breakdown (i.e tech support vs. sales and marketing?)
- What is the employee turnover rate?
- What is the average tenure?
- How does the company demonstrate that it attracts top talent?
- What do employees actually like best about working there?
It doesn’t matter how cool, educated, or dynamic an MSP is if it won’t be around. Your job when shopping for an MSP is to identify a strong, viable, long-term partner who will be there when you need them most.
In my next post, I’ll cover the important area of Strategic Alignment and answer the question, “Does the MSP share our vision for IT and its purpose in our organization.