The CFO's Guide to Choosing an Managed Service Provider (MSP)

Why a “CFO’s guide to choosing an MSP”? Does being a CFO make a difference in choosing an MSP to manage IT?

As a former CIO, I have bought tons of IT over the years. As president of a company, I buy services and solutions across our entire business. 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 businesspeople and they want pragmatic answers to their questions and proven solutions to their problems.

Typical “How to Choose an MSP” guides are

1. Too focused on IT, instead of the business
2. Too tactical, looking at certifications and singular technology capabilities
3. Too self-serving, written to drive you to the MSP’s particular solution

In my role at Waident, I am the first point of contact for any potential new client. As these firms are discerning if they like us, I’m assessing if they are an ideal fit for our approach to IT.  Fit is essential. I believe there are five areas that CFOs should evaluate when assessing an MSP’s fit and, more importantly, ability to deliver the strategic value pragmatic CFO’s desire from a huge investment in IT:

1. Company Strength: Viability to Support Us Over Time
2. Strategic Alignment: POV on IT
3. Process: Approach to IT
4. Expertise: Relevant Knowledge & Results for Your Circumstances
5. Relatedness: Trust and Ease of Doing Business

I’ll outline why these areas are important, the assessment criteria, and the questions a CFO can use to evaluate MSPs in each.

Let’s get started.

DOWNLOAD the Guide in .pdf 

1. Company Strength: Viability to Support Us Over Time

How does the MSP demonstrate financial health and the long-term viability 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 untested by crisis can become an operational anchor around your neck. This is particularly true if the MSP is 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.

Leadership Team

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 the tech, pursue metrics overly focused on the short-term, or prioritize objectives inconsistent with yours.

Relevant questions

1. 1. Who makes up the leadership team?
   2. What is their level of business acumen?
   3. How long have they operated together as a team?
   4. Are they both book smart and street smart?
   5. What KPIs do they use to manage the company? Why these metrics?

Ownership Structure

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.

Relevant questions

1. 1. What is the ownership structure of the MSP?
   2. Who owns the company?
   3. Who controls the company?
   4. What happens if the shareholders have an internal falling out or a principal goes through a divorce?
   5. What is leadership’s exit strategy?

Longevity

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. Look for an MSP that has survived (and thrived) through various economic cycles.

Relevant questions

1. 1. How long have they been in business?
   2. What tough phases has your company gone through? Provide examples of the situation and key decisions/actions you made?
   3. What was the biggest mistake you’ve made as a business? What did you learn from it?
   4. Has the company demonstrated an ability to weather the ups and downs of the economic cycle?
   5. How does the company demonstrate that it is a learning organization and getting stronger as the result of challenges and mistakes?

Financials

We don’t need to explain this to you. CFOs know.

Relevant questions

1. 1. What are the company’s revenues?
   2. Are revenues growing? If so, at what rate and why?
   3. Are they growing at the industry rate?
   4. Are they growing because of a great sales team or because of happy clients?
   5. Are they growing too fast to execute, onboard, and serve clients?
   6. Does the company have adequate working capital and a strong balance sheet?

Talent

In a service company, the employees are the product. Make sure that your MSP can attract and retain the best talent. More important, 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 people approaches.

Relevant questions

1. 1. How many employees do they have?
   2. What is their functional breakdown (i.e., tech support vs. sales and marketing?)
   3. What is the employee turnover rate?
   4. What is the average tenure?
   5. How does the company demonstrate that it attracts top talent?
   6. What do employees actually like best about working there?
   7. Where do you hire most of your people from?
   8. What personal attributes do you look for? Why?

2. Strategic Alignment: POV on IT

Does the MSP share our vision for IT and its purpose?

Why is it important? 

Is your company client-centric or product-centric? Is it sales-driven or marketing-driven? Is your organization a risk taker or a risk avoider? Is your brand seen as a premium brand or a value brand? These may seem like simple questions, but the answers speak volumes about your organization, culture, and expectations for your vendors. You want to make sure that the MSP you choose is simpatico with your business and IT’s contribution to it.

So, before you ask an MSP a single question, ask yourself a few questions about your perception of IT. For example, do you see IT as strategic or tactical? When you buy IT, do you purchase it with the expectation of minimizing its cost or maximizing its return? Do you want your IT function to be proactively bringing you new tools and approaches that may modify your business model? Or, do you prefer that IT simply keep the trains running on time until you dictate otherwise?

The answer to these questions will enable you to narrow the pool of potential MSPs. More importantly, the answers will help you identify the MSP who would naturally perform best against your expectations because your worldviews are aligned. 

Here are important alignment areas to consider:

Technology Philosophy

Knowing how your MSP thinks about technology with a capital T is critical. Philosophical views run along a continuum from tactical to strategic, using battle-harden to bleeding-edge tech, and viewing IT as an expense or investment. You want an MSP on the same pole as you are.

An MSP who delivers services with the goal of simply keeping the trains running on time does not get distracted thinking about how to apply technology to business problems. Unfortunately, if he is looking at his watch and thinking about the immediate train, he does not have the time to build new routes, upgrade engines, provide additional rider conveniences, or explore alternative modes of transportation altogether.

Choose an MSP that shares your IT philosophy.

Relevant questions

1. 1. Who is your ideal/best client (size, industry, technology, IT philosophy, culture, etc.)? Why?
   2. What attributes do your best clients share?
   3. Who is your worst client? Why?
   4. What is your best client’s philosophy about technology and its application? Why?
   5. Do your best clients see IT as a strategic investment or a cost to be minimized?
   6. Do you have a preferred company vertical you work with?
   7. Would our company be a big fish in a little pond or a small fish in an ocean?

Workstyle

Like the name says, MSPs provide a service. It’s critical that your organizational style is aligned with the manner in which your potential MSP delivers said service. Because the firm’s culture will shape the ultimate service delivery, it’s important that you understand what makes the MSP tick. For example: Is the culture laid back or serious? Is the culture process-driven or individual personality-driven? Does the MSP have a knowledge-sharing or a knowledge-hoarding culture?

Relevant questions

1. 1. How would you describe your firm’s culture?
   2. If I asked one of your employees to describe your culture, what words would they use?
   3. How do you reinforce your culture?
   4. How do your best clients prefer to work with you?
   5. Are your best clients more collaborative, passive, or autocratic?
   6. How often and how much do you communicate with clients?
   7. What is different about how you work with your clients compared to other MSPs? Can you provide some examples?
   8. What behaviors will get someone fired at your firm?

Performance Metrics

In the end, the ultimate tell-tale of how well an MSP is strategically aligned with your firm is how it measures its own performance. KPIs drive a culture.  If your measures of business success are not aligned with your MSP, your firms are not going to be rowing in the same direction. Business is tough enough. There is no need to create more work by choosing an MSP who doesn’t share your worldview.

Relevant questions

1. 1. How do you measure the performance of your business (e.g., Do you focus on service delivery, financial performance, client satisfaction/retention, etc.?)?
   2. Why have you chosen those metrics?
   3. How do you measure those areas of your business?
   4. In what area or metric must your employees demonstrate exceptional performance to get promoted? Underperform to get terminated?
   5. How are these metrics baked into your business/culture?
   6. How do you use these metrics to continuously improve?
   7. How do you share these metrics with clients?

One final note on Strategic Alignment, it’s important to pay close attention to the questions your potential MSP asks you. They will be a clear indicator of how the MSP thinks about business, technology, and service delivery.  First, does the MSP ask any questions? Are they questions you expect or have heard time and time again? Do the questions make you think differently about your business? Do the questions reinforce your worldview or contradict it?

DOWNLOAD the Guide in .pdf 

3. Process: Approach to IT

Does the MSP have rigorous processes—and do they work with ours?

Why is it important?

In my mind, there are two schools of thought in IT. The first school is what I call the “IT Cowboy” school. This school is predicated on the myth/nostalgia of the lone cowboy riding into a desolate western town to save the poor citizenry being subjected by an evil rancher, railroad company, or oil tycoon. Through unmatched gunfighting skill, undaunted courage, and divine providence, the hero kills all the bad guys, brings peace to the town, and rides off into the sunset after kissing the girl.

The school is often referred to as the “Break-fix” approach. It is marked by freewheeling heroic action, a fire drill mentality, and unpredictable results. It is the preferred school for tech nerds, employees wanting job security, and chaos junkies. 

The second school of thought is the Process school. In this school, the objective is predictable outcomes at a specified level of effort. This school does not rely on heroic individual effort, untested approaches, and SWAG (scientific wild-ass guesses). It is built on standardized steps that provide structure and predictable results from pre-tested inputs. The processes allow for proper oversight, management, learning, and communication that is documented and fed back into the processes to enable continuous improvement. 

Here are key areas to consider in your evaluation of an MSP’s approach to IT.

Process alignment

Whether the MSP is a member of the IT Cowboy School or the Process School is mostly irrelevant. What is relevant is which of the schools you prefer to align. I suspect, given that you are a CFO, you prefer order and a predictable process in your finance work. But, does your organization also have a standardized sales process, marketing process, or service delivery process at this stage of its development?  Do you have a mindset that small and nimble start-ups need “strategic flexibility” and that process is only for “big” companies? Or, are you exhausted by having to “reinvent the wheel” every time you get a new IT person, onboard/terminate an employee, or implement a new technology platform?  

Be honest with yourself about how your organization operates. Process is hard for many companies to implement and the inertia of the status quo is strong. Process takes effort in the short term before it pays dividends in the long term.

Relevant questions

1. 1. Are you a process-driven MSP? How would I know this?
   2. What processes do you have in place that would be appropriate for our business?
   3. Can you please provide documentation of these processes? (Assess how quickly it takes the MSP to produce said documentation.)
   4. How are these processes created, rolled out, and updated?
   5. How do you ensure that these processes are not only documented but work and are followed as well?
   6. How do you bake these processes into your culture? Our culture?
   7. Does the MSP voluntarily provide adequate examples/stories of how the processes work and have benefited their clients?
   8. How do your processes ensure quality service delivery?
   9. How do you handle process/IT anomalies that a client’s business has?
   10. What do clients say about the MSP’s approach?

Process Impact

It’s important to ensure that the MSP’s approach to IT complements your business and does not needlessly disrupt how you operate day to day. Onboarding, terminations, client service, sales, marketing, billing, and hundreds of other critical business processes are touched by technology. If you prefer to know that IT is managed the way you want it done, be clear about how a MSP’s process can enhance or hurt your preferred operational approaches. The MSP should be making life easier for your team and customers.

Relevant questions

1. 1. What is your process for replacing our IT department or old MSP?
   2. How will your process impact how we currently run? How we onboard employees? Add new applications? Serve clients? Etc.
   3. What happens if your processes negatively impact our business?
   4. How do you handle process/IT anomalies that a client business has?
   5. What do its clients say about the MSP’s impact on their businesses?

4. Expertise: Relevant Knowledge & Results for Your Circumstances

Does the MSP have the breadth and depth of expertise we need to accomplish our goals for IT?

Why is it important?

We all assume that our accountants know accounting and taxes. We believe our lawyers know the law. And, our doctors can address the cause of a fever. But, should we make assumptions that because they have a diploma on the wall that they are good? Remember that half of all CPAs, J.D.s, and M.D.s graduated in the bottom half of their class.

An accountant can file my taxes, but how do I know that he got me all the deductions that I should have? A lawyer can file a divorce decree, but how do I know that she has given me the best counsel for my situation? And, identifying a fever is not necessarily followed by its proper diagnosis. So, how does a “non-technical” executive assess the expertise of an MSP? By not operating from assumptions and conventional wisdom on the assessment criteria.

Here are the areas to consider and questions to help you understand the depth and breadth of an MSP’s “expertise.”

Technical Knowledge

Conventional wisdom tells us to look at technical certifications and vendor partnerships to validate competence/expertise. If an MSP is a Microsoft “Gold Partner,” they must be competent in Microsoft products. If an MSP is an Amazon Web Services “partner,” the partner must understand AWS cloud. Seeing vendor certification logos probably makes you feel more comfortable that the MSP is competent in those products. Perhaps, but remember that a newly minted college graduate is “certified” in finance or accounting or marketing. Does anyone think one of them is ready to be a CFO or CMO?

What it takes to become “Certified”?

Let’s look at what it takes to become part of the Microsoft “partner” system and use its moniker in marketing materials:

LEVEL 1: Microsoft Partner Network 

• • Fill out an online form
  • Agree to Terms of Service
  • Free to all

LEVEL 2: Microsoft Silver Partner 

• • Be a member of the Microsoft Partner Network (MPN)
  • Meet training & performance requirements on any single competency you wish
  • Have 2 Microsoft Certified Professionals anywhere in your firm
  • Complete a Licensing overview assessment
  • Complete Sales & Marketing competency assessment
  • Provide 5 customer references that verify their high standard of service delivery
  • Pay an annual fee of $1,670
  • Deploy 2000 active licenses (active users)

LEVEL 3: Microsoft Gold Partner 

• • Be a member of the Microsoft Partner Network (MPN)
  • Meet training & performance requirements on a competency you wish
  • Have 4 Microsoft Certified Professionals anywhere in your firm. Two of these employees must have training in business-focused competency, while the other two must have completed a technical competency assessment
  • Participation in the Customer Satisfaction (CSAT) index
  • Provide 5 customer references that verify their high standard of service delivery
  • Pay an annual fee of $4.730
  • Deploy 4000 active entitlements (active users)

In other words, to be a Microsoft partner, an MSP must: pay a fee, meet software sales goals, and have just two people who have demonstrated competency in A) selling and marketing Microsoft products and B) know a SINGLE Microsoft product. NOTE: Among the benefits to MSPs before it even gets certified is that it receives a huge discount on software licenses & cloud services for the MSP’s own internal use.

Don’t rely on vendor marketing programs to assess competence. All “Gold” partners are not the same.

 I recommend that CFOs think of MSP technical competence as a matrix, explore the areas that are critical to their business success in-depth, then, look closely at the MSP’s relevant results, our next area.

Relevant questions

1. 1. What is the MSP’s core technical strength? Desktop? Networks? Applications? Support? Security? Strategy?
   2. What is the MSP’s major weakness? (Be wary of any MSP that does not admit theirs.)
   3. Does the MSP have the breadth and depth of skills and partners needed to support my IT needs now and into the foreseeable future?
   4. Is the MSP’s team made up of employees, 1099s, or some offshore company?
   5. How does the MSP define competence/expertise?
   6. What is the MSP’s process for keeping its expertise up to date?
   7. Can the MSP scale competencies up or down as needed?
   8. Why did the MSP choose the partners it did?
   9. What standing does the MSP have with its partners? Is the MSP in the top percentiles?
   10. What do clients say about the MSP’s expertise?

Relevant results

Demonstrated results are the truest measures of an MSP’s expertise. “Certified” MSPs provide little value if they don’t understand the nuances of a technology’s application to your circumstances. Been-there-done-that experience is critical for producing results for your size, industry, sophistication, and culture. This is why the questions about the Ideal Client in Strategic Alignment above are so important. Look for results at MSP clients that look like you.

It’s a good idea to ask the MSP to share BAD references. You read that right. The goal is to simply ascertain why the engagement was bad, how the MSP addressed it, and how the MSP learned from it. Everyone has “Bad clients” due to miscommunications, misaligned expectations, difficult personalities, or changing circumstances. An MSP that does not share bad references is probably hiding something or lacks the humility or willingness to learn from mistakes.

Relevant questions

1. 1. What metrics does the MSP use to assess its performance and how does the MSP’s performance compare to others?
   2. How many happy clients does the MSP have in your industry? Business size? Technology? Circumstances?
   3. Does the MSP offer SLAs? How do they perform in your industry? Geography? Size? Technology?
   4. How does the MSP demonstrate a deep understanding of your business or industry?
   5. When you ask your peers MSP recommendations does the MSP’s name come up consistently?
   6. What do the MSP’s clients say about its expertise/service?

5. Relatedness: Trust and Ease of Doing Business

Does the MSP have my best interest at heart and is it easy to do business with?

Why is it important? 

MSPs like to bandy about terms like “trusted advisor” or “trusted partner.” You know from personal experience that few vendors deserve the title. In fact, a trusted advisor would never refer to themselves with that moniker. According to Charles M. Green, co-author of the Trusted Advisor, whether you are talking about MSPs, dry cleaners, or babysitters, trust is the result of multiple factors.

T =  C + R + I
        S

T stands for trustworthiness—how much the buyer/client trusts the seller or consultant.

C stands for credibility—it speaks to words and credentials.

R is reliability—how others perceive the consistency of our actions, and our actions’ connection with our words.

I is intimacy—how secure or safe the client feels sharing with us.

The lone term in the denominator is Self-Orientation, and it has a double meaning.

Partly it’s about selfishness. Are we client-centric for the sake of the client? Or client-centric like a vulture? But Self-orientation is also about our attention, our focus. Are we listening to do a brain-suck, just to get data to pursue our own hypotheses and ends? Or are we listening to truly hear the client? Are we obsessed by our own desires to succeed or win, and by our insecurities? Or do we truly focus on the client, paying attention to whatever it is that helps them succeed, or makes them insecure? Only the latter builds deep, long-term relationships.

High numerator scores build trust; a high score in self-orientation destroys it.

On the other hand, ease of doing business reflects broader operational, financial, technological, and cultural alignment. Are you overly legalistic or rigid in negotiations and agreements? Do you move too quickly or too slowly? Do you nickel and dime me for every change order? Do your consultants have to fly first-class and stay in five-star hotels? Is your firm sophisticated enough to work with us?  Do your systems speak to our systems?

Don’t get sucked into terms like quality, innovative, responsive, integrity that firms use in marketing materials. See if the MSP builds trust quickly and makes it easy for you to become and stay a client.

Relevant questions

1. 1. What are your contracting practices?
   2. What are your billing practices?
   3. Do I have access to your systems that house information about our company, like support tickets, cyber threats, resource consumption, billing, etc.”?
   4. How do you use technology to make managing our relationship easier?
   5. How do you deal with changes to SOW/contracts?

Conclusion

If you are a smart, pragmatic businessperson, I assume you are outsourcing your IT function to an MSP because you:

1. Don’t have the technical expertise required to manage it yourself.
2. Don’t want to invest in the technical people and continuing education to keep the expertise current.
3. You’ve made the strategic choice to focus on and invest in your company’s own differentiating expertise and outsource everything else.

The secret to selecting the best MSP for your business is knowing what outcome you are trying to achieve and understanding the means to get there.  That means knowing that the MSP you choose:

1. Has the strength and viability to serve you over time
2. Is strategically aligned with you on the purpose of IT
3. Approaches IT with the rigor you demand and complements your processes
4. Demonstrates the expertise for your circumstances through tangible results
5. Is trustworthy and makes doing business with them easy

My final piece of advice is to remember the adage that smart, pragmatic executives keep in mind when choosing a strategic service provider, “How you sell me is how you will serve me.”