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Driving Technology Standards

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Fortinet Channel and Partner Enablement

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Driving Technology Standards

  1. 1. www.Service-leadership.com WHITE PAPERTotal Profit Solutions for IT Companies™ Driving Technology Standards – Best Practices for Driving Business Strategies
  2. 2. www.Service-leadership.com © 2017 All Rights Reserved – Confidential and Proprietary – Licensed Material WHITE PAPERTotal Profit Solutions for IT Companies™ Table of Contents Executive Summary ........................................................................................................................................................1 Why Drive Technology Standards ............................................................................................................................2 Progression Considerations ........................................................................................................................................4 Next Steps..........................................................................................................................................................................6
  3. 3. www.Service-leadership.com | Page 1 of 7 © 2017 All Rights Reserved – Confidential and Proprietary – Licensed Material WHITE PAPERTotal Profit Solutions for IT Companies™ Executive Summary To attain top quartile profitability, growth and Service quality, one of the most important things any Solution Provider can do is to develop, adopt and enforce the use of technology standards across the majority of their customers. Top (Best-in-Class) Solution Providers drive their technology standards starting with Marketing, through Sales and then into the onboarding and Service interactions with each prospect and customer, and do so in ways that increase their market differentiation. Driving the use of technology standards improves Service quality, scalability and profit, and reduces overhead costs by narrowing and increasing the effectiveness of the go-to-market plan. While true in Services-Centric firms, it is particularly true in Product-Centric firms, where too- broad standards typically result in low Service margin and quality, which in turn often results in low Sales enthusiasm for selling Services. Employing a set of technology standards also helps improve market differentiation by enabling a greater degree of specialization and expertise, which becomes evident through Marketing and customer experience to current and prospective customers. As the standards-enabled, improved Service methodology drives higher Service quality and margin, Service Revenue is further accelerated by better account retention and improved referral selling. Well-defined technology standards also improve a Solution Provider’s profitability by reducing the number of operational variables that must be taken into account in managing to success, thereby reducing complexity and investment across a wide variety of strategic to tactical factors. Generally, by “well-defined” standards, we mean having only one vendor’s products available in each segment of the technology stack. Higher-performing Solution Providers will know this from experience. To firms at lower operational maturity, this often sounds counter-intuitive. Lower-performing Solution Providers do not have well-defined technology standards in place or they do not enforce them. For these Solution Providers, too many technology variables remain in play to create an effective Service delivery methodology and an efficient Service operation. In practice this disables the potential of the Service operation – a primary source of profit in most Solution Provider businesses – to deliver predictable, scalable quality and profit. Without driving technology standards, the low performing Solution Provider also allows the go-to-market strategy to grow to an impractical breadth.
  4. 4. www.Service-leadership.com | Page 2 of 7 © 2017 All Rights Reserved – Confidential and Proprietary – Licensed Material WHITE PAPERTotal Profit Solutions for IT Companies™ A key practice of higher-performing Solution Providers is that they develop and enforce the use of technology standards, which is both an indicator and an enabler of Sales and Service operational maturity. These higher-performing Solution Provider firms have two pervasive characteristics: A focused, differentiated go-to-market strategy, and an efficient and effective Sales and Service delivery methodology. Moreover, these higher-performing Solution Providers understand that the most efficient way to clarify their own value proposition is to do so on the basis of a well-defined and relatively narrow solution set – i.e., technology standards. Top performers require full compliance with their narrowly defined, technical standards before implementing Managed Services. Driving your technology standards should be done as early as possible. Initially, though, your Sales teams might be confused as they have to re-prospect, and learn new qualifying techniques against your emerging standards. However, once they make this transition, they should see their time-to-close drop below pre-technology standard levels and their average deal size increase dramatically – the sum of which yield a significant decline in your Cost of Sales. Why Drive Technology Standards The reason for dramatically narrowing the range of technologies you will support under Managed Services is simple and has been proven for decades: It is not possible to provide good support on a sustainable, predictable budget across a too-broad range of technologies. This is a basic management tenet of IT operations. Those Solution Providers that disregard it find themselves faced with constant challenges of meeting committed Service levels and continually aggravated Service labor costs. Lack of standardization plays havoc with many cost and quality functions: The budgets for technical headcount, technical training, tools, process development and automation are all diluted across too many technologies, resulting in either strongly escalating costs or increasingly poor Service quality, or both. Solution Providers must and can dramatically narrow the range of technologies they support, actively controlling what their customers buy and use across the entire technology stack. By doing so, they start a virtuous cycle that is not readily apparent before taking the steps to implement it.  Customers (and therefore Salespeople) are primarily interested in Service quality, not price.
  5. 5. www.Service-leadership.com | Page 3 of 7 © 2017 All Rights Reserved – Confidential and Proprietary – Licensed Material WHITE PAPERTotal Profit Solutions for IT Companies™  Narrowing the range of technology supported is the key enabler of Service quality, especially as the installed base of contracts grows.  When Service quality goes up, customer satisfaction goes up, which in turn increases testimonials, Sales representative enthusiasm and willingness, and referrals (the primary lead source of most SMB and mid-market focused Solution Providers).  When the range of technologies is narrowed, the entire sequence of pre-Sales and early post-Sales activities is shortened. The reason for this is that getting to the end-state configuration is a known, well-tested and well-rehearsed process. The time needed for assessments, pricing, proposing, negotiating, closing, onboarding, ramp to SLA attainment, and first billing are all reduced as much as possible. This improves Sales cost, Gross Margin, and cash flow. This shortened time also results – again – in a happier customer and a happier Sales rep.  Service Cost of Goods Sold (COGS) reductions are also enabled by narrowing technology standards; in turn, enabling you to compete at lower prices (while maintaining above- market Gross Margins). Interestingly, higher OML© MSPs typically use value pricing and therefore don’t compete as much on price, but the reduced COGS enable them to do so when desired.  Lower Service COGS also results in higher Service Gross Margins, which typically increase the commissions, further building enthusiasm among the Sales team. Narrowing the range of supported technologies results in more referrals, more testimonials and greater excitement and commitment by the Sales team. It is also a key enabler of scalability, which permits the growth of, and reduces attrition from, the account base. Taken together, these factors mean that Revenue growth accelerates significantly when the customers are required to comply with your technology stack. Over time the MSP will realize dramatic improvements in operational and financial results.  Greater Staff Flexibility: The more consistent your customers are, the easier it is for your technical team to move between them. Staff levels can be lower because you don’t need to cover as many different technical specialties. You can also spread off-hours work across a broader set of people because the basics about any given account are the same and known by everyone.  Less Staff Training: If you only have one backup system or one type of firewall, you only need to train your team on those specific products. Less documentation is required as well.
  6. 6. www.Service-leadership.com | Page 4 of 7 © 2017 All Rights Reserved – Confidential and Proprietary – Licensed Material WHITE PAPERTotal Profit Solutions for IT Companies™  Lower Inventory Costs: Having the right parts on-hand for hot swaps is easier when there’s a limited number to stock.  Easier Software Management: The more consistent your software environment is across customers, the easier it is to manage.  Current Hardware and Software Benefits: By evolving your set of standards, and maintaining customer compliance to those standards, your customers never use outdated or obsolete hardware and software. Having a predetermined and universal set of standards can serve as a catalyst for upgrading customers to current norms. Progression Considerations Progress can occur rapidly and does so when the leadership of the Solution Provider comes to two realizations. The first is that they will need to drive towards a set of technical standards to organize how they think about, manage and market their business. This realization lays the groundwork for the second, more profound realization: They must drive these standards into their customers and prospects with real discipline. This happens with the decision not to take any more non-standard customers. Starting with your next prospect, the prospective client must agree to adopt your technology standards within a reasonable period of time or you cannot accept them as a customer. While developing the standards can happen very quickly, driving these technology standards is most safely accomplished without skipping levels. Effective progression requires changing the culture to narrow the standards. You should also operate against these standards internally, and evolve the Sales process and compensation to support the Sales team driving the installed base and prospective customers to comply (or paying a substantial premium for non-compliance) – all of which takes disciplined sequential improvement. There are pitfalls in driving technical standards. The first is to make it an internally focused exercise, without understanding the market and competitive environment, most notably what will it take to be the Solution Provider of choice to your target customer. Additionally, your Sales team needs to be retrained and fully enabled against your technology standards to most effectively use the standards to narrow their field of view to customers who will adopt your technology standards. While Service drives the development of your technology standards truly, Marketing and Sales must drive those standards into your installed base of customers and prospective customers.
  7. 7. www.Service-leadership.com | Page 5 of 7 © 2017 All Rights Reserved – Confidential and Proprietary – Licensed Material WHITE PAPERTotal Profit Solutions for IT Companies™ In addition to operational improvements from progressing in this area, the Sales team also benefits in very real and measurable ways. As you begin to impose technology standards, keep an eye on key Sales metrics: cycle time to close, overall close rates, and average Monthly Recurring Revenue (MRR) per Managed Services deal. The Sales team may experience challenges until they have learned new prospecting, qualification, and Sales pitches. As the Sales team progresses, you will start seeing a markedly faster Sales cycle, at higher prices and increasingly against more and more of your technology standards. The costs of developing technology standards for each major solution segment is significant. In addition, you must consider the cost of keeping your technology standards updated as underlying technology vendors’ product offerings evolve. This can run 3% or more of Top (Best- in-Class) Solution Providers annual Revenues – in both hard costs and the soft costs of the manpower devoted to this task. As a result, these top performers seek to control this cost and speed time-to-market by partnering with relatively few vendors. Quality and completeness of vendor-provided reference architectures are key vendor selection criteria. Developing technology standards is not a stand-alone process, it is dependent on other areas including:  Relative maturity in Charging for Assessment -a key tool to understand the scope of the remediation to your standards).  Incentive compensation plans for your Sales team, Sales executive, engineer and Service executive  Sales Management Methodology The incentive compensation plans and Sales Management Methodology plays a necessary role as it helps to drive consistent behavior. As the Solution Provider matures in this area, the initial signs of success include anecdotal reports from Sales that technology standards play a key role in the prospect qualification process and in positively differentiating your company. They are also reporting that leveraging technology standards is both speeding up various parts of the Sales process and yielding higher Revenue per close.
  8. 8. www.Service-leadership.com | Page 6 of 7 © 2017 All Rights Reserved – Confidential and Proprietary – Licensed Material WHITE PAPERTotal Profit Solutions for IT Companies™ Next Steps Every organization will have its own unique set of technology standards. You and your team should start by first assessing the factors which will shape the technology standards for your organization, including:  What technology have you currently deployed in your customer base?  Where does your existing staff have real expertise?  What are your current practices for existing customers?  What are your leading vendor relationships and what assistance can/will they provide in helping you develop your technology standards? Ideally, every customer has an identical environment. In reality, it’s never that simple. New customers and even existing customers that you wish to deliver Project Services and/or transition to a Managed Services model are likely to have a mix of hardware and software already in place. Once you have created your standard architecture, the next step is to determine which standards are non-negotiable and which ones, if any, have flexibility. Higher-performing Solution Providers have as much as 10% flexibility, but no more. Determine what is absolutely required and what is optional. Make sure this is documented and fully understood by both your Marketing, Sales and Service teams so that they can set clear expectations with, and express clear benefits to, the prospects and customers.
  9. 9. www.Service-leadership.com | Page 7 of 7 © 2017 All Rights Reserved – Confidential and Proprietary – Licensed Material WHITE PAPERTotal Profit Solutions for IT Companies™ About Service Leadership, Inc. Service Leadership is dedicated to providing total profit solutions for IT Solution Providers, directly and through industry consultants and global IT vendors. The company publishes the leading vendor-neutral, Solution Provider financial and operational benchmark: Service Leadership Index® . This includes private diagnostic benchmarks for individual Solution Providers and their business coaches and consultants. The company also publishes SLIQ© , the exclusive web application for partner owners and executives to drive financial improvements by confidentially assessing and driving their Operational Maturity Level© . Service Leadership offers advanced peer groups for Solution Providers of all sizes and business models, and individual management consulting engagements for Solution Providers from US$15mm to US$3bb in size worldwide. In addition, Service Leadership provides global IT vendors with advanced partner enablement assets, partner ROI models, management consulting and advanced peer groups, as well as executive and industry best practices education and speaking. Please visit www.Service-leadership.com for more information. Contact Us Paul Dippell, CEO Service Leadership, Inc. Tel +1 972-798-1288 x111 Fax +1 469-362-1179 Paul@Service-Leadership.com Notice: All materials published (electronically or print) by Service Leadership are proprietary and subject to trademark and copyright protections, regardless of where and how it is sourced. The terms and concepts of SLIQ© , Service Leadership Index® , (S-L Index™), Predominant Business Model© (PBM© ), Operational Maturity Level© (OML© ), Normalized Solution Provider Charts of Accounts© (NSPCoA© ), Total Cost of Managed Services© (TCMS© ) and Service Factory© are proprietary to Service Leadership, Inc. All Rights Reserved.

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