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ChannelCon 2018: MSPs face operational growing pains

Operational efficiency improvement is an important step for a growing MSP, but one that can prove difficult to take, according to industry executives at ChannelCon 2018.

WASHINGTON, D.C. -- A time comes in a service provider's life when the early adrenaline-rush of business growth begins to fade and a harsh reality settles in: To continue to grow, and grow profitably, an organization must take deliberate steps to boost operational efficiency.

"It's not the sexiest topic, but it is so important," said Carolyn April, senior director of industry analysis at CompTIA. April chaired a panel discussion on operational efficiency improvement at ChannelCon 2018, CompTIA's annual channel partner event. At last year's ChannelCon, the benefits of diversity were an important focus, while previous meetings highlighted such topics as compliance controls.

A recent CompTIA survey of managed service providers (MSPs) and other channel partners revealed the key operational pain points. Half of the 450 organizations polled cited pricing pressure from customers or competitors as the top operations issue hurting profitability in the last year. Inefficient service delivery and inefficient sales process followed, with 28% of the respondents identifying the former and 27% of the respondents citing the latter.

April said even MSPs raking in sales could be "leaking margin left and right" due to inefficiency.

Carolyn April, senior director of industry analysis at CompTIACarolyn April

Operational efficiency improvement calls for a proactive approach that ensures a service provider has processes in place to run the business well -- versus a reactive approach that hinges on extinguishing fires, April noted.

"The respondents having the hardest time and experiencing the most problems in their businesses are the ones that are reactive and not proactive," she said.

Cultural focus

For Paul Cronin, operational efficiency is built on a cultural foundation. Cronin, facilitator of excellence at Cronin Corp., an MSP, participated in the ChannelCon 2018 panel discussion.

"I believe that operational efficiency begins with a culture of discipline," he said.

A culture of discipline is one aspect of great companies, as defined in Good to Great: Why Some Companies Make the Leap ... and Others Don't. The book studied companies that made the jump to superior financial performance and were able to sustain that edge for at least 15 years.

I believe that operational efficiency begins with a culture of discipline.
Paul Croninfacilitator of excellence, Cronin Corp.

Cronin said he taught a monthly leadership workshop on Good to Great while he was an executive at Atrion, a systems integrator acquired by Carousel Industries in 2017. He is now beginning to shape the culture at his new venture.

Another component of Cronin's operational efficiency approach is Lean methodology and, in particular, the framework's focus on small, incremental changes as a mechanism for process improvement.

"We are very focused on Lean," he said, noting the aim of empowering people to make small changes happen.

Vince Tinnirello, CEO at Anchor Network Solutions, an MSP in the Denver area, said he uses the TruMethods framework, which provides metrics and key performance indicators (KPIs) to help MSPs determine when to hire and expand or contract. "Find a framework and stick to it," he advised the ChannelCon 2018 audience.

Signing up for an MSP peer group can also help a company along the efficiency track.

"Join a peer group because it is business-changing," he said.

All aboard?

In addition to management frameworks, service providers can deploy automated systems to boost efficiency. Remote monitoring and management (RMM) and professional services automation (PSA) software are among the automation options an MSP may select.

April said PSA and RMM tools are important, but suggested the human dimension may prove the bigger challenge for service providers. Indeed, operational efficiency panelists and audience members noted that companies sometimes struggle to get employees to follow the processes and procedures designed to improve efficiency.

An engineer, for example, may prefer to "just get the job done" and ignore KPIs, processes and procedures along the way, one audience member said. In addition, employees hired at a more senior level may think they are smarter than the "dumb" processes the company wants them to adopt, another audience member noted.

Tinnirello agreed that getting every employee to do things the same way has proved to be a difficult task -- even with checklists and policies and procedures. A tool such as an RMM system can help standardize service delivery, but Tinnirello noted that an RMM can't automate every customer request. He said his company now aims to "automate where we can and make processes that people actually follow where you can't automate."

Operational efficiency improvement: Keeping score

MJ Shoer, director of client engagement and virtual CIO at Onepath, an MSP and professional services firm, said the company drills employees in its processes from the time of onboarding. Onepath's approach, he said, is to hire Level One employees and move them up to more advanced positions, rather than bring on employees at a higher level.

The approach, Shoer explained, lets the company "maintain the structure we want," while also providing the appropriate flexibility to adapt to market changes.

MJ Shoer, director of client engagement and vCIO at OnepathMJ Shoer

Onepath, meanwhile, uses performance scorecards to maintain a focus on KPIs. The scorecards track KPIs at the individual level and roll up to department-level and companywide KPIs.

But as MSPs enforce KPIs that support corporate goals, they should limit the number of goals to management amount. Cronin suggested the pursuit of too many goals is the mark of an inefficient company.

"We never had more than three company goals for the year," he said. That's not to say the company didn't focus on other actions to move it forward, but the three main goals cascaded down through the organization, he added.

Cronin cited three top metrics: net promotor score, top-line revenue growth and EBITDA.

"Start small," Cronin told ChannelCon 2018 attendees. "Don't boil the ocean."

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