The One to One MSP Migration
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There has been a lot of MSP and ITSP talk here and elsewhere today and I think that one to one migrations are worth discussing. I think that often when talking about outsourcing IT work to an MSP/ITSP (just SP, after this point) there is a natural emotional feeling in IT pros that this means "laying of internal staff, hiring other stuff from an SP." Of course, this can happen, but that's a different issue of wiping the slate clean and starting over. It itself is not an artefact of the move to an SP structure.
There are so many assumptions made, especially by the IT rank and file, about how SPs do work or will work that I feel it is important to examine some other working modes. Most important, the one to one migration. Let's look at an example:
Ralph, Suzy and Jane work in internal IT for the 100 person firm CapitalBelts. They make, well, belts. The kind that go on pants. The company is doing well and is healthy, they like their IT team. CB, as we will call them, is very good at manufacturing leather goods in strips, at shipping those leather strips to stores and at talking stores into stocking those parts. CB doesn't do their own accounting, they aren't good at that. They have their payroll firm handle payroll and HR functions, they aren't specifically good at those things either. The janitors are not in house but come through a made and maintenance service. Mike, the evening security guard that watches the building comes from Pinnacle Security and Dog Grooming, because CB knows nothing about security, either. Their plumbing, building maintenance, electrical work, logistics and other functions that don't directly represent business value are all outsourced to businesses that specialize in those skills and have the training, insurance, knowledge, scale and management to do those things well.
Looking at how things work, CB realized that it isn't good at IT either. Its IT people are excellent and they like them a lot, they are part of the CB family, but CB has no IT management skills and IT is not a competitive advantage for them. They've had high IT turn over through the years because even though they are a great place to work, the IT people wanted to move on for career options in bigger or more advanced environments. Hiring replacements always takes a really long time and the loss of tribal knowledge between moves is difficult, even with the good documentation that RS&J have done. And if one of the IT staff is on vacation while another is out sick, things can get pretty rough.
CB decides to talk to Mission Critical MSP Services, Inc. (MCMSPS,Inc), who has handled a few little projects and some holiday coverage for CB to see what can be done to improve the situation. RS&J are nervous, what could this mean for them?
In the end, CB and MCMSPSInc concur that IT is not a competitive advantage for CB and attempting to run it in house is an expense in time and management that doesn't need to be spent and there are opportunities being missed. So CB has RS&J do a lateral "slide" over to to become employees at MCMSPSInc where they will report to an IT management chain, have access to coworkers and team members that experience similar business challenges, will be able to see how others handle similar problems, will have the ability to move to another customer, rather than quitting and abandoning CB completely, when time comes to move up and CB can have them replaced "automatically" from within the SP context, no time or effect on CB's part. CB gets the same people as before, but with better training, management and resources to make them even better IT folks than they were before.
How does this work in the real world? The customer and the SP work together to determine the value and pricing on the people involved. Most high SP labour pricing is based around the idea that IT labour will have to service many customers and constantly context shift and will only be paid "while working" for the customer. This is totally different than internal IT staff and while generally less expensive, seems very expensive per hour. Confusingly, many people apply this same logic to full time resources, which are handled very differently. Because the three internal IT resources will remain 100% dedicated to the same customer, all of that overhead of "selling them" to the customer, doing complex per hour billing, proving project time, cajoling for projects to begin, billing disputes (one of the highest per hour cost factors for SPs), context switching and downtime do not exist so the resources can be "sold back" at essentially the same rate than they were already being paid (small percentages of difference will exist as health care packages, overhead, insurance and other things will vary slightly) plus a small additional fee for additional services that did not exist before such as peer review and IT management oversight.
To the original company (CB) this is an essentially transparent move. The resources come to work the same, dress the same, laugh the same, walk around the office the same, sit in the same seats, answer the same phones, respond just as quickly, pick up tickets from the same queue, attend the same staff parties and fix the same problems. But now, when one of them "moves on" to a new job, they are still around to some degree to answer questions and train the next person. Now they get more peer review and training, things can be fixed faster and new ideas are introduced. Initially no one sees that much difference, but the business immediately can start to get their risks reduced and service levels increased while the individual IT pros have improved career prospects and the hope of a longer, more stable job path without having made any day to day change!
In a good move between a well managed customer and a good SP, the move can be painless, transparent, almost free from a cost perspective (same costs before and after) with everyone benefiting. The SP benefits from a tiny margin on the labour and the hopes of handling all of the additional resources (often this would be in the contract) such as holiday coverage, capacity spikes, weekend work, evening off hours work and so forth; the company benefits for being able to focus on its core business and getting improved IT support; and lastly the IT pros benefit from having a better immediate working situation and a far better long term career path in an SP with training, mentorship, IT management, both lateral and upwards mobility, opportunities to enter management, etc. If handled well, this can be a win for everyone involved. Service providers are flexible beasts with much to offer any business.
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Then CapitalBelts decides to outsource its belt manufacturing to Bangladesh, lays off 80% of its workforce, and finds it has no need for IT support anymore.
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@Carnival-Boy said in The One to One MSP Migration:
Then CapitalBelts decides to outsource its belt manufacturing to Bangladesh, lays off 80% of its workforce, and finds it has no need for IT support anymore.
Well, let's break down that possibility, because that's very real:
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Outsourcing to someone would mean having another company do all of the work. This is unlikely because this is their core operations and what they are good at. But it is possible and if they do, they need more IT to oversee that interface.
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Offshoring to Bangladesh. The leather supply chain that makes them who they are isn't available in Bangladesh. But, in theory, they could work that out. But even if they do, there is likely almost zero IT for the actual belt stitching, but by moving to Bangladesh they would need it more, not less, to clearly and quickly communicate completion times, order details and such back to the US. So IT would probably grow (I've done this work before, this is an IT boon for sure) and the US/UK operations of management, design and sales would need IT just like it always has, maybe more since in theory they can invest more in growth with the lower cost of manual labour. So again, boon to IT. Also, bigger possible IT budget.
In either case, IT wins. Lowering the cost of manual labour does not hurt IT in any way, it helps it. IT rarely supports that department but this would make IT more needed for those cases. And now IT is needed in multiple places instead of just one where everyone can just talk to each other or push paper around. IT has gone from being "nice" to "critical." And as the company grows or becomes more efficient, IT wins. IT is directly tied to business success, essentially any business decision that helps the business helps IT.
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The move to a MSP will be more expensive, what we dont know is how much more. 1%, 10%. Etc.
Still might be worth it as the manager who was managing them can now put those resources toward the business goals or be removed... But probably not removed completely because there would still need to be an interface between the MSP and the company deciding projects, etc, right?
Maybe you'll say no, because the same 3people are still there and they will continue to do the work assigned just like before?
Question, how do those three people get more training? How do they interact with their MSP brethren?
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@Dashrender said in The One to One MSP Migration:
The move to a MSP will be more expensive, what we dont know is how much more. 1%, 10%. Etc.
In a full one to one, yes. Always has to be a tiny bit more at least. But that's only true in the theoretical case where internal IT is so large and complete that no external services are ever needed. Which might never exist. Once the majority case bigger picture is involved it is easily cheaper.
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@Dashrender said in The One to One MSP Migration:
Question, how do those three people get more training? How do they interact with their MSP brethren?
How do you interact with peers in any business? How do staff in any company get training? MSPs aren't special. Same as any dedicated service company.
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@Dashrender said in The One to One MSP Migration:
The move to a MSP will be more expensive, what we dont know is how much more. 1%, 10%. Etc.
I think that the "always costs more" thing is over stated. In cases where I've been involved it cost less not more. Because the cost of talent acquisition, retention and turn over was reduced. It was actually cheaper. Won't happen every time, but all the assumptions around higher costs really are just assumptions. Internal IT isn't cheap or free like people often assume.
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@scottalanmiller said in The One to One MSP Migration:
@Dashrender said in The One to One MSP Migration:
Question, how do those three people get more training? How do they interact with their MSP brethren?
How do you interact with peers in any business? How do staff in any company get training? MSPs aren't special. Same as any dedicated service company.
So you're making an assumption that the MSP will provide training where it's very likely that the internal staff probably didn't. Most small businesses I know don't pay for that.
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@Dashrender said in The One to One MSP Migration:
So you're making an assumption that the MSP will provide training where it's very likely that the internal staff probably didn't. Most small businesses I know don't pay for that.
Correct. Most small businesses normally do pay for that - but only for operational staff, not ancillary staff. This is specifically a reason that we move to outsourcing for all those specialty roles (IT, HR, Legal, Accounting, security, etc.) An IT organization provides training naturally, and is normally full of training resources.
- Books
- CBT
- Videos
- Mentors
- Peers
- Managers
- KBs
- Labs
Does every MSP have all those resources? No. But any dedicated IT operations company would have to have some and most would have nearly all. No different than any other business. Take any shop that has any amount of skilled core operations, is there any common example where there is no training naturally from it being the center of the business? Doctors aid fellow doctors, mechanics teach fellow mechanics and so forth. Unlike an ancillary department, training the operational staff directly creates the ability to do work.
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I think working in isolated, non-IT companies where there is no peer support at all it might be easy to forget how much training is endemic to any organization's core. If you are a lithography company and have many litho machines, many litho workers (even, say half a dozen of them) there is a natural cross training and sharing of knowledge, an automatic introduction to different equipment, styles and techniques. Even when no effort is put into training and development, which is effectively unheard of for any business in its core operations, there is a natural training effect through knowledge training. This is why cities with a high skill density for a given field have higher end people and pay more than other markets (NY for IT, SV for SE, Detroit for Automotive engineering, etc.)
