How Can the FTE Model Compete with the MSP Model?
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@kelly said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
We also cannot simply trust your assumptions if we're to properly discuss the topic. Otherwise we just become an echo chamber and nothing of value is created. Is there some resource (outside of your own articles) that gives empirical credence to your conclusions?
Here is the basis of my logic, this is an assumption so this is where I think you have to prove me wrong: An MSP staffer can act identically to an FTE in price, capability, and function making them identical in all ways to an FTE, but also has the flexibility to do other things that an FTE cannot.
Ok, why do they have that flexibility and an FTE does not?
Because an FTE cannot scale to other customers to bring the benefits of "pool resources".
But our apples to apples comparison requires an equal labor time, presence, and attention. How does the MSP provide pool resources?
You have to break down "equal or better." If you are checking to see if it can be equal, you can prove that with the "acts as an FTE" case. The pool is an option, only to be used when it is beneficial over the "acts as an FTE" case. Since it is optional only, and the other case is equal, you guarantee equal or better because we can prove the ability to always be equal.
You can't do the "equal" and the pool at the same time, obviously. But you have the option to do either.
So the only way in which an MSP is better than an FTE is that it can easily switch between "equal" and "pool'? Is that correct?
Sort of, but it isn't the switching itself that makes it better, it's the larger range of options. MSPs fully encompass all options of the FTE, but then add more. For 99.9999% of businesses, they will never switch or ever consider the FTE style option because it is so dramatically poorer in the real world.
What options are you saying that the MSP can bring that an FTE cannot? I'm trying to understand how the MSP is better than the FTE.
Everything that an MSP is known for: pooled resources, partial resources, etc. FTEs come in increments of 1. MSPs can, but don't have to. There ARE PTEs, but MSPs can do that, too, of course. But shared resources are the backbone of the MSP industry and are unique to them.
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@kelly said in How Can the FTE Model Compete with the MSP Model?:
Stuart is the IT Pro. He has his sets of experiences and skills. Assuming that he is working full time for only one organization how is he providing more value to the company within the MSP model over the FTE model?
Who said MORE. The statement is equal or better.
In your example, he's equal.
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@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
Stuart is the IT Pro. He has his sets of experiences and skills. Assuming that he is working full time for only one organization how is he providing more value to the company within the MSP model over the FTE model?
Who said MORE. The statement is equal or better.
In your example, he's equal.
More is an equivalent statement to "or better".
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@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
In your example, he's equal.
And the MSP will be cheaper for the company. So why pay more for equal?
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@kelly said in How Can the FTE Model Compete with the MSP Model?:
@obsolesce said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
Stuart is the IT Pro. He has his sets of experiences and skills. Assuming that he is working full time for only one organization how is he providing more value to the company within the MSP model over the FTE model?
Stuart has the full scale of pooled resources and flexibility from the MSP that the FTE person does not have.
Now we are no longer comparing apples to apples. You're assuming that the MSP has a larger IT staff than the company. Not necessarily wrong, but an assumption that is critical to evaluating and responding to the discussion.
Kelly is correct, that would violate the apples to apples. That's a way that an MSP could be better in an "all fruit to all fruit" example, but not apples to apples.
Kelly is also right, the MSP may or may not be any larger than a single person. We must assume that it is not in the apples to apples comparison.
The only key in this niche case, is that this is the "equals" not the "or better". So it still keeps the statement true, even in this "worst case" scenario.
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@obsolesce said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
In your example, he's equal.
And the MSP will be cheaper for the company. So why pay more for equal?
How do you come to that conclusion? Again, I'm not saying you're wrong, I am asking for the basis of your assumptions.
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@obsolesce said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
In your example, he's equal.
And the MSP will be cheaper for the company. So why pay more for equal?
No, the MSP would not be cheaper. I mean, there is an insane theoretical case where the MSP would turn the resource into a loss leader, but that's silly and we'll discount that.
The MSP can't reasonably be cheaper, but it can be equal. I know no MSP that would take a loss on labour to get work in this way (other ways, sure.) But I do know MSPs that will do FTE equivs as a break even to get the chance of work.
So it's not that you do this to be cheaper, you do it to have "more options" without any caveats.
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@kelly said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
Stuart is the IT Pro. He has his sets of experiences and skills. Assuming that he is working full time for only one organization how is he providing more value to the company within the MSP model over the FTE model?
Who said MORE. The statement is equal or better.
In your example, he's equal.
More is an equivalent statement to "or better".
Right, in the logical statement "equal or more" you only need either equal, or "more", to be true. In this case, it's the equal that is true. If "more" were true, then "equal" could not be true.
The point is that MSPs are always equal or better, but it seems people approach it that it must always be better, but that was never said. Only that it was always at least equal, but potentially better (and in the real world, essentially always.)
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@pmoncho said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
I think the most important thing for people to understand here is that we are talking about a model of engagement, not different people.
Doesn't the model of MSP vs FTE imply a Many vs One scenario? This is where I am getting a little confused when trying to do the comparisons.
If the MSP is a singular person, then there are no pooled resources that belong to the individual MSP that the FTE doesn't have. I am unable to see the difference in the two other than the letters.
Right, there is no difference. That's the point. That's the equal. If the MSP has any situation other than the worst case, it falls under the "better". If it hits the worst case, it's "equal."
The point is "equal or better."
MSP doesn't mean many, and FTE doesn't really mean one (we mean it in the plural here.)
We are using the model of "resources under an MSP" and "resources under internal employment" of equal amounts.
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@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@pmoncho said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
I think the most important thing for people to understand here is that we are talking about a model of engagement, not different people.
Doesn't the model of MSP vs FTE imply a Many vs One scenario? This is where I am getting a little confused when trying to do the comparisons.
If the MSP is a singular person, then there are no pooled resources that belong to the individual MSP that the FTE doesn't have. I am unable to see the difference in the two other than the letters.
Right, there is no difference. That's the point. That's the equal. If the MSP has any situation other than the worst case, it falls under the "better". If it hits the worst case, it's "equal."
The point is "equal or better."
MSP doesn't mean many, and FTE doesn't really mean one (we mean it in the plural here.)
We are using the model of "resources under an MSP" and "resources under internal employment" of equal amounts.
If that is true, then the answer to your question is that the FTE model can compete just fine with the MSP model. If their provided value is equal then it becomes preference. Unfortunately the real world does not give us many situations where the model remains unbroken. Poor leadership affects the ledger relative to the side that it resides on. Once the relationship is no longer one-to-one on the MSP side it is a trade off of the pool and salary savings vs the cost of switching (person or context if person remains constant) and response time.
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My perspective on the battle you appear to be fighting (establishing the legitimacy and competitiveness of MSPs) is that you're not going to make much headway. For one thing, a true MSP (as you've defined it) is rare in my experience. I can't think of any in my area. All of them a mix of VAR and MSP on some level. Given that, most organizations are going to have mixed experiences, at best, with outsourced IT labor. In addition, there are so many variables that affect the calculation of whether or not an MSP can provide better value over an FTE that it is a case by case evaluation that is difficult to "rule of thumb" or "best practice".
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@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
No, the MSP would not be cheaper.
Why not? The company hiring the MSP doesn't have to pay the MSP guy 401k, medical benefits, insurances, etc... he gets that from HIS employer, who is the MSP.
So if a company has an employee for 50k/year, the company pays a LOT more than that besides just the salary of hte employee.
If a company hires an MSP, let's say for $50k/year... that's it.. nothing more.
So, yes... cheaper.
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@kelly said in How Can the FTE Model Compete with the MSP Model?:
My perspective on the battle you appear to be fighting (establishing the legitimacy and competitiveness of MSPs) is that you're not going to make much headway.
Is there headway to be made? There are a lot of questions and discussions, but is there actually any dissent to the logic?
I see that there is a lot of "not wanting to accept it", but I don't see any "where it might be wrong."
I think we've established that we all agree that the MSP Model has to be equal or better than the FTE model. I think the real issue might be that this is so insanely obvious that it is confusing people and they think that we are discussing something else. All of the "this isn't true" is about something other than the MSP vs FTE model thus far. Or is based around something that isn't an MSP.
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@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
My perspective on the battle you appear to be fighting (establishing the legitimacy and competitiveness of MSPs) is that you're not going to make much headway.
Is there headway to be made? There are a lot of questions and discussions, but is there actually any dissent to the logic?
I see that there is a lot of "not wanting to accept it", but I don't see any "where it might be wrong."
I think we've established that we all agree that the MSP Model has to be equal or better than the FTE model. I think the real issue might be that this is so insanely obvious that it is confusing people and they think that we are discussing something else. All of the "this isn't true" is about something other than the MSP vs FTE model thus far. Or is based around something that isn't an MSP.
I'm not disputing the models necessarily. I'm stating that the models are difficult to apply in many markets, and thus make them irrelevant to business decisions.
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@kelly said in How Can the FTE Model Compete with the MSP Model?:
For one thing, a true MSP (as you've defined it) is rare in my experience. I can't think of any in my area.
I know two in this community that are national and real MSPs. So you definitely have the option.
If you talked to most companies, they'd say that even IT staff is rare and not available in their area, and they would be correct too, if they meant "is identified and standing within 100ft of me right now." But if there is IT staff and/or an MSP that services your area is without question, available.
Another point of the MSP model is that you don't need more than one. Of course there are hundreds of thousands, but because they are IT "groups" and not IT "people individually", the number of them is only relevant if it falls below one. As long as there is one, you have an MSP option.
There are likely no fewer than a thousand that service literally anyone.
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@obsolesce said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
No, the MSP would not be cheaper.
Why not? The company hiring the MSP doesn't have to pay the MSP guy 401k, medical benefits, insurances, etc... he gets that from HIS employer, who is the MSP.
So if a company has an employee for 50k/year, the company pays a LOT more than that besides just the salary of hte employee.
If a company hires an MSP, let's say for $50k/year... that's it.. nothing more.
So, yes... cheaper.
In my experience in working with MSP/VAR technicians their hourly rate is significantly higher than the FTE. In my area you can expect to pay $150-200/hr for a mid level network admin. I don't know any that are getting that as their hourly rate.
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@kelly said in How Can the FTE Model Compete with the MSP Model?:
@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
My perspective on the battle you appear to be fighting (establishing the legitimacy and competitiveness of MSPs) is that you're not going to make much headway.
Is there headway to be made? There are a lot of questions and discussions, but is there actually any dissent to the logic?
I see that there is a lot of "not wanting to accept it", but I don't see any "where it might be wrong."
I think we've established that we all agree that the MSP Model has to be equal or better than the FTE model. I think the real issue might be that this is so insanely obvious that it is confusing people and they think that we are discussing something else. All of the "this isn't true" is about something other than the MSP vs FTE model thus far. Or is based around something that isn't an MSP.
I'm not disputing the models necessarily. I'm stating that the models are difficult to apply in many markets, and thus make them irrelevant to business decisions.
Well that's different and I totally agree, to some degree. But trying to apply the value of models to deciding if you should use an MSP or not isn't good practice.
Let's switch to a similar thing... should you use open source software or closed source software for your business? It's a provable fact that open source is the better license for the customer, always, no exceptions. As a license goes, it's purely better, never worse.
But that's not relevant to the decision the business makes. The business needs to understand the value that the license brings (which is possibly approaching zero) and evaluate the products it is considering based on their value to the business as they stand. Windows (closed) remains an important tool regardless of the fact that it's license is not ideal. The idealness of the license is a near trivial factor in the grand scheme of software purchases.
Likewise, it's important for every business and every IT pro to understand that the MSP model is always the better approach. But then it is equally important, or moreso, for those same people to always understand that available resources must be evaluated in situ, not based on their model.
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@scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:
@kelly said in How Can the FTE Model Compete with the MSP Model?:
For one thing, a true MSP (as you've defined it) is rare in my experience. I can't think of any in my area.
I know two in this community that are national and real MSPs. So you definitely have the option.
If you talked to most companies, they'd say that even IT staff is rare and not available in their area, and they would be correct too, if they meant "is identified and standing within 100ft of me right now." But if there is IT staff and/or an MSP that services your area is without question, available.
Another point of the MSP model is that you don't need more than one. Of course there are hundreds of thousands, but because they are IT "groups" and not IT "people individually", the number of them is only relevant if it falls below one. As long as there is one, you have an MSP option.
There are likely no fewer than a thousand that service literally anyone.
Yes, but many organizations want three things that affect how far afield they will willingly go for a consultant: business buy in, prompt access, and face to face communication. That is the larger issue that would need to be proven out to create a compelling argument that an MSP can provide equivalent value to an FTE.
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@kelly said in How Can the FTE Model Compete with the MSP Model?:
In my experience in working with MSP/VAR technicians their hourly rate is significantly higher than the FTE. In my area you can expect to pay $150-200/hr for a mid level network admin. I don't know any that are getting that as their hourly rate.
- I can guarantee you better rates in your area, right now.
- You aren't comparing to "by the hour" FTEs. You broke the apples to apples here. Explain below...
If you hired an FTE for one hour, they'd be obnoxiously expensive. It's not the MSP factor that makes it expensive, it is that you are using the MSP in a "by the hour" approach and the FTE is a "by the year" approach.
Flip that, hire an MSP for an annual contract, get dedicated full time resources and you can get in your market rates roughly identical to local FTEs. Try to hire an FTE for one or two hours at a time with no contract, and you'll be paying $150/hr too.
In this example, you aren't comparing the MSP vs. FTE model, but the hourly vs. indefinite rate models and associating them with the approach you took when choosing them.
