What are Managed IT Services?
There's a lot of confusion out there about Managed Service Providers (MSPs), so lets get a few things out of the way up front. Those of you aware of what Managed Services are, scroll on down to the next section!
Managed services is the proactive monitoring, management, and support of a business.
Typically, Managed Services comes with:
1. A technology suite designed to fit specific customer types based on categories (Dental and Pharmaceutical would be considered different customer types, despite being in the same category of healthcare, for example)
2. An ongoing proactive maintenance and support model, which is unlike the reactive break-fix model
3. Longer term contracts, usually 12 months or more in length, paid monthly.
MSPs have different styles of implementing these components, when evaluating your IT provider be sure that their style fits for your business. It's useful to think of the MSP as a business partner and not just an IT guy or provider.
Why use Managed Services instead of on-demand (break-fix) IT support?
IT and business have a different relationship than they used to. In years gone by small and medium businesses used technology to supplement their existing products and services. IT function failure was an annoyance decades ago to be sure, but businesses could continue to serve customers effectively without IT. Today, almost all businesses rely, price, and model their business with the assumption that their Servers, Computers, Email, etc are functioning perfectly.
This may sound familiar. An employee walks into your business early to open, they can't get on their computer, phones, wifi, or print documents. The non-technical employee does their best to fix the problem over the course of hours or days with the help of another worker, only to give up and call their massage therapist's best friend's cousin's daughter's long lost twin who "knows computers". This new IT guy solves your problem, but in the process you get a huge bill for that single fix. This leads to the following business outcomes:
Most break-fix IT support starts off this way. Lets use a dentist office as an example. Systems go down, dental hygienist does his best rainman impression, but eventually the odd distantly known acquaintance shows up hours, days, or weeks later and fixes the problem temporarily. Nobody can work effectively for the period of downtime. After the break-fix IT support shows up (typically a single person entity) and saves the day, a new arrangement begins; Every time this dentist office has a problem they call the same guy and VIOLA! A new company is formed.
This seems all well and good, however while the problem was solved in the short term, the negative aspects of a relationship like this brood beneath the surface. Speaking of relationships...
Motivation and relationships in a break-fix model
There are a few common break-fix IT support types that emerge from a relationship like this. We've detailed a few below to illustrate
The IT Tyrant
This is a very unfortunate but all too common occurrence. That new break-fix person who was called to help solve the problem uses that initial trust and access to control the customer. Over time they change and control passwords, monitor the employee's activities (with or without their knowledge) reading emails and messages, recording phone calls, personal information, and swipes passwords. Worse yet, this type of "support" often comes with invoices via extortion. You'll get a $25,000 bill for a piece of software that you could buy on your own for $10,000. The tyrant gets away with this by saying "If you do not pay my rate for that software, I won't support it." You might be thinking you'd just tell this person off and acquire support from the software company, which is the right response. But the tyrant has locked down access to your entire environment. Even if you could get the software company to support you, they can't do it without access. This is an absolute nightmare.
The Max Netflow Solution:
Fortunately a good managed service provider can perform password recovery, hardware replacement, and cut off the tyrant's access to your IT systems. Any decent Managed Service Provider will be able to supply any future hardware, software, and licensing for a lower rate, and customer privacy is built right into the software we use. We don't want to watch your personal information in the form of data, but due to the processes and programs we use, we couldn't pry if we wanted to.
There's some overlap here with the tyrant so we'll keep this brief. Essentially the extortionist will hold your systems hostage with billing. Typically they come in for a very low price. But as time goes on the extortionist makes profits by forcing high premiums on services that you don't want, don't need, and don't understand. That last part is essential. They keep you in the dark while claiming to be your hero.
The Max Netflow Solution:
Our primary objective is to keep your business up and running at a sustainable rate. The entire partnership is different. An MSP like ours does not stay in business or keep customers if they can't keep the systems up and running with clear and concise billing and projects.
The Fire Starter
You could probably tell by the title, but this type of support involves causing problems or leaving things half-fixed to come back and fix it later. The Fire Starter is always fixing problems that you're not even sure you had, but you are sure you had to pay for them. It's hard to blame the Fire Starter, after all their entire business revolves around customers having serious IT problems which only the fire starter understands. This is the core of the problem with break-fix support. It's a slimy trick as old as time, but when you incentivize payment for problems, you'd better plan on having a lot more problems.
The Max Netflow Solution:
Managed Service Providers do not want their customers to have problems, and we're no exception. The more resilient the customer's systems, the better the MSP does from a business perspective. This means the MSP will provide ongoing maintenance, monitoring, and regular meetings to ensure objectives are being met. MSP contracts are built on mutually beneficial relationships. In fact, at Max Netflow we screen our customers and if we don't think it's a good mutual fit, we wont offer services.
An unfortunate IT stereotype that rings true for some, The Hermit. You could also call this person the IT Grim Reaper. They don't want to hear from you, and you definitely don't want to hear from them. Unpleasant to talk to and difficult to pull in for support, you'll only see this person when there's a problem. Some may even sell you on knowing this fact. "Pay me so you never have to see me again." Compelling sell... but clearly not a partnership
The Max Netflow Solution:
Regular meetings with our customers to ensure standards are being exceeded and that new business objectives are being enabled and improved by technology. We even smile!
This one is quite different from our previous four. The Hero IT support involves one person trying to do everything. They answer all your calls, they are highly responsive when an issue occurs, they're not actively causing problems, and heck they're even friendly. So what's the problem? The problem is this is unsustainable for both parties involved. The Hero often has a high level of expertise, however in today's IT world technology becomes exponentially more complicated every few months!! This means even if The Hero dedicates 80 hours a week and every point of their IQ into learning about the IT world, they can't keep up. This shows up as inefficiencies in several areas such as slower resolution times, outdated equipment and practices, weak cyber-security, increased systems failures, and sloppy business processes, all from being spread too thin. In the same way that a Dentist shouldn't fill in for Chiropractors and Heart Surgeons, a desktop IT guy should not design your Network and Servers.
The Max Netflow solution:
Use our livechat and phone support options to get help in 12 seconds or less for high responsiveness, and leverage a network with hundreds of engineers in several timezones and disciplines, using specific resources for specific jobs. Cloud architects for cloud engineering, Systems architects for servers, and Network Architects for networks.
A Financial Case For Managed Services
Alright so we know so far the quality of life improvement and business purposes for Managed Services Vs Break-Fix. So what about the finances? The remainder of this section will use industry averages of Small and Medium Dental Offices to compare. At the enterprise level cost savings become incredibly effective, but the math gets more complicated. We're using dentists to stay consistent. A bit of warning there's quite a lot of math behind the scenes here, we will only be including the relevant parts to illustrate.
Let's get into the averages for our SMB Dentist's office, we'll use $1,000,000 in revenue for our calculations, and a dental hygienist and a dentist as the in-house personnel trying to solve the IT issue before calling break-fix in San Francisco.
Average downtime (loss of system usage) hours per year: 120
Average hours lost rescheduling patients: 12
Average payroll as a percentage relative to revenue: 26%
Average Dental Hygienist Wage: $45/hr
Dentist Adjusted Wage: $100/hr
Average hours spent by dental firm per year solving IT issues: 240
Average spend per year on breakfix: $10,000
$45,000 lost in wages to internal staff due to hours of downtime per year
$34,800 lost in time spent by the Hygienist and Dentist
$10,000 spent on breakfix putting bandaids on the system
$4,500 lost to rescheduling patients, assuming all patients return
Breakfix losses at $94,300. Now lets look at the same situation from a Managed Services perspective. We will only be adding the data that changes from above. I must add that these again are normal costs and do not necessarily reflect Max Netflow prices.
Average Downtime hours per year: 15
Average hours lost rescheduling patients: 1
Average hours spent per year solving issues: 0
Average spend per year on Managed Services: $35,000
Managed Services expenses at $41,000
$5,625 lost in wages to internal staff due to hours of downtime per year
$0 lost by the Hygienist and Dentist solving IT problems
$35,000 invested in your business' technology
$375 lost to rescheduling patients
A $53,300 improvement by using Managed Services over break-fix for a small to medium dental office.
Larger organizations see numbers that can exceed millions, and typically eclipsed six figures.
We should mention that this cost savings does not include the peace of mind having your systems actively monitored and maintained, as well as the protection from Cyber Security threats. If you are in fact a healthcare professional, and you want to lose some sleep, you can calculate each patient file of an active patient at around $1,000, and inactive patients around $150. This is the crux of ransomware and why it targets businesses regardless of size. Those files are valuable.
"But Will, my business is nothing like what you described and we pay less/have no IT problems/already have a provider/have no budget/etc." Fair enough. As you can see above, we put a premium on time and we're putting our money where our mouth is. We're currently offering complimentary IT evaluations along with a more in-depth cost analysis than what was shown above. If you have a system or provider that's currently working for you and we can't add value, no arguments, no hard sell, but you can be confident in your current solution.
For any inquiries use the following contact information:
Sales email: Sales@maxnetflow.com
My email: William@maxnetflow.com
Phone number: 415-432-8989
Understanding How Cisco Negotiates
Negotiating with Cisco can be a complicated ordeal. They have been around for a long time, really. Cisco takes credit for inventing the router. Whether that's true or not, think about that from a technical standpoint. Cisco has been on the frontier of selling technology since its inception.
With decades of practice, they have developed a sales process that looks chaotic... by design. With a company of that size and experience, taking on Cisco in a negotiation can feel like trying to cut through the Amazon with a butter knife. The purpose of this article is to give you the appropriate mapping of Cisco's sales processes so that they can be navigated correctly.
How To Work With Your Sales Rep
Believe it or not, your sales rep may not have any more visibility into pricing and discounts than you do! This is intentional by Cisco, and important to keep in mind. Again, that cannot be overstated; your Cisco rep may have less insight on pricing and discounts than you do.
The way this works for Cisco is that the rep can position themselves as advocates for your business in a way that they genuinely believe they are getting the best deal possible for you, the customer. They may say things like "this is the best rate I've ever seen." While not realizing 30% has been left on the table. If your rep knows how heavily Cisco has discounted for customers of your size under another rep, they may feel guilty about only giving you 20% when another customer got 60%. Cisco wants its reps and its customers to feel like every negotiation is a new battleground.
Sales reps at big corporations like Cisco have very high stress jobs. They have to meet specific deadlines on specific products with specific growth goals quarter after quarter, regardless of relationship or account size, and they're not given full knowledge on discounts and premiums within their own organization.
It is important to understand your reps motivations. Typically speaking, they want to get the sale, especially if a new product is involved. However, you will find the odd rep that does not intend to give you the best deal.
As you may have guessed at this point in the article, they are not the ones calling the shots on what discounted rates could or should be, and Cisco wants it this way. They report to someone above them who is the GateKeeper on our financial targets for the Cisco’s product. Our objective in any deal with Cisco is to get to that person.
So how do we get to that person? We use the rep. The rep is the only bridge to our discount gatekeeper. We often have to train the sales rep on how to get the GateKeeper motivated to get us competitive rates. After all, the rep wants the sale no matter the cost, and the GateKeeper is mostly concerned with target figures that only they have access to.
Working With The GateKeeper
There is no way to get a deep discount from Cisco without getting the gatekeeper involved. This can be tricky, as the gatekeeper does not want to be highly visible. The goal of the Gatekeeper is to stay behind the scenes, and ensure Cisco is as profitable as possible while still getting the sale. The interesting part of this engagement is that we must give the rep ammunition for the Gatekeeper to move. This involves sending targeted and timed messaging which allows the rep to provide organic communications to the GateKeeper to improve the deal.
This reinforces our earlier point you must educate your sales rep on how to communicate with their own organization! Again, most reps just want to get the deal in to boost their quarterly figures. The best Cisco reps are advocating for the client, but we have to give them the ammunition.
If you do not feel that your rep wants the best for your firm, do not request a new rep unless absolutely necessary. Cisco has moved reps by request before but they are highly resistant to do so. Cisco knows that a customer who moves a rep has a low chance of closing, and will likely require a lot of work. In most cases, the rep will not be moved and you will now have a very unhappy rep who is unlikely to work with you in the same capacity as before, even if they seem fine on the surface.
Cisco moves reps around all the time internally in a scheduled fashion. This is to provide fresh faces to accounts, allowing new reps to take a crack at selling you new or additional products while putting water under the bridge. If the previous relationship was positive, you likely have a positive opinion on Cisco in general. If the previous relationship was negative, the new rep may be able to smooth the waters.
This is absolutely essential to know in negotiations. If your rep is new, they are highly incentivized to make a sale before the new rotation. If a sale goes through after your rep has been cycled out, regardless of how much work they did on a product/project, they do not get credit. This gives incredible leverage if acted upon with appropriate timing, and can be a horrible blunder if a project slips through a rep rotation. A new rep has all the patience in the world to sit on a project and account that is new to them, time is on their side.
Partnering with your rep
We strongly recommend partnering with your rep. This means keeping the emotional part of the relationship positive. Remember, they are in a highly stressful position with little to no information, and the good reps are motivated to sell not necessarily to withhold discounts.
This should sound familiar "I've done everything I can to get this deal for you, but I can't go any lower. There's nothing I can do."
Remember, the rep does NOT have deep insight into discounts beyond their own accounts. They may believe they cannot go lower because they have never gone lower before... You must remember that they are probably not lying to you, but they have run out of tools to use on their own to get a better deal. If your rep is getting emotional, Cisco wins. The sales system is designed to cause some division without losing the deal. Most customers will at this point either 1) Accept the rate. The rep seems genuine, the customer thinks the rep has all the information, and the project has a start deadline or 2) Protest a bit longer, delay the project, and eventually accept a minor concession from Cisco, which they were willing to give all along.
Both scenarios have a similar result. They know your projects have timelines, they know their products and their competitors, and they know that if the rep is getting frustrated, that they're actually winning the negotiation.
There are some exceptions in emerging markets within Cisco's product portfolio, but in their core products, this process is standard.
Fracturing is a tactic used by any organization that sells high value goods, and Cisco is certainly no exception.
Fracturing is the method of approaching as many layers of the customer corporation as possible. The process goes something like this:
- CXO invited to non-technical event full of salespeople
- Calls to your IT directors to discuss technology goals over the next few years
- Calls and meetings with your user leadership to show off features that may or may not be useful or even executable in your environment
- Demos to your technical staff without your knowledge
So what's the result? All personnel have differing technology goals, all of which conflict with one another, but revolve around one vendor. This keeps the discussion about how the Cisco product will be used, and not about whether or not it will be used. The goal of Cisco in this instance is to gather as much information as possible so that their recommendations are paramount, even over your own internal decision making resources. Cisco now owns your network.
The only remedy for fracturing is preemptive planning. Stakeholders and users within the organization must agree on objectives and initiatives to align exactly to how products will be used over the next several years, not just the next 12-24 months!
This is a rare and unusual feat for companies of any size. We have seen fracturing work just as effectively in a 5 person company as it does a multinational conglomerate. A common and more feasible remedy to this is to use a VAR or Managed Service Provider who works with Cisco. This then allows the VAR/MSP to be the in-between for the customer and Cisco. Cisco has a much harder time manipulating the sales, processes and objectives through a largely unbiased partner whose entire existence is predicated on knowing these processes.
Think of a VAR/MSP like your doctor. A good doctor will treat your ailments and is not interested in taking you to baseball games to get you to buy full body scans. In a similar fashion, a good VAR or MSP will assist with solving your problems and aligning your vision. They will see your success as their success with a long-term vision, and they have unbiased experience with similar accounts and similar products from Cisco with visibility on discounts and rates that your Cisco sales rep does not have.
Differences between products and new/existing customers
This is the most complicated part of the whole process, and again it's by design. Lets discuss the differences between what Cisco views as core products, services, licenses, add-ons, and emerging technologies for new and existing customers. All of which require different negotiation tactics.
What you must understand about Cisco is that they have turned into an acquisition company in recent years, which means the complexity of negotiation is extraordinary. We often take on new customers who think they're starting a new relationship with Cisco, only to find they've been using one of their acquired technologies for years. In fact, your rep in one Cisco product probably has no clue at all if you're using another Cisco product. Again, lots of fracturing.
Core Products - Core products have processes in place with more or less defined price ranges. Most of the negotiation that actually moves the needle here is volume, timing, and competitive quotes. To keep a clear conscience, you should never share a quote from one vendor with another, but you can certainly imply that prices are not reflected appropriately from Cisco based on competitor quotes.
Services - Services fall into the SAAS department for negotiation purposes, and they revolve heavily around renewals and ongoing revenue. The services negotiation changes dramatically depending on whether you are a new or existing customer.
Licenses - Licensing execution and sales processes are highly inconsistent from one product to the next within Cisco. Across the board however, they're tacked on (by requirement) with your physical or virtual hardware. This allows licenses to be mixed and matched with blending discounts. Margins here can vary wildly for large technology vendors. Which leads us to...
Add ons - Licenses or software are very typical add-ons for nearly every Cisco deal. What they do is add a high margin item with a low margin item. You will often see this in the form of a core product with an emerging market technology that you are not sure you want or need, but Cisco will not budge on the core product. Therefore, you bite on the add-on to get a small discount on the core product that you are really after. It is the oldest trick in the book, but for good reason, it works.
Emerging technologies - These are the products that often are used for fracturing. It's far more common for stakeholders to have differing visions on an emerging technology that your organization may or may not need, than a core product. These technologies have dedicated, highly incentivized and specialized teams that work hard to make sure that you hear all about this new tech, whether you need it. Here's the kicker for the negotiation process, your Cisco rep may not even get sales credit on the emerging technology. That's right; your go to contact at Cisco may get no credit whatsoever depending on the technology. This can create opportunities for your organization, and should not be wasted.
New and existing customers - Be very, very wary of the dollar amount you sign up for as a new customer. If you sign up for X dollars over 3 years, the rep already has a targeted sales increase, regardless of how much you may or may not have overpaid. Your rep will be reprimanded internally if they don't hit those targets when it comes to renewal time. This can cause serious problems. This means if the goal is 10% growth, and you overpaid, Cisco will still target a 10% increase.
If the rep cannot hit their numbers, the relationship can become toxic between themselves and the customer. It's not what you want. You want to be in lock step with your rep, making a solid case for discounts.
Product variety from Cisco is a double-edged sword. On one hand, everyone down to the rep is highly incentivized to get product variety into your environment. Why? Because it's nearly impossible to migrate off. Once your staff gets used to the single vendor for all of their processes and support, it's extremely difficult and expensive to train and hire for the new products. Outsourced IT can help with this as they can cycle in and out experts in several fields, but it's nearly impossible to have an internal team migrate from an all Cisco shop to a new vendor. Cisco knows this when they introduce variety.
Now for the positives. Your rep and the GateKeeper will do everything they can to increase that variety within your environment and that includes top-notch support. The problem is once you're in, you're in. They know how expensive a migration is for a customer, even a technical customer, which allows them to stick their heels in the ground in future negotiations. Be sure that if this is the best path for your organization, this leverage is not wasted.
Protecting Against Feature Creeps
Tell me if this sounds familiar, you sign on for an emerging technology. It's a great price, it has nearly all the functions you need, it aligns with business objectives, and you're pleased as punch with the purchase. You sign up for a 3-year pact, and before you know it the product has doubled, tripled or quadrupled in price! You approach your rep, steam coming out of your ears asking for an explanation.
What they tell you is "We've added new features and capabilities with ongoing development, so we had to raise the price." This causes a big problem for the organization.
Say for example when the emerging technology purchase was made, 80% of the features were used in your live environment. Perfectly appropriate for a purchase. However as the years passed by, an insane quantity of features were added at an intentionally high rate. What's the probability that your organization was able to keep up with every single feature and implement it correctly? 0%. It's extremely difficult to keep up with added features on emerging technologies while also supporting the business. This likely reduces your feature usage from 80% to 60%. You're now being forced to choose between an expensive and time-consuming migration, or to accept paying three times as much while not likely using many of these new features you're paying for, if any. This again reaffirms our point, do not waste leverage when you have it, as it will come back to bite you later.
The goal of this article has been to empower you and your organization on the sales processes of Cisco and vendor negotiations at large.
Current Customers: It has been an absolute pleasure to work with you, and we would love your feedback on this article.
To New and Prospective customers: We hope this article has helped you understand negotiations with Cisco and other large tech vendors. Our goal as a VAR and MSP is to unequivocally advocate for our customers. We believe articles like this one are game changers for everyone who relies on technology for their business.
Want more information on how we can help you reduce your Cisco or tech vendor expenses? Contact us at https://www.maxnetflow.com/contact.html or via email to myself William@maxnetflow.com OR firstname.lastname@example.org.
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