Are Service Level Agreements (SLAs) "Table Stakes" for High-Maturity MSPs?

If you've ever played a game of Texas Hold 'Em you know the phrase "table stakes" refers to the limit you can win or lose while playing a hand. Within the context of managed IT services, however, think of it as the minimum buy-in required to sit at the table with your MSP competitors. So what's that amount to for you? A strong service level agreement (SLA).

Here at Continuum, we've learned a lot about the power of peer-to-peer networking by partnering with HTG Peer Groups, a collection of 25 peer groups, comprising of IT company leaders who meet quarterly to network and share best practices with one another in a non-competitive environment. Last week, I had the pleasure of speaking with Arlin Sorensen, Founder and CEO of the Heartland Companies and HTG Peer Groups, and Pete Sorensen, Partner at HTG Peer Groups. Arlin and Pete largely work with high-maturity MSPs—those that are larger and experience high annual growth—and according to their experience, these shops no longer differentiate their service offering with SLAs. It's widely understood that competitive service levels are expected and therefore, shouldn't be the focus when discussing optimal service delivery. So what should be, and why is that?

Service Level Agreements aren't the Focus Anymore

Looking to win over more clients with your SLA? It's going to take more than that to convince them. If you're a high-maturity MSP, chances are you've already learned that clients demand strong service levels. Response time expectations continue to shrink, so simply offering speedy service delivery won't push you over the edge in a sales situation. CompTIA's 4th Annual Trends in Managed Services report backs this up with the KANO model used to explore factors driving customer satisfaction. According to this model, "response times at this point are considered such a basic attribute that they are fully expected and not considered a bonus feature." In short, clients don't achieve any extra satisfaction from your SLA, however "there is a penalty for failing to provide it at the expected quality level." Again, it's not to say that SLAs don't matter or should be glossed over. They're just more like the cost of admission, rather than that Royal Flush you've been waiting to play.  


Why Did the Rules of the Game Change?

This paradigm shift is due to an increase in managed IT services market maturity, a change in consumer needs and more advanced tools. About four or five years ago, SLAs weren't predictable and were therefore much harder to pin down. IT service providers didn't know how long it would take to bring a server back online because they weren't able to leverage proactive solutions. Thanks to powerful and preventative technology like remote monitoring and management (RMM), however, IT service delivery is a lot more predictable today. MSPs can detect vulnerabilities and disruptions before they develop into larger issues that yield costly downtime for end users. 

And the businesses you want to work with haven't been living under a rock either. Increasingly, they've come to view proactive IT support as the standard. According to the same CompTIA study cited above, 64 percent of participating businesses claimed they "are currently using what they believe to be an MSP for at least one operational function." With managed IT services quickly becoming the new norm, clients now seek out high-maturity MSPs for something extra...

What Should MSPs Lead with Instead?

So if stellar response and remediation times don't sway the tide, what will win over your prospects? Becoming their trusted business advisor. Many MSPs have had tremendous success filling a much needed executive role at their clients' businesses by acting as virtual chief information officer (vCIO). It's one thing to provide equipment and after-hours support. It's quite another to demonstrate to clients how your IT solution fits within the whole scheme of things. By helping out in areas such as budget planning and managing all of their IT service needs with your robust platform, you'll increase their SMB efficiency and profitability, thus augmenting both the amount of clients you obtain and their average lifetime. 

Stickier Clients Choose MSPs that Over-Communicate and Enhance Service Levels

Remember when I cautioned you not to mistake this post as an excuse to ignore your MSP business's SLAs? That still stands. One way high-maturity MSPs prove they are their clients' strategic advisors and vCIOs is by holding semi-annual or quarterly business reviews (QBRs). These recurring meetings offer the perfect opportunity to restore clarity and revisit SLAs so as to ensure standards are properly understood and met. Often, MSPs run into the issue of lack of buy-in or confusion about what you are and aren't willing to do for clients. Similarly, clients may not fully comprehend their respective responsibilities. Have you ever had to deal with uncooperative ones that fail to keep hardware current and under warranty, for instance? Both Arlin and Pete agree that communication is key for managed IT services success. From their experience working with HTG Peer Groups, those MSPs that conduct QBRs tend to have more more clearly defined SLAs and in turn, more satisfied clients. So you see it's not about giving up your SLAs or letting them slide. Far from it. You just have to up the ante to be considered a serious managed IT services player!

Looking to play with the big dogs?

MSP Guide to Managed Services SLAs  [white paper]