If you want to increase your margins, there are two main ways to do so. Option 1: you can increase your prices, which may lead to tough conversations and/or client churn. Option 2: you can decrease your costs, which can be much more effective because it gives you more control over your margins and isn’t client-facing.
In this blog post, we’ll outline some key considerations and strategies to decrease your remote monitoring and management (RMM) support costs to help you optimize your profitability and grow your business.
To maintain healthy margins in your business, it's imperative that you understand all of the costs associated with the platforms that you use. When it comes to RMM solutions, there are three main support activities:
- Setting up the solution
- Using the solution
- Maintaining the solution
Within each of these activities, you can break it down by hard costs and service costs. Hard costs are much easier to calculate, but are usually the lesser of the two costs. Service costs normally involve your employees’ time, which can be difficult to calculate if you’re not tracking it properly.
Let’s take a look at each support category and review some ways to decrease the costs for each.
Support Cost #1: Setting Up the Solution
If you’re already using an RMM solution, you may consider this a sunk cost. But don’t forget about the time it takes to set up the solution for new clients. Hopefully you are adding new clients each month, and if you’re inefficient at onboarding those clients, you could be wasting a lot of money. This cost will also be a key consideration if you’re looking to switch your RMM solution.
For the most part, setting up your RMM solution isn’t a weekend project. RMM solutions typically take a lot of time to configure when you first get started, and can even take more than 6 months to get up and running efficiently. From installing agents to adding in your alerting conditions and setting up your automation and patching policies, having your technical team set up the solution and tweak it to your needs is an involved process.
Let’s do some rough “back-of-the-napkin” math. Say you pay your technician roughly $80,000 per year. That boils down to about $40/hour. If two technicians spend their whole month configuring a new RMM solution (which is conservative, considering some solutions can take over six months to get set up properly), that’s almost $13,000 that you’ve added to the upfront cost!
Make sure that you’re factoring in these costs in your evaluation process.
The hard costs associated with installing an RMM solution usually involve setup or training fees. While they’re easy to identify, find out if the vendor charges these fees because they might not be upfront about it.
The Solution: Make sure you fully understand the setup costs associated with getting started and onboarding new clients. Look at how quickly you can install an agent and start monitoring for problems. Additionally, be mindful of any setup fees or minimums that may be included in the initial engagement. Speeding up the agent install and monitoring process will reduce these costs, dramatically impacting profitability.
Support Cost #2: Using the Solution
The costs associated with using an RMM solution are most likely your largest support costs, but they’re probably more significant than you realize. You will never be able to reduce this number to zero, but finding ways to help your team operate more efficiently and manage more endpoints will allow you to support more clients and redeploy your staff to focus on more strategic, revenue-driving projects.
These costs depend on how much time your team spends using the product. While there are a lot of activities associated with using an RMM solution, the biggest service cost relates to tickets. One of the best ways to determine if your RMM solution enables business efficiency is by looking at how many tickets are opened and closed and how many hours are spent doing so.
Let’s go “back to the napkin” for some math. Say RMM solution 1 allows you to close 10 tickets for 1 hour of a technician’s work. If all that technician did was work tickets throughout the day, they’d close 80 per day, 400 per week and 20,800 per year. If that same technician costs you $80,000 per year, you pay $3.84 per ticket.
Now, say RMM solution 2 allows you to close 15 tickets for 1 hour of a technician’s work. They’d close 120 tickets per day, 600 per week and 31,200 per year. At that rate, it would cost you $2.56 per ticket.
Now, to compare these two solutions, let’s say you generate 100 tickets per week. With solution 1, it would cost you $384 per week in service usage costs, which equals $19,968 per year.
For solution 2, it would cost you $256 per week, which equals $13,312 per year. With solution 2, you add over $6500 to your bottom line!
In order to determine the hard costs of using your RMM solution, look at your invoice each month. However, you may want to factor in some other costs as well, including the cost of your PSA, support fees and access to resources.
The Solution: Most MSPs make the mistake of only looking at the hard costs associated with using their RMM solution, but the service costs can be significantly greater. Finding solutions or processes that enable you to manage more endpoints and close tickets faster will allow you to dramatically reduce your RMM support costs.
Support Cost #3: Maintaining the Solution
This is probably the largest hidden cost that most MSPs don’t consider when calculating the total cost of goods sold. Not only do you have to use the RMM solution, but you have to maintain it as well. This includes activities like adding or updating your alerting conditions, configuring the solution and upgrading or installing new versions. All of these are necessary tasks that can eat into your profit margins.
How much time do you spend updating and maintaining your RMM solution each week? 10 hours? 20 hours? Do you have a full-time employee who’s dedicated to managing just your RMM tool for you? If so, you should be factoring these costs into your total cost of goods sold because it’s part of the time you spend delivering managed IT services.
Additionally, as your vendor rolls out new updates and features, how does that upgrade process work? Does your team have to spend time installing a new version of the software or reacting to those updates? If so, estimate how much time this takes and how frequently it happens. Then, add that into your maintenance service costs.
You may or may not have hard costs associated with maintaining your RMM solution, but these would include installation fees, upgrade fees, migration fees or renewal fees.
The Solution: Look for a platform that stays up-to-date on its own, especially when it comes to managing and updating your alerting conditions. This frees up your team so they don’t have to spend time babysitting your solution. Additionally, look for a cloud-based solution because you automatically get access to new features and updates with minimal impact on your team.
Extra Support Cost: Change Management
In addition to the three main RMM support costs, there are some additional costs you should consider when selecting an RMM solution, especially as it relates to change management.
Change management costs comprise any costs related to changes in your organization. This can include new hires, technician churn, client churn or change in processes. Technician churn is one of the biggest challenges that MSPs face. When you go about selecting an RMM platform, you should make sure you understand how a tech leaving may impact your business. Will it be easy to find and train a replacement if one of your team members does leave? How will your service levels suffer? Will you need to restructure your team to support your clients, and if so, how do those changed roles impact productivity?
This cost can be very difficult to calculate, but it should be considered when evaluating your RMM solution.
The Solution: They say the only constant is change, and that’s certainly the case when it comes to managed services. Make sure your solution allows you to scale easily to meet your business’ demands and ensure you are operating profitably at all times.
Calculating your support costs can be challenging, but it’s important to do if you want to stabilize and increase your margins. Looking for the right solutions that allow you to reduce the amount of time you spend using them and increase your team’s productivity will enable you to take on more clients and increase your profitability. Your solutions shouldn't just allow you to run your business, but to optimize and grow your business.
Are you confident that you’re using the right solutions to grow your business? Learn more in our upcoming webinar!
By Gretchen Hoffman
By Gretchen Hoffman