Sometimes, a slice of the pie is just as sweet as the whole thing. And that’s why more and more MSPs are looking into co-managed IT. While the prospect of partnering with customers’ internal IT teams might seem daunting, industry vets say the rewards can be substantial–if you know how to structure the relationship.
Co-managed IT services could be a significant opportunity to increase your margins and access larger clients.
“For us, the whole reason behind doing it is it opens up [the] opportunity to work with a lot of larger customers and to be able to say ‘yes’ more,” says Tom Glover, chief revenue officer at Atlanta-based Responsive Technology Partners.
Plus, the profits are real. Brandis Kelly, Midwest region president for DigeTekS, says, “The margin on co-managed is phenomenal. Better than any other, because there’s so much less work if you do it right.” For her company, this efficiency comes from reduced help-desk burden and the ability to focus on specific, high-value services and tools rather than day-to-day support tasks.
The Secret to Landing Lucrative Co-Managed Deals
Ideal customers will have 25–50+ employees and an internal IT team. But success in co-managed IT starts with identifying your own MSP’s strengths.
“You have to have some sort of focus or specialization expertise level when it comes to co-managed—that’s your way to get your foot in the door,” Kelly says. She recommends compliance as an entry point, given several new mandates and frameworks coming down the pike.
Meanwhile, David Javaheri, CEO of Waltham, Massachusetts-based Direct IT, suggests starting with cybersecurity. “The security angle is the best angle to get into the head of the CEO,” he says. “We explain to them that it’s scary if you are not relying on a security expert, because your IT person cannot be an expert in everything.”
Once you determine your offerings, should you target the IT director or the CEO? You might just have to experiment to find the answer.
Javaheri recommends starting with the CEO. “What didn’t work as much was going after the IT person. They felt more in danger or their jobs more threatened by an MSP,” he explains. Instead, he suggests getting to know the IT person through the CEO.
Kelly, on the other hand, has found more success targeting heads of IT. “You want them on your side, going to their board, going to their C-suite executives and saying, ‘Hey, there are a few gaps over here, it would really be great if some of this stuff could be offloaded to an IT company.’”
Glover suggests including heads of IT in sales conversations to help overcome inevitable distrust. “Make sure they understand that you’re not in there to take their job,” Glover says.
Why a One-Size-Fits-All Approach Will Cost You Clients
Co-managed IT cannot be a one-size-fits-all offering. So, Javaheri says you need to be prepared to be extremely flexible and responsive to what the customer wants. “You cannot have one solution and say, ‘I charge $150 per seat,’” he says. “It’s going to fail big-time if you do it that way, because every IT person is different.”
You can also expect a longer closing cycle, about “30 to 60 days from the moment they understand they need to do something,” says Javaheri. These variations stem from differences in internal IT teams’ capabilities and preferences. “You could come across an IT person who doesn’t want to give up his servers to an MSP to handle because the trust is not there,” he explains. “Maybe he’ll give it to an MSP a year later, after the relationship starts. But not right away, so you need to have a program available that does not touch the servers.”
That’s part of why Kelly stresses the importance of understanding your costs when developing co-managed offerings. “Break down how much it would cost, and not just the hard cost,” she says. “I’m talking about the soft cost and the labor side of that.” Then, she walks clients through services line by line to choose a la carte.
Maintaining a “Co-zy” Relationship Is Critical
Success in co-managed IT requires careful attention to both technical and interpersonal aspects of the relationship. And there must be clarity about responsibility and liability. “One of the really critical components that we have in our statement of work when it comes to co-managed is a shared responsibility matrix, detailing all the things that can happen and who’s going to be the responsible party for it,” Glover says.
Training plays an important role, too. “If I give their engineers automatic access, and they go in and turn something off that allows them to be breached, we have a problem,” Glover says. “So what we’ve done is require them to go through training. We put their engineers through the same training that our engineers go through.”
Training is also a profitable service, Kelly notes.
Get Growing Now with a Co-Managed Strategy
While co-managed requires more flexibility and customization, the reduced labor costs and higher margins make it an attractive growth path for providers who can execute it effectively. It’s a significant opportunity for MSPs ready to adapt—and step back.
“Our best day is when they’re successful,” says Glover. “We referred to it as a reflective glow. We’re doing the back-end stuff, and you get to take the credit. I’m happy with that.”
For more tips from David Javaheri on co-managed IT, see David Javaheri Reveals The Proven Strategies He Used To Skyrocket His MSP Business
