ISPCON: How Providing Services Has Made My Life Easier

Most ISPs assume that if you're just offering the pipe, you've got it easy, and that adding services will make life tougher. But Alan Jacubenta said that after revising his business plan, his life improved.

by Alex Goldman ISP-Planet Managing Editor [June 10, 2008]

ISPs are all about customer service. The industry is dominated by giants who can beat any startup on price, but they have a weakness, and that weakness is customer service.

Alan Jacubenta, president of Cleveland, Ohio-based webhost and services firm Mango Bay Internet, spoke in a session called Successfully Managing Managed Services. He said he had one insight to convey, an insight that revolutionized the business, allowing him to be "friends with our customers."

He said that there are three models for services: 1) break and fix 2) offer a block of discounted tech support hours and 3) managed services.

Before he changed the business model, he was running a mixture of 1) and 2). "I was judged on my ability to drop everything, put on my cape and solve the emergency. There were no predictable revenues for me, and my customers could not budget their IT expenses."

Taking the time to solve tough problems could harm a business relationship, if he was charging by the hour. "If a server failed and the backups were infected too, we could spend a week fixing the problem and lose the customer."

So break fix was bad, and even the discounted block of hours wasn't much better. "The customer keeps wanting a discount for the same amount of work."

Sell more, earn money and respect
Becoming a Managed Service Provider turned it all around. "It allows the customer to budget. It gives them peace of mind and allows them to focus on their business, not yours. The customer gets high-end U.S.-based techs. Remote access saves time and money and gas. It provides value for your company and gives you something to sell and do!"

"Now, we charge a flat rate per machine. We define excatly what's modified. We charge for anything added to what's now my network. We charge more than we used to but less than the cost of a full time IT guy. It's about $30,000 per year vs. $50,000 per year or more for the tech guy."

But earning greater ARPU is not what makes this business plan great. It's having the customer see you as an ally instead of as an opponent. "Customers used to micromanage us. If my tech was downloading patches and updates and waiting for the download to complete, the business owner would ask, 'what are you doing?'"

Now, since the customer is paying a flat rate, they don't care if they see a Mango Bay tech who appears to be doing nothing even though he is in fact waiting for all those patches to download.

An unexpected bonus: there are fewer emergencies. That's because part of the contract says that only Mango Bay and nobody else is allowed to work on the network. "We used to walk in and immediately ask a lot of questions about are you performing Windows updates and are you updating your virus signatures. Now, we're proactive in the event of a problem. For example, if we note that a hard disk on a server is close to failure, we'll help with the migration over a weekend. We install server probes and client agents and establish a baseline for all hardware."

If you choose to do this, you'll need to have the contract right. "You need a tech lawyer, not a real estate lawyer," Jacubenta said. You need to limit your liability and exposure. That's worth paying for.

Learning how to do it
Besides attending ISPCON, Jacubenta learned how to make the change by reading. He recommended Channel Pro magazine and the following books:

The Guide to a Successful Managed Services Practice by Erik Simpson

Service Agreements for SMB Consultants by Karl W. Palachuk

The Network Documentation Workbook by Karl W. Palachuk

A Guide to Selling Managed Services by Matt Makowicz

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