Well-structured partnerships can help move your MSP business from surviving to thriving. With strategic alliances, you can fill any service, resource or skill gaps your respective companies may have.
Now, you might be thinking that you’re relinquishing control over your business by having someone else, i.e. another IT company or even a potential competitor, service your client, but it’s actually quite the opposite. What it does is it gives you more opportunities for your business and grow it in ways you never thought possible.
To get you settled in, let us explore a couple of ways you can structure and grow your MSP business through strategic alliances.
You can leverage a partner’s services by hiring them as a subcontractor. As an MSP, you can use subcontractors when there’s a need for extra labour; maybe you need specific expertise or additional resources when your backlog is high, or to service an area where you don’t have coverage.
In this setup, your partner company will be representing your company as they deliver the work to your client and invoice you directly for the services rendered.
When you invoice your client for the subcontractors time, you can bill at cost, or mark-up for additional profits.
Typically, this is the preferred option as most MSPs prefer to maintain the ownership of the client relationship and act as the “One Stop Shop” for their customers.
Examples of projects that we’ve seen successfully delivered like this include Office 365 migrations, Sharepoint and/or web development, but the most common one would be for resource overflow.
When contracting out for new business, if you’re utilising someone for their expertise then consider leveraging their brand and/or previous work to help secure the business.
You can also offer your partner’s services as a direct referral. Here, you don’t need to act as a middle-man as it would slow down the process of delivering the work.
With direct referrals, the partner meets your client, representing their own company, and then delivers the work required. The partner then invoices your client directly and pays you a referral fee.
With direct referrals consider doing this with businesses that don’t directly compete. For example, if you have don’t do web development you might look to directly refer to another web development business that you’ve developed a strategic alliance with and in return they might refer MSP clients back to you.
As with any business relationship, strategic alliances come with risks and potential pitfalls. How does one overcome those? Well, first you need to know what they are.
In a subcontractor setup, things may not always go your clients’ way, and if something goes wrong, it’s not just the subcontractor’s reputation that gets hurt, but yours too.
Subcontractors are typically experts in their field, but their work ethic or business standard may not live up to yours. This is why it’s important to find the right ally and build a relationship with them as the latter is a lot harder to gauge than skills or expertise alone.
How to start?
Trust is often a big factor when considering to enter into such alliances. To get the ball rolling, you first need to set your expectations up-front. It’s always a good idea to start small — give your partner small jobs to deliver, with specific instructions on your do’s and don’ts. For example: Do wear our company uniform when working with a client or Don’t engage in any direct work with our client and so on.
You can also put in place Non-Disclosure Agreements (NDAs) and Contractor Agreements to set the conditions of your partnership.
The core of strategic alliances is trust. If you don’t trust your partner, or they don’t trust you, the partnership will fail.
Strategic alliances are a great way to grow your MSP business and add additional resources, geographical reach and value to the services you offer.