Chris Day, CEO at IT Glue, talks about the true cost of having bad processes at an MSP.

2. Once upon a time, an MSP set out to
build a recurring revenue business
with predictable income, healthy
margins & happy customers.

3. Every day, the MSP worked tirelessly
to impress its clients, hoping &
praying for something to be left at
the bottom line at the end of the day.

4. One day, the MSP realized that
customers weren’t that happy, and
they weren’t really making any
money either. (WTF!)

5. Because of that, staff became
frustrated, clients left, and old
problems became new… It felt a lot
like “Groundhog Day”.

6. Because of that, the MSP became
frustrated, and started wondering if
this business was as awesome as it
once seemed… or if flipping burgers
might be more rewarding...

7. Until finally, the MSP figured out that
it needed to invest heavily in process
in order to deliver great service, at a
great price… and still make money.

8. The MSP spent one year completely
dedicated to developing and
enforcing process… They tattooed all
of their staff accordingly.

9. One year later, the MSP emerged as
one of the top performing companies
in their region, able to grow, inspire,
charm & make money at the same
time. THE END.

10. CHRIS DAY, CEO @ IT GLUE
• 2002 – Founded Fully Managed
• 2008 – 10 Employees
• $1.5M Revenue, 5% EBITDA
• 2014 – “Retired” to Chairman
• 2015 – 50 Employees
• $10M Revenue, 25% EBITDA

11. • Founded in 2013
• 9 Year “Beta Test”
• 600+ MSPs Globally
• 20,000+ Users
• 14 Countries, 5 Continents
• Synonymous with great IT
Documentation!
ABOUT IT GLUE

12. The first company in any industry
that fully embraces the LEAN
methodology will dominate their
industry over the long run.
–Verne Harnish
LEAN

13. 3 COGS
Process
People
Technology

14. PEOPLE
Process
People
Technology

15. Mastery
Purpose Autonomy
PEOPLE

16. TECHNOLOGY
Process
People
Technology

17. TECHNOLOGY

18. PROCESS
Process
People
Technology
Knowledge Management
Business Intelligence/Reporting
Change Management
Incident Management
Problem Management

19. --Eric Ligman, Director, Worldwide Partner Group, Microsoft
TIME

20. BEST-IN-CLASS
What makes a
best-in-class
MSP?

21. MSP FINANCIALS
Revenue $2,000,000 100%
COGS
Gross Profit
SG&A
Net Income

22. COMPANY “A”
Revenue $2,000,000 100%
COGS $700,000 35%
Gross Profit $1,300,000 65%
SG&A $800,000 40%
Net Income $500,000 25%
BOOM!

23. Revenue $2,000,000 100%
COGS $1,200,000 60%
Gross Profit $800,000 40%
SG&A $800,000 40%
Net Income $0 0%
FAIL!
COMPANY “B”

24. TRUE COST OF BAD PROCESS
Technical Staff
Focus on Technical Team ROI
5
Average Annual Salary
For All Employees
$60,000
Average Hourly Labor Rate
Fully Burdened + 15%, Rounded Down
$43/Hour
Time Wasted Due to Bad Process
Experts Estimate @ 20-30%
20% / 10% / 5% (high/medium/low)
Monthly Cost of Time Waste
(Number of Tech Staff) x (1 Week Labor) x (Time Wasted)
$6,880 / $3,440 / $1,720 (high/medium/low)
Monthly Opportunity Cost
Based on 50% GM = (Monthly Cost of Time Waste) x 2
$13,760 / $6,880 / $3,440 (high/medium/low)
Total Monthly Cost of Bad Process
(Monthly Cost of Time Waste) + (Monthly Opportunity Cost)
$20,640 / $10,320 / $5,160 (high/medium/low)
Total Annual Cost of Bad Process
(Monthly Cost of Time Waste) x 12
$247,680 / $123,840 / $61,920 (high/medium/low)

25. TRUE COST OF TIME VARIANCE
Sample Tickets 1. Setup New User Account
2. Troubleshoot a Slow Computer
3. Deploy a New Workstation
Estimated # Transactions Annually
Based on 50 Customers, Avg. 20 Staff (1000 Users/Endpoints)
300 Transactions
Estimated Hours Per Transaction
Total Labor Required for Each Transaction
0.5 to 2.0 Hours
Total Annual Cost (All Transactions)
# Transactions x Time x Hourly Cost ($43/Hour)
$6,450 to $25,800
Potential Savings w/ Good Process
High - Low
$19,350 Wow!

26. TRUE COST OF LABOUR VARIANCE
Sample Tickets 1. Setup a New Complex User/Workstation
2. Deploy a Switch, Firewall or Backup Device
Estimated # Transactions Annually
Based on 50 Customers, Avg. 20 Staff (1000 Users/Endpoints)
250 Transactions
Estimated Hours Per Transaction
Total Labor Required for Each Transaction
2.0 Hours
Range of Labor Costs Per Hour
Variance from $35,000 to $95,000 + Overhead
$25/hour to $68/hour
Total Annual Cost (All Transactions)
# Transactions x Time x Hourly Cost
$12,500 to $34,000
Potential Savings w/ Good Process
High - Low
$21,500 Wow!

27. TRUE COST OF A NEW HIRE
New Hire Efficiency Time & Cost of a New Employee
Efficiency of New Hire Due to Bad Process
Based on $60,000 Fully Burdened Salary, Level 2 Engineer
80% @ 4 Weeks to 80% @ 10 Weeks
Hours Wasted Due to Bad Process
Time Spent Training, Researching, “Shoulder-Tapping”
98 to 272
Setup Cost for New Employee
Hours Wasted x Hourly Cost ($43/Hour) + Opportunity Cost
$12,642 to $35,088
Potential Savings w/ Good Process
High - Low
$22,446 Wow!

28. THE PROCESS VORTEX
Area of Waste Potential Annual Savings
(1000 Endpoint MSP)
Time Variance
Variance in Time Required for Common Tasks
$19,350
Labor Costs
Tasks Requiring Level 1 vs. Level 2 vs. Level 3 Engineer
$21,500
New Hire / X-Training
Assuming Single New Hire @ $60K Salary
$22,446
Potential Savings w/ Good Process
High - Low
$63,296 Wow!

29. QUESTIONS?
Chris Day
CEO, IT Glue
cday@itglue.com