Many IT firms overlook the importance of a service catalog in growing an IT services business. The catalog is more than a convenient way to present your services to clients. It is the anchor for MSP sales and operations that drives both revenue growth and services profitability.
The chart shows this correlation. It is from a recent TSIA keynote presentation that highlighted the service catalog as a key success tactic for services companies. It shows the clear relationship between a service catalog and MSP sales growth. From my own experience, I can point to several reasons why the service catalog is so significant to MSP growth and profits.
It starts by creating focus. The process of developing a service catalog forces an IT firm to focus on what they really do. Until you list out your services, there is no boundary on what can be sold. Adding a “box” might sound like it constrains your sales opportunities. I found that going from a wild west approach to a formal catalog actually makes sales easier.
First, it establishes confidence with clients. Customers see your productized offerings and that implies expertise, commitment, and a proven delivery model. Your service may not be fully baked, but it is miles ahead of not having any catalog. An experienced IT client knows a service provider has certain things they really excel at, and the stuff in the catalog is the short list.
Once you have sales for the offerings in the catalog, you can promote those successes to new prospects. It lowers the risk for the buyer when they know that a specific service has been successfully performed for others. If you are shopping for an MSP, would you be more confident in the partner that has reference customers for their company, or the one that has reference customers for the specific Managed Widget Service that you need?
A good catalog can also instill confidence in the sales team selling the services. Like customers, a sales team is more confident selling services that are well defined and have been successfully delivered to other customers. Selling a managed service that is not well defined is a risk to their customer relationship. It can easily cause missed expectations. If the delivery isn’t smooth, they could lose a customer.
Incentives drive sales teams, and the service catalog is fundamental for sales incentives. Specific SKUs and product categories can be created for the services in the catalog. With SKUs you can easily add sales incentives – tiers or accelerators or spiffs for example – on a specific SKU or category. Sales attainment is nebulous to measure without SKUs tied to the incentives. This can cause uncertainty, and uncertainty is not good for sales. This is especially true for MSP sales where there can be a grey line between professional services, support services, and managed services sales. If a sales person is uncertain whether a sale fits that bucket, that may result in uncertainty and dilute the incentive affect.
Setting customer expectations upfront is crucial to service success and profitability. It is especially important to know what is not included in the service. Otherwise you end up with scope creep in the service delivery. That kills profitability. Service exclusions are typically listed in the contract fine print or technical service definition. From my experience, that is too late in the process. Expectations get set during the sales calls before anyone sees the contract. When exclusions are not addressed until contracting, customer expectations often have to be reset, causing sales friction. It’s worse if they are never addressed and result in customer satisfaction issues or services performed at a loss. They should be covered at a high level in the service catalog and shared upfront in the sales process. This sets the right customer expectation from the start for more satisfied, more profitable customers.
Reliable profit also depends on consistent execution. A well-defined service is fundamental to that — the scope and deliverables, the pricing, the SLAs, the exclusions, the repeatable processes. For me, these all tie back to the service catalog. That’s what sets the initial customer expectations. The catalog should guide the sales team to a defined service or package of services for a client instead of a custom service. A well-defined service has known profitability, or at least good estimates. The delivery cost of a custom managed service tends to be a much higher risk and inconsistent in profitability.
If you also track operations performance against specific services in the catalog, then the profitability of each service can be measured and improved. This performance data is critical for identifying issues with pricing and delivery efficiency. It can also identify activities being performed by the service delivery team that are out-of-scope compared to what is in the catalog. Profitability improves by using this data to adjust pricing, improve efficiency and refine the services over time. It all starts with a service catalog to anchor your MSP sales and operations.