Managed Services as a Growth Catalyst

Managed Services is one of those offerings that we don’t know quite how to categorize and for different organizations (and industries) it may live in different functions. Managed Services may or may not be a revenue line item. Historically, managed services were originally associated with outsourcing a specific IT function, such as network management or application management.

But I’m going to take a different point of view:  Managed Services is one of those capabilities every B2B SaaS organization needs to have, or at least seriously examine as a catalyst to MRR growth, customer satisfaction, retention and a key ingredient to converting new sales. This principle is highly relevant for increasingly complex SaaS and Fintech solutions. 

However, even for the most ardent product-led SaaS companies at the low end of the price point scale, you’ll undoubtedly find a task, business process or recurring higher context level of expertise that many customers would love to offload. 

In my experience, well architected managed services:

• Have Attach rates of 80%+ 

• Operate at unit margins of 20-40%

• Revenue halo effects of 2-4x

• Product line attrition rates below 3%

• Contribute to significant improvements in Customer Sat and NPS, 

• Are the difference maker for lighthouse wins (conversion)

Most likely, your customer success teams (as well as  CS, revOps teams) are already doing some sort of “managed service” , especially in higher growth product segments. As my friend and colleague Matt Marino points out in a recent post no function has seen scope creep like Customer Success. One segment which repeatedly blurs the line between in-scope support and additive service, is the intersection of product expertise, domain knowledge and business process enablement.

Defining Managed Services

Rather than thinking of managed services as “outsourcing”, view a managed service as “Augmented Expertise” for your platform. A managed service is most successful when it compliments your product / service, through a specific set of skills, product knowledge or industry expertise. 

• Managed Services are complementary and integral to your products and solutions. They are not simply business process outsourcing (BPO)  functions like a call center or first level support

• Managed Services are generally: a specialized process function related to your tech stack, industry expertise, or some sort of ongoing service offering (e.g. training, knowledge transfer etc.)

• Managed Services can bundle in “set up, training, and launch” and high touch concierge service. Some organizations build this high touch service into their brand, but others may find an opportunity to segment customer onboarding and activation from low/no touch to high touch.

• Managed Services may be provided  by a third party partner for a specific tech stack (e.g. Accenture / functional expertise on an ERP).

• Managed Services may require a new organizational home. Often it rolls up into Operations and reports into a Client or Professional Services function.

• Managed Services can, and may require service level agreements (SLAs) and Service Level Objectives (SLOs) to be viable for customer uptake. These can be binding with penalties for non performance or more perfunctory. An MS offering with  fair and transparent SLAs, can be a deal winner and sales cycle accelerant. Note:  I have spent countless hours with my internal Legal colleagues getting to “yes” on SLAs and SLOs for managed services).

Examples and details of what a “managed service” would look like, for completely different businesses are provided below. The key point is to recognize that providing augmented expertise to enable your customers’ success is applicable across different industries and business models.

Pricing Models & Unit Economics

You can start with looking at the cost /productivity side of the unit economics equation. Break down your unit of work for a specific task

• Unit of Work: Case handling (exception management).

• Unit measurement: Minutes per case handled

• Unit Productivity: # of Minutes per work day / the minutes per case handled

• # of Cases Per Day by Customer Profile

• Fully Loaded Cost of Labor

Other “units of work” -  may be  weekly or monthly consultations, product setting updates, or specialized consulting or training. Be sure to include the hours/effort required for preparation.

Pricing will vary based upon your business, product/service offering, and industry. Typical pricing models are flat fees, per unit fee (ex. Per case handled, per transaction monitored), or combination of both.

When developing your business case, ensure you break down your customer profiles (enterprise, mid-market, SME). As a stand alone revenue line item, managed services solutions will often hold their own. However, I recommend that your organization consider the halo (first, second derivative) effects of what a managed service brings. The first derivative effect is an increase in sustained utilization and throughput of your platform offering. 

Positioning, Packaging & Selling Managed Services

Managed Services may be offered as a discrete line item or offered with  higher tier solution bundles. It may be appropriate that a managed service is a completely separate product portfolio, with specialized sales and domain experts.

Key points for sales engagement:

• Sales teams should communicate that a managed service eliminates the need for overhead, hiring, training and upskilling. Managed services can help customers achieve their goals much more quickly and with a high probability of success, leading to increased ROI.

• Provide an option to transition the MS over to the client after a period of time, including knowledge transfer.

• Managed Services should be sold as a “solution”, and not hours worked or number of Focus on what value is enabled vs. how much work is done by the MS teams.

Operations: Staffing and Scaling.

As mentioned, many organizations may already be doing some informal “managed’ service. Organizations need to stand up a separate team of specialists for the managed service. Having existing teams (e.g. Customer Support)  deliver MS services could be feasible (but not advisable) as a pilot, but a managed service is a distinct solution, with its own processes, skills and most importantly, customer expectations.

Managed Services will reside in either a delivery function (e.g. client services) or be placed within Customer Support organization. As organizations mature and the MS function grows (revenue, customer impact) the function may have its own organizational support structures.

We would recommend that MS staff be FTEs and fully ingrained in the business, its culture and its strategic direction. Using supplemental resources, such as a business process outsource (BPO) partner is feasible for certain types of managed services, but the operating framework needs to be managed ultra carefully. Dedicated work teams, management, and service level structures with the BPO partner are musts.

Managed Services can and do scale. In a previous organization, we started with one managed service expert, a desk, and several customers needing augmented expertise. Today that function is a 24/7/365  organization with footprints in the UK/EMEA, Latin America, Asia Pacific, and the US. It is a strategically important asset for a global fintech provider and one that has grown and expanded its scope with a stacked roster of Fortune 1000 customers in the portfolio.

Potential Impact of GenAI: Who needs a Managed Service anymore?

You can make the point that GenAI will automate the “expert” - and eliminate the need for any human based supplemental support. In theory, this is true (as is one day living on other planets, which in theory is also viable). But the practicality is that human oversight and higher level contextual decision making will be complemented, but not replaced by GenAI, especially in more complex solutions and regulated industries (personal data, healthcare, security).

GenAI has the capability to make a managed service expert more productive; so instead of supporting 15 level enterprise clients, that expert might support 2x as many accounts. In the near term, GenAI will enable that MS expert to make better recommendations, work more efficiently and provide greater levels of insight than she or he is able to do today.

Bottom line; in the near to medium term, GenAI supports greater profitability and scalability for managed services - but does not replace them. In the longer term, certain levels of expertise and “recommender” capabilities can be delivered by GenAI, but with human oversight and guidance.

Examples of Managed Services

We’ve provided some examples of what managed services might look like. 

Example # 1 B2B Payments Risk Management: 

A  B2B Fintech provides a global  invoice payments platform managing payables with average payable value of $40,000. One of its key functional offerings is to automate invoice payments to overseas suppliers. Certain risk, compliance checks and exception handling of failed payments falls to internal staff. A managed service could be a valuable offering for organizations that struggle to fill that type of role, or find it too burdensome. The portfolio of MS offerings could be:

Risk identification and assessment: assist customers identify and assess financial risks using a variety of methods, such as risk workshops, risk surveys, and data analysis.

Risk monitoring: monitor risks on an ongoing basis to identify changes in risk exposure. This can be done using a variety of tools and techniques, such as risk dashboards, risk reports, and key risk indicators (KRIs).

Risk mitigation: Help customers develop and implement risk mitigation strategies to reduce the impact of financial risks. This can involve a variety of measures, such as risk avoidance, ongoing education, risk reduction, and risk transfer.

(A  summary of what a managed services portfolio for a  B2B payments platform could look like developed by NoodleHive AI, a growth insights engine we are developing. https://noodlepost.com/ip/shared/3a46f6cf-e47e-4792-9b3e-17050a7ba1ed )

Example # 2 Cybersecurity ZTNA  Provider for Mid to Enterprise Market: 

Your organization provides an Zero Trust Network Access (ZTNA) solution for mid to enterprise level organizations in financial services, healthcare and government. You’ve noticed that although your solutions are in demand, there are challenges in getting  customers skilled up and activated. 

 A managed service which includes deployment, configuration and ongoing management would alleviate the burden of activation from customers, while simultaneously providing them a path to bringing in-house as cycles and resources become available. Key benefits of the MS solution:

Reduced costs: Customers avoid the costs of hiring and training staff to manage ZTNA solutions.

Improved security: Customers benefit from the expertise of a managed service provider that specializes in ZTNA security.

Increased efficiency: Customers focus on their core business while the managed service provider handles the day-to-day management of ZTNA solution.

Scalability: Customers easily scale their ZTNA solution up or down as needed.

Compliance: Customers ensure that their ZTNA solution is compliant with industry regulations and best practices.

(Proposed details for managed services for ZTNA solutions can be found here https://noodlepost.com/ip/shared/0f330b2d-81f9-4cc1-a98f-074b094cb782 )

Example # 3 Case Study:  HR & Payroll SaaS provider for SMBs

As we mentioned, managed services aren't just for enterprise customers requiring dedicated support and expert service augmentation. Bambee a U.S.  provider of HR Management, Compliance and Payroll solutions for Small and Medium sized Businesses (SMBs) is a good example of managed services for Product Led Growth platform. The company launched a “Talk to Bambee” campaign by providing dedicated HR and Payroll “managers” for their SMB clients.  According to their website Bambee will provide you with a dedicated HR Manager, HR coordinator, and Business Manager. We'll give you the best of both worlds: HR-compliant services with support from your dedicated HR team and payroll outsourcing that saves you time.”

What Opportunities Exist for Your Platform and Managed Services?

A key focal point on determining whether managed services is appropriate for your business, is looking at time to activation and “depth” of utilization of your feature set. Many times, lack of domain knowledge (risk handling, security protocols, or HR compliance) is a roadblock to activation and your customers fully realizing the value of the solution set. Managed Services can be hugely successful in helping clients realize more value from their relationship with your organization.