7 requirements for a scalable vCIO offering

Posted by Denes Purnhauser on Jan 11, 2016 7:32:12 AM

In vCIO, IT management, MSP vCIO, MSP, Virtual CIO, CIO

requirements of the Virtual CIO service delivery
The MSP 2.0 model is catching fire around the world. Many MSPs have already started to design, sell and deliver vCIO services. Adding $2.000 - $4000 of vCIO monthly recurring revenue (MRR) to a current 40 seat $5000 MSP MRR is now doable but requires some preparation. We’re going to take a look at the requirements (which can be easily overlooked) of the delivery to make sure we make it profitable.

All seven requirements center around a common set of principles: realizable expectations, efficiency in execution, excellent communication, and transparency.

Let's see the requirements one by one:

1. Cycle based pricing

We’ve emphasized all along the proper pricing strategies of the vCIO... how and why to separate it from the MSP package (except for the vCIO Light type services that are boosted Account Manager or Technical Virtual CIO activities attached to the MSP package). The key is to put the defined vCIO activities into separate cycles, define the resource allocation for each cycle, then annualize the hours needed for the certain activity and divide it by 12 to arrive at a Monthly Recurring Revenue. Also for each and every activity the vCIO will do is a process and defined deliverables are set in advance. It is not a consultation on an ad-hoc basis. Rather there needs to be a clear, planned process behind every service we offer.

Example: We do a Quarterly Planning Session, a Project Review, a Selected Application Training and a Budget Review. These are the services we do every quarter, and altogether eat up 10 hours per quarter, or 30 hours per year. (We have just three quarterly cycles because the fourth is considered the annual cycle). Our expectation of hourly revenue for this (just for internal planning) will be $200. That means a budget of $6.000 budget for the year. Therefore, the MRR requirement for that will be $500. Of course, we add up the annual, monthly, and weekly activities as well in the calculation of the full MRR requirement for delivering this service.

Tool Hint: the given calculation sheet is used to create different plans for different sizes/scopes of vCIO plans. See what is and isn’t inside the package, and do "what if" analysis based on the given time and expected revenues.

2. Separated Ongoing and Project-based agreements

In the MRR pricing, we can only include ongoing services. Do not even start on projects without separate vCIO Project agreements. What we can do regarding separate projects in the ongoing plan is to manage a Project Portfolio...review projects from outside, report to the CEO, have a fixed amount of resource to coach, help internal people managing different IT related projects like application implementation and so on. That leads to predictability. Individual projects have to be managed individually.

Example: let’s say during the annual planning the customer has five projects: two of them are technical MSP focused projects, one is an Application Integration project managed by the vCIO, and the other two are smaller projects managed by the internal team. The responsibility of the vCIO is two-fold.  First is to make sure the projects are well defined and ready to go for both the vendor (MSP) and the internal team. This is part of the annual process, and the time is allocated ahead for those project kickoff meetings, planning and so on. The second responsibility for the vCIO is a secondary agreement that manages the Application Integration project. First, it manages the planning of the project and then the project management itself.

Tool Hint: the methodology and tool can give the best practices to maintain proper scope and clearly separate the ongoing and project-based activities. Doing both will allow us to leverage the synergy, while reporting will still occur separately.

3. Well defined services

Each and every service line item needs to be well defined over several properties. We need to  get an overview of what goes into the agreement and establish the needed skills within the service, the marketing and sales materials, tools being used and a time budget. As well the service cycles must be integrated.  To this end the Annual plan is going to be the base of the Quarterly Plans, the Quarterly Plans will include Monthly Progress Reviews, and so on, set up as a visible framework. The more specific we are in a service the clearer and more effective we can be both for the client and internally.

Example: The IT Strategy Planning Process is done every year. It takes 7 hours to complete and consist of three meetings on Preparation, Planning, and Finalization.  The defined deliverables based on templates are an IT Development Roadmap, Quarterly Execution Plan, and Strategy Governance Plan. There are nine steps in the process, with warnings and pro tips.

Tool Hint: gathering all services related to the vCIO is critical in setting the right expectations and ensuring we deliver what we promise. Create a framework and tie the services together.

vCIO Module Orientation
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4. Customized Agreements

When setting up our vCIO plans, we are going to present three or four different templates, like Light, Basic, Pro, and Enterprise. These templated vCIO service offerings are designed to ease the process of setting basic expectations. However we can’t think that our clients will sign up to any template precisely.  Each client is different and has individual needs. We want to avoid the need to generate custom pricing every time of course - it’s too much work to deliver ten different agreements to ten different clients - so we fine tune the templates and just slightly customize the parameters. We can take out one or two line items or change the needed time allocation for select services. The backbone of the contract will follow the template but will have room to conform to the individual client as well. Like successful automakers you offer a choice of a few sizes and models, and then further customize on a finer scale.

Example: A manufacturing company of 50 people is aligned with the Pro package ($2500 MRR), and they have two main locations.  The Annual Planning will be in one place but the because the team is separated the quarterly activities will eat up more time. We can allocate a little more to the quarterly activities and delete the user training entirely.  Overall we get retain the $2500 MRR with the same profitability by adapting the plan to the situation.

Tool Hint: in the tool the contract module allows you to customize the agreement based on the template. You can add and remove service line items and adjust the hours. Further since you may be utilizing junior vCIOs for some cases, or your CEO will be in on the Annual Planning, you can adjust the internal hourly rates line by line. It promotes the right expectations and strengthens your profitability.

5. Executable deliverables

You know you have the skills, tools and resources to operate a vCIO service at a high level. You are ready to do annual planning sessions, discovery business sessions and so on. But how precisely defined are those activities?  You don’t want to engineer a new launch system for every spaceship. Have a standard best practice with todos, notes, agenda items, templates to make it a smooth practice. If our deliverables are not specifically defined with properly set goals, even with these processes, we can neither manage the vCIO service nor the client involvement. The devil’s in the details.

Example: The vCIO goes to a manufacturing company and starts the Project Visualization workshops. He has the meeting agenda items in a template, the goal he has to reach, the time slot for the meeting and knows the next steps. The vCIO can explain the process quickly to the CEO, that they were just gathering basic information now, and the next step is to make the selection criteria for choosing vendors. The client likes that there is a process for that, sees the momentum and decides to let the vCIO initiate the planned service right away, and skip the next sessions.  Thus clear definition of deliverables reduces the disruption and time involved as a result of client-side disruption.

Tool Tip: Every vCIO service line item is well defined yet gives room to adapt for the vCIO. There are task lists, tasks, agenda items, meeting memos and template files. It has all the execution ability for the vCIO and full option to improvise if needed.

6. Transparent workspaces

A vCIO performs a very high-level management job that can be boring and not so visible sometimes. Negotiations with vendors, internal project meetings and keeping people accountable in weekly huddles are usually not seen by the client executives. Things are going to go well, and projects will be delivered on time, yet directors can get complacent and forget they were ever issues. We can’t just create value, but must also prove and demonstrate it consistently. Smart Client-facing Workspaces are the tool to keep our sponsors informed about our activities. An intelligent collaboration tool, it can send the essential digest to the upper level.

Example: The vCIO is finishing the monthly review and checks off the items done that week, and the projects completed. Then in the chat he applauds a job well done and thanks a particular member for the overtime last weekend. Then come the plans for next month based on the activity templates, and updates completed items of the IT annual plan. Now the system sends a daily digest to every team member showing the last items on the discussions, the completed todos, the updated memos and so on. The CEO has a quick glance on the incoming email and gets a reassurance that his vCIO is working 24/7 for his company.

Tool Hint: While most IT companies are using PSA solutions like Autotask and Connectwise, they are limited. These applications work best for IT teams and not for client executives. We integrate with Basecamp as a lightweight project management and collaboration application to make things light enough but still easy to manage.

7. Management Dashboard

Many IT managed services providers see offering vCIO services as a good idea, but without proper processes, vendors, and management maturity, scaling the standard MSP practice can still be a nightmare. If an MSP is able to reach 12-15 people level it can accommodate 1-2 vCIOs full time. Even with workspaces and processes in place some activities will become overwhelming pretty soon.  How can we stay efficient and overlook 10-20 clients with 1-5 projects and ongoing services for each without losing our minds or our clients? That’s why we need one dashboard for someone overlooking the vCIOs, and one for the vCIO as well to prevent overlooking the team's tasks and responsibilities.

Example: An average quarterly cycle defines 40-50 tasks easily for a vCIO. Having ten clients is going to scale up 400-500 tasks for the cycle.  We need a way to reduce the clutter, to hide the less pressing tasks and show what matters. We can slice and dice the dashboard quickly for individual accounts, contracts or projects. This gives us the peace of mind that we can handle that load of activities, and stay sane.

Tool Hint: We’ve designed a layer as an umbrella above every project, and ongoing workspaces for vCIOs to operate. We get every task, deadline and assignment there. At the start we see just the big picture, then as we delve into accounts and then to projects we drill down to the specific tasks and deliverables.


Take a moment to think of each of these 7 requirements not being in place. What if we don’t have the proper process for the vCIO, how would it affect efficiency, the management, the headaches and so on. How could each one enhance your current possibilities, profitability, and peace of mind? How could they help you build up a professional service company and distinguish yourself from the competition?

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