Managed services lead MSPs to closer customer relationships—and healthy hardware sales.
By Eugene Grygo
It may seem counterintuitive, but selling managed services can yield significant hardware sales. The added sales are a direct result of cultivating deeper relationships with customers.
For many solution providers, managed services represents a complementary opportunity to challenging hardware markets, says Renée Bergeron, Ingram Micro's vice president for managed services and cloud computing. "As we know," Bergeron says, "profit margins on services are higher because you are selling business value."
More important, MSPs serve as clients' lifelines to a functioning IT environment. "As the provider of the managed services, you are well positioned to take on any hardware revenue," says Bergeron. MSPs have expertise in selling hardware and software that can be leveraged for this lifeline support.
Keeping end users' needs prominently in mind, Platte River Networks, a Denver- based remote monitoring provider, is converting approximately 100 customers to 24/7 network monitoring services over the next six months, says David DeCamillis, head of business development at Platte. The company embraced the services model this past August and found it "allows us to bundle our services and make them more cost-effective and affordable for customers," he says.
"Previously, we were using an on-site model, and now we're doing a combination of on-site and 24/7 monitoring of networks," says DeCamillis, who adds that Platte maintains a strong presence among customers. Absent MSPs risk losing business. "It's important to stay in front of the customer, to be in the environment, and to know what's going on there. You can't get that from remote monitoring alone."
In fact, MSPs have a critical role to play in their customers' IT strategizing and hardware recommendations, DeCamillis says.
"If we're not involved in those recommendations, it increases our risk of having network issues," he says. "Even if a customer buys the hardware separately from us, we're still blamed for that downtime because we're their IT company and we're managing it. I'd rather put my neck on the line, make the recommendation and make sure they're getting the correct hardware."
Turnaround in 2010
Getting more involved with customers can lead to surprises, as Jon Nitto, president of The RetroTechs, an MSP based in Atlanta, learned.
"For the past two to three years, it's certainly been heavier on the services side in terms of overall percentage of our business," Nitto says. "For 2008 and 2009, hardware sales were down significantly." Hardware and software sales constituted 30 percent of total revenue for those two years. However, in 2010, RetroTechs is on track to double its hardware sales over 2009. "This year, hardware sales represent 53 percent of our revenue," says Nitto, "a welcome bump to the bottom line." Managed services sales continued their steady ascent during 2010, he adds.
In 2011, RetroTechs will target a revenue split of 60 percent managed services and 40 percent hardware and software, Nitto says. The company also will advance its customer ties.
"The engagement level is intimate—I know more about my clients' businesses today than I did three years ago and that trend is increasing," Nitto says. "As we get smarter about our clients, we can better tailor our technology solutions, aligning them with their business goals. Without that relationship, that's hard to do."
About the author: Eugene Grygo has been covering the IT industry since 1987.
SOLUTION PROVIDER MENTIONS Platte River Networks, www.platteriver.com The RetroTechs, www.retrotechs.net
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