Magazine Article | December 1, 2005

Increase Data Center Revenue By Offering Complementary Services

Adding complementary networking and storage technologies to its service offerings is helping this VAR grow at 18% to 20% per quarter.

Business Solutions, December 2005
Written by: Megan Burns
Select Security Partners Carefully

With several vendors in the market offering managed security services, how do you know which one is the right one for you to partner with? That was the question David Jones, president and CEO of Peak 10, Inc., faced last year. Many of Peak 10's customers needed security services to protect critical data and comply with government-imposed regulatory requirements such as Sarbanes-Oxley and Gramm-Leach-Bliley.

Jones began by evaluating features and functions of products offered by different vendors, including ProtectPoint. He specifically evaluated each vendor's managed intrusion detection and prevention, managed firewall, and vulnerability scanning solutions. Peak 10 chose ProtectPoint partly because of the vendor's approach to security. "Its solution matches our sales approach and strategy," states Jones. For instance, some of the questions Peak 10 asks potential customers include: How critical is the data you need to protect? What support staff do you have? What kind of attacks are you subject to? How flexible does the solution need to be? What rules do you need? Based on what its customers were telling it, Peak 10 decided to use ProtectPoint with some test customers. The vendor allowed the VAR to offer security services a la carte, just as Peak 10 does with its other network and data center services.

This flexibility was important for an insurance company preparing to go through a compliance audit for Sarbanes-Oxley. "It needed to show it had the appropriate levels of security on its applications," says Jones. "By using the ProtectPoint services, we were able to sell the company the levels of security it needed to meet the audit. As it has grown over the past year, it has needed additional services, and we were able to add ProtectPoint's content filtering and firewall services."

Peak 10 has seen increased demand for the managed security services it is offering. While many customers use the services on their networks at the data center, some are expanding them to their physical locations as well. "As more of our customers use our Metro Ethernet service, they are adding on the security solutions at each end," says Jones. Security continues to be a big concern for end users, and Peak 10 is now positioned to meet more of its customers' needs.

For more than 15 years, Business Solutions has promoted the concept of offering complementary technologies and services. Not only can you make more money by offering total solutions and being a full-service VAR or integrator, doing so is also the best insurance against commoditization, product obsolescence, and economic downturns. Peak 10, Inc. is one example of an integrator that has added services to complement its core offering and is reaping steady growth.

At its inception in 2000, Peak 10 offered standard data center services, such as co-location, redundant bandwidth, and enterprise hosting. However, David Jones, president and CEO of Peak 10, wasn't satisfied with relying on those services for growth. Over the next five years, Jones continually evaluated market demand for technologies related to data center services and added those that are complementary to his company's original business. Now, Peak 10 operates six data centers in five markets (two data centers in Louisville, KY and one each in Tampa, FL; Jacksonville, FL; Raleigh, NC; and Charlotte, NC). The company's offerings have expanded to include server hosting (monitoring and management), Metro Ethernet, managed security services, disaster recovery, enterprise messaging, network monitoring, data protection, and storage solutions. As a result, Peak 10 has grown at a measured pace of 18% to 20% per quarter since its beginning.

Determine Which Services Complement Your Network Solutions
Peak 10 is very strategic when choosing which complementary services to add to its offerings. In 2000 and 2001, Jones watched as many of his competitors launched complete end-to-end services before they established that there was enough demand to support those services. As a result of their poor planning, many of those companies went out of business.

To avoid the same fate, Peak 10 listens carefully to the types of problems its customers are having. The VAR's consultative sales approach helps uncover these underlying issues. "Often, customers approach us thinking they need a certain product or service. As we talk with them and ask questions, we realize they're trying to solve a different problem," explains Jones. When Peak 10 notices a recurring theme in the solutions its customers need, such as intrusion detection or managed firewalls, for example, the company will investigate adding that service to its line card.

After identifying a potential new service, one of the first things Peak 10 evaluates is whether the service complements what it already offers. "Offering a high-quality, secure data center infrastructure is core to everything we do. New services must scale and build on that base so we maintain our expertise and credibility," says Jones. When Peak 10's data center customers began looking for ways to secure their networks and applications, the integrator knew that offering those services would be a good fit. Peak 10 was already securing its own data centers and monitoring customer networks, so there was a foundation of related knowledge.

Jones also evaluates the scalability of a new service before deciding to sell it. The new service should be able to scale across all five of Peak 10's geographical markets. Since Peak 10 serves customers that range in size from SMB to Fortune 1000, the service also must scale to fit those customers.

Should You Partner For Complementary Network Services?
Once Peak 10 decides a service has sufficient market demand, relates to what it already offers, and is appropriately scalable, the integrator decides whether it will seek a partner to offer the service or develop in-house expertise. Jones begins by looking at the services Peak 10 is already offering. "When we began offering monitoring and management of servers, systems, and networks, it was clear that, based on our existing data center services, we should offer the monitoring and management services ourselves," illustrates Jones.

Next, Peak 10 evaluates the cost of offering the service itself or through a partner. These costs include building additional infrastructure versus using a partner's existing infrastructure. Jones considers whether his staff has the necessary expertise to launch and support the new service. The more specialized the service is, the more likely Peak 10 will work through partners. "When we decided to offer managed security services, we knew we didn't have the security expertise in-house to develop the service in the time frame we felt was necessary. We had simultaneously sought out companies to partner with to meet our customers' demand," states Jones.

When Peak 10 evaluates potential partners for a complementary service offering, it evaluates both the company and the service. The VAR critiques the features and functionality of the service to ensure it fulfills customer demands, as well as planned enhancements to the service. Then Peak 10 examines the level of service. "It's our name our customers see, so we expect our partners to offer the same high level of service as we do with our in-house services," emphasizes Jones. Finally, Peak 10 checks that it and the potential partner are targeting the same type of customer and have a compatible operating culture.

Just because Peak 10 selects partners to offer a service doesn't mean it will always partner for that service. The VAR recently brought its backup and restore service in house after offering that service through a partner for three years. After a periodic evaluation, Jones discovered Peak 10's costs were equal to or greater than what it would cost the company to offer the backup and restore service itself. One reason was that Peak 10 had already built the in-house backup and restore expertise it would need. "We chose to offer our own storage hardware several years ago, so we already had the infrastructure in place," recounts Jones.

In its operations center in Charlotte, Peak 10 had a high-end engineer on staff who was well versed in tape systems. The engineer met with the partner and coordinated the transition from the partner's service to Peak 10's in-house service. Over a four-month period, the engineer and partner worked to run backup and restore trials, including running the services in parallel to ensure the systems would convert. "Throughout the process, we maintained a positive relationship with the partner. Today, if we have an issue our staff cannot handle or a highly specialized service we are not equipped to provide, we can go back to our former partner for help," adds Jones.

Offer Complementary Data, Network Services A La Carte
When selling complementary services, a consultative sales approach is especially important. A VAR cannot simply walk into a customer's office and tell them they need a specific solution or show the customer a list of services and ask which they want. "It's important to ask the customer about the problems they're experiencing and base your recommendations on what they tell you," advises Jones. The worst thing a VAR can do is recommend a solution that isn't the right fit for the customer. "Walking away from business is not always a bad thing," he adds.

Another strategy Peak 10 uses when complementing its data center offerings is to provide services a la carte. Many of Peak 10's customers started with basic data center solutions, then, after they became comfortable with Peak 10, they added other services that address their specific needs. Of Peak 10's customers, 20% to 25% use a complete end-to-end services package, but 95% use some level of managed services. Jones believes that offering flexible solutions helps build trust and loyalty with its customers by allowing them to purchase only what they need.

It is also quite common for the VAR's customers to add services as they grow. Between 40% and 50% of Peak 10's revenue is from existing customers, and it rarely loses customers. "Many of our customers started with us when they were smaller firms. As they grow, they evaluate adding infrastructure and services to protect their data and applications," explains Jones. Peak 10 explains what a customer needs on the front end, and as the customer grows and can afford additional services, the VAR helps it become more efficient by adding enhanced services.

By offering services that complement its core expertise in data centers, Peak 10 is continuing to grow steadily quarter after quarter. As its customers look to it as the one place to go for IT services, the company becomes more of a partner to its customers. Jones plans to continue to listen to the market and evaluate new services that integrate with the services Peak 10 is already offering.