Managed Services ... With A Twist

What are managed services? Most often, you could say that managed services means proactively managing any aspect of a business to provide uninterrupted service. Such services
typically are paid for on a monthly subscription basis. Common managed services include network monitoring, patch management, hosting e-mail, and off-site backup services. Today, MSPs are popping up everywhere, as the model is popular for a number of reasons. The benefit to customers, of course, is dependable service at a cost lower than doing it in-house. The benefit to MSPs is reduced operating costs and travel expenses while receiving consistent, often monthly, revenue. Today, the managed services model is becoming widely accepted, creating a competitive market for those looking to be successful MSPs. Deka Technologies is one MSP that's finding particular success servicing the SMB market using a model unique to the industry.

Managed Services Foundation: Become Your Customer's IT Department
According to Travis Earls, president of Deka Technologies, his company's success comes from mixing traditional managed services with an on-site component. Earls calls his business model a 'human touch' approach to managed services, and he feels that the approach is his company's differentiator. What this means is that Deka spends considerable amounts of time on-site to service a company's IT — in essence becoming that company's local IT department. The odd part of this approach is that it is contradictory to what many MSPs want to maintain, namely reduced overhead by remotely servicing a client. Indeed, Deka sends technicians on-site to clients regularly, sometimes daily.

When it comes to on-site support, the frequency and level of support depends on the customer's need. Nothing groundbreaking there, right? Well, whereas some MSPs lock customers into levels of support for the term of a contract, Deka is almost always willing to let customers change support needs, even if downgrading. "We have some customers who may initially think they need one of our support technicians on-site three days a week," says Earls. "They may eventually feel they need us only twice a month. In those instances, we will adjust their service level and fees without penalty." Earls does have one stipulation. A customer desiring a change must have been a customer for at least 60 days before they can change. While Deka might lose money with this policy, Earls feels it's more important to keep customers happy. In fact, in five years of offering managed services with this model, Deka has lost no customers due to poor performance or contractual disagreements.

Deka's on-site presence also extends to a phone support hotline. "While it's common for a Fortune 500 company to have its own call center for first-level support issues, most SMBs can't afford one at all," says Earls. Therefore, as part of its services, Deka provides a 24/7 help desk via call center. Currently, Deka has 6 full-time people dedicated to supporting 86 customers in four states. In addition, when Deka's on-site technicians aren't on location at customer sites, they help provide help desk support. This means that there are 6 to 10 people covering phones at any given time.

Earls says that having the on-site support techs answer the phones helps Deka in many ways. First, by answering calls, support technicians get an understanding of the problems all customers are facing, not just the ones assigned to the support technician. "This also is a way to train our people on different infrastructures and help them learn things they haven't seen," says Earls. He adds that covering the help desk also gives support technicians more of an appreciation for what the help desk does, creating a more team-oriented atmosphere amongst employees. "Also, by having support techs cover phone support, we don't have to hire extra people for the help desk, keeping costs low for customers," explains Earls. In fact, to keep costs low and maintain contact with his customers, Earls occasionally works the help desk himself.

According to Earls, there's no major trick to selling managed services built on this model. "SMBs aren't confident with the traditional MSP model of paying for equipment sitting unseen in someone else's data center," says Earls. "Still, you have to understand that many times customers are leery to turn control of IT over to an unknown entity." For this reason, if the situation warrants, Earls will agree to give customers a free trial. "If I think a customer is worth it, I don't have a problem proving our value with a 60-day trial," he says. "In fact, we've given our services away six times." In each case, the result of the trial was a new customer, each averaging $42,000 a year in services.

Managed Services Must-Have: Hosted E-Mail
While Deka offers such managed services as on-site IT support, remote monitoring, and backup services, one of the company's most popular and revenue-generating services is hosted Microsoft Exchange. Like most of its managed services, hosted Exchange appeals to many of Deka's SMB customers due to the affordability of the service. It took about six months to install the infrastructure required to offer managed Exchange. An initial investment of $15,000 bought Deka four HP servers, configured in two clusters for redundancy. Deka also invested in a DS3 (digital signal 3, or T3) data connection. A DS3 can handle the data equivalent of 28 T1 lines. The point? Lots of bandwidth.

Luckily for Deka, it had one customer three years ago that was willing to act as the first subscriber of the hosted Exchange service. To help offset the cost of adding the new service, Earls discounted the customer's 24/7 server and network monitoring fees, as well as on-site support costs. "We needed a successful implementation to show other customers we could offer the service effectively and efficiently," Earls explains. Deka ran a 30-day test with five users from the customer before moving the rest of the client over to the hosted Exchange system. In all, it took Deka three months to go from no hosted Exchange service to a tangible service ready to sell. Today, the company has its hosted Exchange service split into three levels. The basic level costs customers $10 per user. Midlevel is $15 per user, and the 'Executive level' costs $25 per user. The levels are split based on functionality and storage space. For instance, BlackBerry Enterprise Server capabilities and unlimited storage space fall into the Executive level.

To see how another VAR is selling VoIP to SMBs, go to BSMinfo.com/jp/3258.

The Future Of Managed Services: Hosted VoIP
While all of its services contribute to Deka's success as an MSP, Earls feels that interest in hosted VoIP is gaining momentum. In today's competitive economy, using the latest VoIP software and hardware can give customers the impression that a small company is as advanced technologically as a large company. Additionally, whereas a traditional VoIP system might cost a business $30,000 in hardware and then require ongoing maintenance and administration, hosted VoIP can cost a business as little as $40 a month as a service subscription, with no great initial expense.

If you're scratching your head wondering what it takes to even begin selling hosted VoIP solutions, Earls has some good news. He says that despite his lack of IT knowledge, he managed to teach himself the technology. "About a year ago, I downloaded free IP-based PBX [private branch exchange] software called 3CX," he says. "In one day, using references freely available online, I had phone calls coming in and out of the IP PBX system. Only three months later, I sold the 3CX product in a five-user installation, increasing my revenue from that customer by $200 a month."

While achieving basic functionality in one day was a major victory for Earls, he cautions that he still had much more to learn. In fact, he'd recommend that VARs hire someone with a background in telecommunications or experience with an ISP (Internet service provider). "The biggest cost savings a business can achieve occur when VoIP is delivered 100% through a data line," he explains. "Today, many VoIP implementations are delivered via a PSTN [public switched telephone network] and gateway, which basically means the business still has a phone line they're using and paying for." To remove that phone line and switch to 100% data requires some specialized knowledge. Earls says that while many people are proficient at working with hosted IP PBX software that runs over traditional phone lines, having someone with telecom and ISP experience who knows the intricacies of data will ensure customers get a VoIP solution that provides reliable and high-quality service. Today, Deka relies on Linksys and 3CX for its hosted VoIP solutions.

The combination of on-site support, as well as the many hosted and managed services that Deka offers, equates to an 18% increase in sales revenue for the MSP in 2008. Deka isn't alone. In fact, according to The Insight Research Corp., the U.S. managed services market will grow from $34.4 billion in 2006 to $93.9 billion in 2011. That's a CAGR (compound annual growth rate) of 22%. Hopefully, your business is seeing the same amount of growth.