Q&A: Why Aren't You Selling Managed Services?

From a VAR's perspective, what are the benefits of offering managed services?
Barb Miller, VP of government, technical, and integration services, Tech Data Corp.: There are many potential benefits VARs can realize from a successful managed services practice. First is generating regular recurring services revenue they can accurately forecast for themselves. In addition, by taking over more, if not all, of their customers' IT functions, a managed services provider is a much more strategic partner to end users, creating stronger relationships between the VAR and its customers. That leads to greater insight into a customer's IT needs and new sales opportunities.

Justin Crotty, VP of services, North America, Ingram Micro, Inc.: The benefits of offering managed services revolve around profitability and efficiency improvements in a VAR's businesses, as well as improved customer satisfaction or service levels. The tools, processes, and delivery methodologies that VARs now can employ to deliver managed services are all aimed at improving their ability to service clients in a more efficient, more profitable way, and with higher quality than traditional labor-based IT services. Another obvious benefit of offering managed services is the ability for VARs to differentiate themselves and the specific offerings they craft to take to market.

Paul Constantine, VP of solutions and services, ScanSource, Inc.: The most obvious benefit of remote monitoring and management as a service offering is proactive notification of potential issues. VARs can take action while the problems are still small, making it possible to resolve issues more efficiently. In addition, by using reporting tools, remote monitoring and management technology gives VARs the ability to document the kind of service they're providing. VARs can meet with customers regularly to build more value into support contracts. Through the logging of proactive responses to problems, VARs can move from fixing problems to documenting valuable uptime. Finally, these services allow a VAR to differentiate itself during the sales cycle. The application of this technology is new in certain spaces (point of sale). For the foreseeable future, selling this will be a huge benefit.

What are the disadvantages of offering managed services?
Miller: Like any new business model or emerging technology solution, there is a tremendous amount of education required. VARs need to train their own sales and technical staffs to look beyond a hardware-first mentality and adopt a services/solutions-leading sales and support model. There also is a lot of end user education VARs need to do to create an accepting market for managed services, which is essentially a new model for technology acquisition, consumption, and use.

Crotty: Common issues that VARs run into when delivering managed services include a greater need to help the client understand the specific problems being solved and the activities that the VAR is undertaking in the management of a customer's infrastructure. Often, with managed services, the infrastructure is running much better, and the customers begin to question why they are paying for IT support if everything is working properly. The VAR must ensure that it is carefully outlining exactly what it is doing and why that improved functionality is a direct result of the activities the VAR is undertaking.

Another potential disadvantage is the build vs. buy decision a VAR must make when getting into managed services. Will the VAR build the data center, NOC (network operation center), and help desk or outsource them? Most VARs choose to outsource those capabilities and focus on their core technical competencies. Those VARs that choose to build those capabilities in-house typically find themselves burdened with higher costs and overhead than those who outsource to competent partners for commodity infrastructure components.

Constantine: One disadvantage of offering managed services is that you can't start using this technology and not change some of your processes. For instance, you'll need to change your support process, which in the past was a purely reactive process. With remote monitoring and remote management, your staff will come into work and see a list of things that may have happened overnight. They need discipline to check customer alerts in the morning and fix them immediately without waiting for the call. There also are sales process changes. The sales team has to understand the values and benefits of the service and how it differentiates the company. Another possible disadvantage is that, if improperly positioned to the end user, managed services can create unrealistic expectations. With remote monitoring and management, it's not going to mean they'll never have problems again.

What does it take for a VAR to get into selling managed services?
Miller: VARs completely transforming their business models to focus exclusively on managed services, including building their NOCs to perform remote monitoring, face considerable investment in infrastructure and other resources. VARs leveraging a hosted delivery model may not require as much infrastructure investment, but they still need to reconsider how they train and compensate their sales force in order to drive a successful managed services business.

Crotty: A vast majority of VARs can start selling managed services with little or no up-front investment in people or technology. So long as the services are folded into the VAR's offerings slowly and methodically, the VAR doesn't need to make any major changes to make these services work. Over time, larger changes to process methodologies and skills will be necessary to convert to a more robust managed services model, but those can be undertaken slowly and as needed, and there is much assistance out there in the form of best practices, peer groups, and industry information to assist VARs with this transition.

What are the commonly overlooked/underestimated aspects of managed services VARs should be aware of?
Miller: While there's a lot of talk about managed services tools such as remote monitoring, there are some fundamental business issues VARs must address. For example, financing is key. How do VARs finance hardware purchases for their managed services customers paying monthly fees? A solution available in the channel now is for VARs to leverage their leasing options from distributors.

Crotty: VARs often think they have to change their business model overnight. This simply is not the case. VARs should fold managed services into their services portfolio slowly over time. Offer one or two services initially, such as help desk and managed backup or antivirus. Get used to selling and delivering those. Then offer additional services as your confidence and understanding of the benefits grows. You will progress more confidently and have greater success doing it in this manner.

Constantine: The hesitancy to implement managed services stems from the changes the VAR is going to have to make to business processes. Also, it may be difficult to embrace a service that doesn't generate revenue for that day.

How important is it for a VAR to have thorough SLAs (service level agreements) for its managed services? What information should not be overlooked?
Miller: Established and clear SLAs are as critical for managed services providers as they are for traditional VARs. They need to make it clear to their end users what services are covered, how soon staff can arrive on-site if necessary, what additional charges may be involved, and what uptime (if any) they can guarantee.

Crotty: SLAs are critical — they should outline exactly what a customer can expect in a particular service and exactly what that service offers and does not offer. SLAs are not necessarily a guarantee, but they should define how resolution of problems will occur. SLAs are as much for the benefit of the VAR as they are for the customer.

What's the difference between a successful managed services offering and a failure?
Crotty: A guaranteed failed managed services offering is one that is never attempted, so get out and give it a shot. There are many options available to VARs today, and offering a managed service is not difficult. Take your new managed service to your best customers as a starting point for testing. Once perfected, take the offering to new clients.

Constantine: The most successful implementations occur when a VAR integrates managed services into its support contracts. In other words, don't try to sell managed services as separate stand-alone services. Simply make managed services part of the process, and add it into every contract by subsidizing the cost yourself or slightly raising the price. Managed services more than pays for itself through sales differentiation and help desk efficiency.