Magazine Article | September 16, 2013

Big Opportunities In Managed Services

By Brian Albright, Business Solutions magazine

This cloud computing and application hosting services provider lands a unique project with a healthcare client that has a multimillion-dollar IT budget.

The continued expansion of hosted applications and cloud-based services has blurred the line between vendor and resellers. Increasingly, it is also blurring the lines between vendors, VARs, and their clients. Consider InsynQ, a provider of cloud computing and application hosting services. InsynQ is currently helping one large client virtualize its own application infrastructure, while simultaneously laying the groundwork for the client to sell its own managed application services.

InsynQ (a member of Dell’s PartnerDirect Service Provider Program) has been working with a large healthcare company that operates several dozen laboratory facilities nationwide to transform its distributed, on-premise application portfolio into a centralized, hosted infrastructure in order to reduce its IT support costs. The company also plans to turn its IT operation from a cost center to a profit center by offering access to a suite of hosted applications to the thousands of doctors’ offices that make up its customer base.

“This client has a large multimillion- dollar annual IT budget,” says John Gorst, chairman and CEO of InsynQ. “As part of their strategy to turn this into a profit center, they are going to go to their external customers and offer managed and hosted solutions out of their own data centers to those doctors’ offices.”

Client Becomes An MSP
The client will leverage InsynQ’s CloudRunner platform (which is being spun off into its own entity), which allows companies to provision desktops, provide application access, and manage data storage, along with other capabilities. InsynQ provided a solution to help them establish an internal app marketplace and delivery solution for their own laboratories and is helping the company establish its own managed services offering for remote managed services for doctors’ offices.

“The customer can manage its own cloud services using our platform,” Gorst says. “For companies that want to deliver Desktop as a Service or hosted apps as a service, we can get them set up quickly. We can plug an MSP into our platform, and they have a fully branded solution with all billing and delivery tied into a customer application marketplace.”

The client elected to set up its own server infrastructure and data center using Dell hardware. “We’ve put our CloudRunner platform onto the Dell infrastructure, and they will be able to deliver a virtual desktop that has any number of healthcare applications attached to it which leverages a variety of Dell Software solutions,” Gorst says. “They will have their own healthcare vertical app marketplace, made up of different applications they currently use and that the doctors’ offices use to manage their practices.”

For the healthcare client’s internal operations, the new hosted infrastructure will replace on-premise software deployments at the laboratories, including office productivity tools, lab testing software, and other solutions. InsynQ is working with the thirdparty software providers to package the solutions and integrate them within the marketplace.

“The customer could spend hundreds of thousands of dollars to build that marketplace,” Gorst says. “With our platform, they don’t have to worry about that.”

The client is expected to save close to seven figures in engineering services annually by centralizing its application infrastructure on the new cloud model. “That will reduce their engineering headcount so they can focus on level-one support,” Gorst says. “The level-two headcount will be reduced, and they are outsourcing all level-three support to InsynQ/ CloudRunner. They won’t have any payroll responsibility for that.”

For a per-user monthly fee, InsynQ also handles troubleshooting for both the applications and infrastructure. “Since we’re packaging those applications for delivery, we take 95 percent of the responsibility for support,” Gorst says. “We’re giving them a full suite of services.”

Doctors’ offices will pay a per-user, per-month fee to access the new app marketplace through the client. “The client will leverage their existing sales team, which sells lab services to the doctors, and they will rep the new hosted IT solutions to those customers,” Gorst says. “They already have relationships established with all of those clients.”

In fact, Gorst says there’s not much difference in the sales approach between traditional application offerings and managed services. “The only thing you’re doing differently is delivering the apps on a virtual desktop,” Gorst says. “You’re still doing the software integration on the back end, dealing with bandwidth, routers, and mobile devices. You can take a guy that is selling traditional services and move him into cloud-based sales very quickly. The biggest difference is, instead of doing this at multiple locations, you are doing it out of a single data center, and that’s where you make money. You centralize services.”

Tips For Services Pricing
Since InsynQ is working with a number of MSPs in addition to the healthcare client, Gorst shared some insight on services pricing. In the case of the healthcare client, “They can charge a premium per month because there are a lot of compliance and regulatory issues to deal with,” Gorst says. “If you are deploying complex systems like SAP or an ERP (enterprise resource planning) solution, you can demand a higher per-user fee for that. But for basic office/accounting/CRM solutions, for a typical SMB, it usually runs $55 to $75 per user, per month.”

Incentivizing the sales team to embrace this model can be challenging, but there are a number of compensation models that have worked successfully. “I’ve seen companies pay on the full contract or a percentage of the annual contract up front,” Gorst says. “We’ve modeled our own sales team on an annuity basis. They start at a higher base, because they’re not getting those big pops on commissions, but they are getting a percentage of that recurring revenue every month, which compounds. They build up an annuity base, and it takes a little while, but they climb up into six figures within 12 to 18 months. It can be challenging to get the sales team on board, but there are a lot of different ways to approach it that can make it work.”