Magazine Article | November 15, 2010

Industry Perspective: Drive Higher Profitability With Hybrid Sales

By Gennifer Biggs, Business Solutions magazine.

Balance is important in life, both on a personal and professional level. It is also key in the business world, which is becoming clear as many MSPs realize that perhaps they shifted too far to the services side when that recurring revenue model gained popularity a few years ago. Today, businesses that moved to a pure services model are starting to feel pressure from competitors that continue to offer a mix of services and products, and that pressure is coming in terms of lost customers and lost revenues. "There was a shift in the last 15 years or so toward services-focused IT practices — managed services — and it was valid that businesses moved that way to take advantage of recurring revenue, especially as margins declined on technology products," explains Patrick Burns, director of product innovation at Autotask, an IT business management software vendor long involved in the managed services space. "We don't question that scenario, but we do question the wisdom that there is no growth opportunity, or greatly diminished opportunity, in product." Burns explains further. "On the services side, you can reap higher margins, and with product, you see higher revenue, but typically at lower margins. When we look at the hybrid model, we see a higher blended profit margin than with product alone, and higher top line revenue that with services alone. It's a win-win."