Blog | September 5, 2012

Is Your Hybrid Managed Services Business Model Aggravating Your Customers?

By The Business Solutions Network

As I've been talking with networking, storage, and managed services vendors and MSPs about trends they're seeing in the channel and getting feedback on Business Solutions' editorial coverage plans for 2013, I've noticed a common theme emerging to my question: "What are the top challenges MSPs are wrestling with?" Everyone I've spoken with is talking about the hybrid business model that's resulting from break-fix companies trying to make the transition to a recurring revenue business model.

I'm seeing three scenarios playing out right now in the IT infrastructure channel. Some VARs are spinning off separate businesses that are focused on selling IT services instead of IT solutions. Another option I've seen, and we've covered recently in Business Solutions magazine (see "Sell Managed Services Without Making Break-Fix Exceptions") is VARs that make the decision to completely transform their businesses to a managed services model. Cory Carson, CEO of Computer Doctor describes this transition process in this month's feature story "30 Days To Double-Digit Growth." I strongly suspect, however, that the vast majority of IT infrastructure solutions providers don't fall into either of these first two categories; rather, they fall into a third category: the hybrid business model. In this model, channel companies try to maintain break-fix sales and managed services sales.

So far, I haven't talked to anyone in the hybrid managed services category that's doing well. In fact, all the VARs I've talked to that eventually made the decision to go all-in with managed services did so because they nearly wrecked their businesses trying to have it both ways.  Besides the two stories mentioned above, I just interviewed Dyrand Systems' managing director, Ed Anderson for a case study, which will appear in our October issue.  He shared with me that his company's attempt to have both a break-fix and service business model resulted in broken customer relationships on both sides of the business. Others have shared with me that their sales process became too complicated and they couldn't figure out how to incentivize salespeople in such a way that the salesperson would ever pursue a subscription sale with as much passion as big CapEx install sale.

If your company is in this latter category, I'd love to hear from you and to get some insight as to how you're doing that -- especially if you have a different perspective. Specifically:

1. How do you pay salespeople for a break-fix sale vs. a managed services sale?
2. How do you manage your technical resources to accommodate both business models?
3. Is this a temporary solution or do you plan to keep it that way for the forseeable future?

As we start planning our 2013 editorial coverage, I can see this becoming a topic that will be worth delving into more deeply.