Magazine Article | July 18, 2013

Turn Your Customer's Downtime Into A Cloud Upsell Opportunity

By The Business Solutions Network

An MSP’s (managed services provider’s) data recovery solution saves a retail customer’s business from downtime and positions the MSP for a cloud backup upsell.

Like other managed services providers, not all of OMNIPOTECH’s customers are under a managed services program that would enable the MSP to proactively monitor and remediate their IT assets before IT emergencies occurred. Such was the case with Dessert Gallery, a high-end bakery customer with 60 employees and two retail locations, a retailer that has been a client of OMNIPOTECH’s since 2008.

Following a period of growth in 2007, Dessert Gallery contracted with the MSP to fix its wireless network and to make a few changes to its network. “We sold them a Dell server and virtualization licenses for a couple of virtual machines, including a StorageCraft on-site backup appliance with off-site disaster recovery,” says Robert Kyslinger, managing general partner at OMNIPOTECH.

The plan was for the MSP to continue expanding the retailer’s IT networking to include other necessities such as a cloud backup, so the bakery could be fully protected in the event of a natural disaster, such as a fire or a tornado.

Overextended IT Resources, And Inevitable Consequences
By the end of 2008, Dessert Gallery, like so many other companies, started feeling the backlash of a failing economy, and the retailer ended up closing one of its stores and laying off several employees. Additionally, its IT plans got put on hold.

Fast forward three years, and the bakery retailer’s business is once again starting to grow, but like so many other companies, it’s become accustomed to running bare bones IT and stretching its IT assets beyond the recommended life cycles — until one day when its primary business server crashed following a severe power surge. “We got a call on a Saturday morning from the business owner letting us know that their cash registers weren’t working,” says Kyslinger. “The bakery couldn’t access its point of sale (POS) system, and it couldn’t process credit card transactions.”

OMNIPOTECH engineers were unable to log in remotely to the server or StorageCraft backup appliance, so they had to go on-site to check out the situation. “Shortly after they arrived, they discovered the power surge not only fried the server, it took out a network switch as well. In less than two hours, OMNIPOTECH was able to replace the switch and get the client’s POS system back up and running on the backup appliance.”

The good news with the data restore was that the bakery lost only a few minutes’ worth of data and suffered very little downtime. The other good news was that the customer had business continuity insurance, which covered the cost of the IT equipment damage (around $18,000) and other damage caused by the power surge. The bad news was that the backup appliance didn’t have the processing power and capacity of their server that had just crashed, and it wasn’t designed to run the entire operation, so it performed more slowly than the original server.

Turn On-Premise IT Fixes Into Cloud Upsell Opportunities
OMNIPOTECH used the opportunity to convince the bakery customer to move its entire IT infrastructure into the MSP’s cloud data center. “When I have these kinds of discussions with clients, I often use the analogy of a backhoe,” says Kyslinger. “For example, I like to dig in my yard every once in a while, but that’s not a good reason to justify owning a backhoe. A lot of times businesses take a similar approach with their IT; they buy a server and storage beyond their current needs, and they hope they’ll grow into it someday.”

With the cloud, he says, customers buy only what they need now, and they can easily add more storage, licenses, and computing power as their needs grow. Also, the cloud offers a disaster recovery component that on-premise solutions can’t match. “Our customers’ data is stored in a data center that runs virtual machines from clustered servers. And the servers are connected to redundant SANs (storage area networks) to further reduce the chance of failure,” he says.

Within three business days of receiving the phone call from the bakery customer, OMNIPOTECH had a new server provisioned for the client in its data center, and it was performing cloud backups on the data. “We’ve worked alongside colleagues following the devastating tornadoes that leveled several homes and businesses in Joplin, MO, just a few years ago,” recalls Kyslinger. “We emphasize to our customers that it’s just a matter of time before one of their computers or servers stops working — and they can’t take for granted that their business is immune from a fire, flood, hurricane, or tornado. Making a small investment today to build in a layer of data protection could make the difference between getting back to business and going out of business down the road.”

If You Don’t Sell Backup As A Service Now, You’ll Regret It Later

Robert Kyslinger, managing general partner at OMNIPOTECH, readily admits that selling BDR (backup and disaster recovery) solutions and services makes up less than one-third of his annual revenue. However, it’s by far the most profitable service his company sells. “Our gross margins on BDR sales are 90 percent,” he says. “For example, if we did $400,000 in BDR sales during the course of a year, about $360,000 would represent bottom-line profit.”

“The smallest BDR appliance, which holds 1 TB of data, costs a VAR/MSP about $1,000 to own,” says Kyslinger. He also estimates MSPs pay approximately $4 per month for the Microsoft SPLA (service provider licensing agreement), about $1 per month for SaaSbased antivirus protection, and then about 63 cents per month for remote monitoring and management services. “All together, the MSP’s costs are just under $6 per month compared with the customer’s cost [i.e. monthly recurring revenue for the MSP] of $250,” says Kyslinger. “Even if you add in an hour per month at $65 per hour to cover the expenses of a level-3 technician’s time, you’re still looking at a comparison of $71 in expenses against $250 in revenue. I would challenge any VAR or MSP to find a solution or service that yielded a higher profit margin than selling BDR services.”