Customer reliance on ‘break-fix’ model holding back managed services

Dallas — Jon DuFresne is all pumped-up about the value that managed services provide to his company’s clients but he says many clients still need to get rid of their dependence on the break-fix model.

Customers like the added insight and control on items such as equipment service and maintenance costs, but still need to get used to the idea that DuFrense is now selling them managed services rather than a product in a box.

“It’s kind of hard for me to explain to clients who pay me when things break that from now on I’ll be making money by keeping their equipment working,” said the vice-president for operations for Glendale, Calif-based VAR Computer Physicians Inc.

Offering managed services provide customers with assistance in monitoring equipment and application performance and maintenance and the ability to develop best practices to reduce ownership and operation costs. The so-called “break-fix” model focuses on selling products.

“I believe being an MSP enables me to provide my customers with more value and it appeals to my sense of being an honest businessman,” said DuFresne.

The challenges that DuFresne faces are typical to most VARs who, during the last three years or so, have listened to the call of tech distributor Ingram Micro to explore the largely unchartered MSP waters.

At the third Seismic Partner Conference in Dallas, Texas this week, Justin Crotty, Ingram’s vice-president for services, North America, said he’s optimistic the MSP push is moving a long at a favourable face.

“Traction in the MSP market has been really good. For the last two and half years we’ve been able to attract a little over 1,000 solutions providers to become Seismic partner buying and offering our Seismic tools,” he told CDN.

He said Ingram partnerships grew by as much as 158 per cent in 2008 and 135 per cent during the first quarter of 2009.

Ingram Micro even announced the launch of four new additions to the Seismic family of MSP tools that it offers its VAR partners.

The four offerings are:

Seismic Global NOC – An enterprise-grade NOC and help desk services available from multiple locations around the world which SMB partners can use to reduce cost and allow staff to concentrate on high margin opportunities.

Seismic Recovery on Demand – A services offering that allows VARs to offer customers the ability to provide physical server failover to a virtual server.

Seismic Epicenter –A single console that allows Seismic partners to manage all the tools and applications they offer their customers. This can be accessed through a single portal.

Business Intelligence Analytics Dashboard – Helps MSPs to monitor and understand the health and wellbeing of equipment they sell to customers. The dashboard is linked online to a global system that enables MSPs to compare how the wellbeing equipment they service compare with those of other dashboard users around the world.

Crotty said Seismic tools “really fits the VAR base” because it is helping partners realize more recurring revenues.

For instance, one VAR partner in Toronto has built an entire disaster recovery platform using Seismic, he said.

“There’s a lot of great feedback from the Canadian partners,” said Crotty. But part of the penetration challenge in Canada and other areas is that only a few partners are able maximize Seismic’s potentials.

“In many cases a small percentage of our top partners are able to penetrate a large number of their user base but there’s still a challenge for everybody to get widespread adoption,” Crotty explained.

For instance, in some areas the top 10 per cent of vendors have an average of 12 users signed up for the service, but the remaining 90 per cent of the vendors have less than two customers on the service.

In another case, 48 per cent of licenses purchased are deployed, while 52 per cent are still on the shelf. In this scenario the top 10 per cent of partners have an average of 26 licenses deployed across the end user base, but the remaining 90 per cent of partners have an average of less that five licenses deployed.

“There’s a lot of work to be done in penetrating more end users and get the value proposition to resonate among them,” said Crotty.

He attributed the problem’s to the MSP industry’s growing pains. As more users become familiar with the concept, Crotty expects adoption to grow.

Jason Beal, director of services sales for Ingram, agrees. For example, he said, managed printing services has not taken off as expected.

“You would think that more companies would embrace the opportunity to reduce printing and copying cost. But many businesses are still locked on the notion that printing expenses is a product issue,” Beal said.

Crotty said technology is not the problem: “I think partners understand the technology very when. The issue is having a concise message to a wide variety of customers and being able to differentiate themselves to the customer in a manner that is meaningful to the customer.”

“This is where we fall down in this industry, we’re great technologists, we’re great doers but we’re not necessarily fantastic sales people.”

The major challenges that Crotty outlined in his presentation were:

* Transitioning product-focused sales team to services-focused
* Sales training and sales skills development
* End-user facing marketing collateral and tools
* End-customers not ready for managed services model; they still prefer break-fix model

VARs need to concentrate of developing their business brand and not rely on the names of big-time vendors according to Greg Onoprijenko, managing director of sales for E-ternity Business Continuity Consultants Inc. of Mississauga, Ont.

“The partner’s focus should be pushing the services and value they offer rather than telling clients they’re associated with other big vendors,” he said.

He also advised that VARs emphasize the value their services bring rather than dropping tech terms such as software-as-a-service or virtualization.

“The majority of the customers don’t care if it’s called SaaS or virtualization. They want to know how they can save time and money,” he said

Another surefire way of creating repeat revenues, Onoprijenko said, is to identify the criteria for a “perfect customer” and keep on targeting that type of customer. Here are some of the strategies that Mississauga-based sales director employs:

1. Build your brand/don’t rely on vendors
2. Develop and distribute Customer Profiles
3. Develop effective marketing collateral
4. Develop “Perfect Customer” criteria and qualify hard
5. Simplify T’s and C’s in Agreements
6. Disciplined prospecting
7. Get referrals from your happy customers
8. Don’t be afraid to hire “green” sales people
9. Upsell often
10. Stress value-added services vs. SaaS

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Nestor Arellano
Nestor Arellano
Toronto-based journalist specializing in technology and business news. Blogs and tweets on the latest tech trends and gadgets.

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