VARs Must Look Beyond 'Easy Stuff' To Sell Managed Services


Everything Channel CEO Robert Faletra said Friday that managed services represents a significant growth market -- specifically, a $54 billion business, responsible for about 13.9 percent of North American channel business in 2009.

In a keynote address and panel discussion presented to about 300 VARs at Ingram Micro's VTN Spring Invitational Friday in Orlando, Fla., Faletra explained recent data from Everything Channel's Institute for Partner Development & Education (IPED) that suggests about 85 percent of solution providers currently deliver, or are soon planning to deliver, some version of managed services.

Additionally, he said, those MSPs are currently offering some form of managed services to 50 percent of their overall customer base -- up dramatically from 10 percent in 2008. About 78 percent of those MSPs co-brand their managed services offering with vendor partners, Faletra said.

"There is a lot less mystery in this market now," Faletra said. "And the margins for the most common managed technologies are starting to decrease. This means there is more competition for basic services."

"It might even be higher," he said. "There are still holdouts, but at this point there's really no good reason not to do it."

According to Faletra, the managed services segment has far passed the point where the "easy stuff," such as remote monitoring, is the standard. Managed services providers need to have progressed to delivering remote remediation via service desk, and from there having a fully managed services offering -- one that promotes proactive planning, solves problems and manages entire infrastructures.

"Virtualization makes it easier to drive the higher end of the managed services market," Faletra said. It's also one of the technology drivers making managed services one of the best opportunities for upselling customers.

"The most important thing you can do from a managed service perspective, is see what else you can offer. We're back to the future a bit because we used to chase volume with hardware, and this is also a volume game," he said, citing IPED data that MSPs who could manage more than one type of IT service for a customer would see 75 percent higher retention rates.

Help desk and call center management remains the top area for customers choosing a managed services offering, with network infrastructure management, e-mail management and desktop management rounding out the top four. The fifth and sixth highest ranked services, Faletra said, are where to focus VAR attention now: the increasing popularity of VoIP services and business continuity, both of which Faletra called "ripe for managed services."

"Solution providers with big VoIP practices I talk to, in some cases they're having the best quarters they've ever seen this year," he said.

Faletra said that where solution providers stumble most is changing their mindset about how to sell it.

"You have to teach people how to be more consultative," Faletra said, describing managed services as a "hunting-and-farming kind of approach to sales."

"You're handing over big pieces of your critical infrastructure to me. That's a big change in the sales relationship. I'm not advocating throwing out the sales force you have, but there's a real need to make sure they're developing that different skill set," he said.

Continuous marketing is also something many solution providers don't have in their DNA, Faletra said, but was needed to execute on managed services.

"I would argue that you should position yourself more like an Accenture -- a big integrator where you can take on the role of consultative outsourcer but fundamentally have your customer feel good about your ability to execute on this."

Following his keynote, Faletra hosted a solution provider panel, where VARs said the hardest part about managed services sales was getting customers to understand the offering.

"This is a game of trust in what we're doing," said Israel Lang, Managed Services Director at NetGain Information Systems, a Dayton, Ohio-based solution provider. "Once they see it's not just vaporware, there are other opportunities that make you scalable."

Solution providers said no one vertical was better than others when it came to managed services.

"One practice might need one thing where another practice needs something else. It's not so much vertical," said Don Conaby, owner of Conpute, an Oshawa, Ontario-based solution provider.

Are VARs reworking their sales teams or properly motivating them for managed services sales?

"We didn't bulldoze them, but we did reposition them," Lang said. "The guys that have gone on to the managed services space, what they're seeing is money can be made but it does take a different mindset and skill sets."

Upsell opportunities abounded, VARs said, but existing customers can take a little more work and consultation before they're willing to hand over large pieces of their operation to a managed services provider.

"We've actually had a tougher time converting our existing clients," said Duane Claxton, general manager at Entre Solutions, a Savannah, Ga.-based solution provider. "Our managed services offering has been almost exclusively a new customer play, and we're more aggressively trying to market those service plans to our existing clients."

In a Channelweb.com interview after the keynote, Justin Crotty, vice president of Services Sales at Ingram Micro, said the types of services he saw climbing in popularity included hosted services, managed NOC, and Web and e-mail security.

He said that VARs were at a point where they were "less concerned with the definition of managed services than what they can offer."

"It's the sales capability I hear about most often," Crotty added. "It's 'how do I market it?' The technology is not what they struggle with; it's how do they make customers understand what they're offering."

About 75 percent of Ingram Micro VAR partners are doing some form of managed services, Crotty said, up from between 40 and 60 percent a year ago.

"It might even be higher," he said. "There are still holdouts, but at this point there's really no good reason not to do it."

Crotty said he saw the next managed services challenge as making so-called cloud computing easily consumable through the VAR space. What's the offering, in other words, and how do you make money from it?

"You have a solution provider that says they have a cloud computing solution and they really don't," he said. "Cloud is a buzzword. How do we really harness these applications so people can actually action them? How do you bill for it and who's consuming it?"

Everything Channel owns Channelweb.com.