Leveraging Technology

By  Karen M. Kroll
Several years ago, Victor Barris, CEO of Identropy, a provider of identity management solutions, realized that after his firm completed a client implementation, Identropy's employees still would receive about two-dozen phone calls, with questions and requests for information. While Barris wanted to ensure Identropy's implementations were successful, he couldn't ignore the fact that Identropy wasn't getting paid for these contacts.
 
To meet this need, Barris and his partners developed IMIS, or Identropy Managed Identity Service. Rather than working on a project-by-project basis, IMIS offers clients ongoing, comprehensive reporting and monitoring.

Barris isn't the only reseller moving from a project or "break/fix" business model to a managed service approach. "There's clearly growth to managed services," says Kurt Johnson, vice president of corporate development with Courion, a provider of identity management solutions.

Managed Services allow clients to leverage technology as they would a utility, says Brad Miller, CEO with Perimeter eSecurity, a provider of on-demand security services. As with a utility, one company builds the capability, and others plug into it. "They don't have to buy, build or manage anything," Miller says.

"End users like a Managed Services platform because it provides a predictable IT budget," says Jason Beal, director of sales with Seismic, Ingram Micro's Services division. Many also appreciate the "IT road-mapping" that's typically provided, which helps them plan for technology hardware needs down the road.

 A managed service model becomes necessary as IT and e-commerce environments becomes more complex, critical and real-time, says Bob LaGarde, founder and CEO of LaGarde, a Kansas City-based e-commerce solutions provider. "These aren't batch jobs that run in the basement at midnight," he says. "The break/fix model doesn't work any more."

Reaping the Benefits
Along with their customers, resellers also can benefit. "I love the recurring revenue, versus (billing) projects and blocks of time," says Laura Steward, president of Guardian Angel Computer Services LLC, a Norwalk, Conn.-based reseller.

A managed service approach offers resellers economies of scale, as well. Most can add clients without boosting resources to the same extent, Beal notes. Moreover, resellers no longer need to wonder when the next call from a customer will come, says Len DiCostanzo, senior vice president of professional services and business operations with AutoTask, an East Greenbush, N.Y.-based provider of IT management software. Instead, they work with clients on an ongoing basis.

While Managed Services may have only recently become a household name, it's actually been around for about a dozen years, resellers and vendors say. However, the way it is practiced has changed. "Years ago, for a VAR to get into the Managed Services business, he or she had to mortgage the house to underwrite the cost of equipment," needed to offer customers a managed service option, says Ken Totura, vice president of channel sales with MX Logic.

Currently, a variety of programs allow resellers offer Managed Services without an eye-popping upfront investment. For instance, Zenith InfoTech has a network operations center with a staff of 650, along with data centers in California, Arizona and Maryland. Synnex Corporation offers managed remote data backup, security and disaster recovery services. Ingram Micro offers applications resellers can leverage to deliver managed services.

Culture Shock
Even so, moving to a managed service approach requires a shift in thinking for many VARs and their employees, as it's almost the opposite of the break/fix model, says Clinton Gatewood, vice president of corporate development, Zenith InfoTech. With a break/fix approach, "tech utilization" is key. Technical specialists need to bill as many hours as possible. "That's where you make your money," Gatewood notes.

Under a managed service business model, the focus is on efficiency. Because you're working for a set amount of money, inefficiencies eat into your margins. You need to provide the best service possible, as efficiently as possible. 

 "End users want their systems working all the time," notes Bob Stegner, senior vice president of marketing with Synnex Corporation. "They don't care how you do it; they just don't want to deal with it."

Some customers' employees may be concerned that a managed service model is a guise for outsourcing, Totura notes. Resellers need to let them know that the new approach will reduce the time consumed by low-level activities, so they can focus on areas that require their expertise, such as managing the LAN and ERP systems.

Most who have switched from a break/fix to a Managed Services model say that the biggest challenge has been getting employees to accept the change. "I didn't realize the mental costs of getting the staff to understand the new way of doing business," says Guardian Angel's Steward.

The compensation plan may need to change, as well, notes MX Logic's Totura. Under many break/fix programs, employees earn commissions based on hardware sales. That won't work with a managed service approach.

Resellers also need to decide whether to work with a provider who offers a portfolio of technology and solutions they can resell, or host everything themselves. Working with a solutions provider offers a number of advantages. Most significantly, the cost to get up and running is lower, as it's not necessary to build a network operations center. 

Steward says Guardian Angel initially built its own network operations center. In addition to that expense, there was "the challenge with doing it all ourselves." When a technical expert left, it could take months for a new person to get up to speed. And, staff had to be on call 24-7.

The idea is to act like a general contractor, says John Mamon, principal and COO with Radical Support, an Atlanta-based Managed Services Provider. The reseller needs to assemble the right people, and manage their efforts so that the customer's needs are met.

And, the hosted approach doesn't work in all applications. With identity management, for instance, most clients are not ready to move to a hosted model, says Barris of Identropy. That's because identity management is the starting point for many other internal business processes, such as expense authorization.
 
Of course, your pricing model also will need to change to fit the managed service model. A managed service business that isn't priced correctly can fail, even with a solid group of clients, experts say. After all, if a contract covers everything, and a technician spends a week resolving a problem, no extra money comes in. A Managed Services model is "actuarial," notes Mamon. "Some months, I lose, or one account might bury me. Other accounts do o.k."

Let's Get it Started
Most resellers need to gradually introduce their managed service offering. That way, they maintain their current sources of revenue while the change is under way.

The reseller also needs to separate the business and technical sides of the operation, says Mike Ellison, manager of partner development with N-Able Technologies, a service provider for MSPs. Many IT people are terrific problem solvers, but tend to focus on the details. You need to look at the business from a more strategic framework. "Separate, and let people make the decisions they're comfortable with," he says.

It also helps to focus on a specific vertical, DiCostanzo says. You can show customers that you know their business, and where technology can help. Moreover, once you become an expert, you can more easily apply your skills and experience with different firms.