If you aren’t taking your business into the managed services space, you are missing a huge opportunity. The compression on product margins in technology is only increasing, so developing recurring revenue streams is critical to driving company valuations as well as profitability and sustainability.
In our financial modeling for Executive Relevance Selling (ERS), for example, we modeled Infrastructure as a Service (IaaS) and found that without offering managed services along with it, customers actually lose money. In fact, it costs customers more to put things out in the cloud if you don’t offer managed services to help them either redeploy resources or cut selling, general and administrative expenses (SG&A).
Managed services is a critical path item that I believe is essential to safeguarding a company’s future capabilities and truly ensuring its viability. However, before you move into the direction of managed services, consider which business model fits best for your organization:
Build your own: Choosing this option will depend a lot on available capital and patience. Building a managed services capability with a network operations center (NOC), etc., takes millions of dollars and years to complete. It’s not something you can just say, “I am going to be in the managed services game in 30 days.”
On top of the long time commitment, it will take a long time to realize ROI. If you have a lot of capital, have the time and patience, and you are successful, you can make more money in the long term. However, you really are rolling the dice because you are competing against large companies that have made massive investments and you will be playing a catch-up game that may potentially not even pay off.
Find a partner: This is the fastest route to market at the lowest cost, because the right partner has already made the investment for you. Most offer white-label services that you can sell as your own, or you can offer their managed services as a third -party pass through. Using a managed service partner can be a short cut to profitability with much less investment, and I am seeing this solution start to take off.
However, finding a partner doesn’t mean you should not add value for your end customer. Most companies that offer a white label managed services offering will take the first call from the customer, for example, and then pass it along to the managed services provider. The dilemma becomes how you show the value of the managed services in order to make your offering sustainable.
An example would be visiting the customer on a quarterly basis to report on the number of tickets that were opened and what solutions were provided for those. That puts you in the realm of partner and advisor, because you can offer insight into trends on a customer’s network and offer recommendations in terms of additional services, product sales, or changes to the help them sustain and scale the network or cloud environment.
Regardless of how you choose to approach it, managed services can be complicated. You have to have a mindset that you are selling a longer-term, stickier relationship instead of selling a box and walking away. Therefore, once you decide to invest in managed services, you need to educate your salesforce around how to position it to customers and turn a product sale into a valuable partner/advisor relationship.
In my next post, I will talk more about that type of selling and how Comstor’s Executive Relevance Selling (ERS) can help you create a successful managed services support and sales team.
