by Marc Winter | 2/29/16
“It’s like we spend more time fighting for pennies on the floor instead of taking dollars off of the table.” This is an amazing quote from an owner who hasn’t met expectations from his managed IT services business. A lot of dealers are reaching this conclusion, and the cause is usually a combination of high expectations and low ceiling business execution. So what can dealers do to recalibrate?
Start By Knowing the Business of Managed IT Services
Just about every dealer or reseller we’ve encountered started offering managed IT services as part of their business because “the market is billions of dollars.” Fair enough. However, the key to success is massive volume. For example, there are some very good, popular MSP platforms available for resale. Let’s say one MSP platform has 200 resellers billing an annual average of $500,000. That MSP is now a $100 million business, the dealer is generating just over $700,000 in revenue (including margin). Not quite what the dealer planned on when investing in a multi-billion-dollar market. The reality is that the level and types of services MSP resellers offer are of value to a very limited market.
That typically leaves a dealer with two options – raise your game or lower expectations.
Raise Your Game. For clients, document management is important to process and efficiency. But IT is absolutely critical. IT company brochures – whether it’s a guy with a Microsoft certification and a Yellow Pages listing or a global enterprise – claim to provide the same services. Clients are pitched by a laundry list of resellers trying to sell a product or service, so the well is already tainted. If a dealer’s strategy is to push additional line items like hosted desktops or service blocks, the chances of winning business is small. Experience, expertise and problem-solving capabilities open the door to more opportunities. Raise your game, be more than the competition and you’ll reach new heights.
Lower Your Expectations. Maybe the level of effort, sales training and MSP support are as far as you’re willing to invest in the IT business at this point. Then it’s time to lower expectations. That first year bump in revenue from “low hanging fruit” or relationship business will be difficult to replicate, and even more challenging to maintain year after year. So plan on a lot of churn and short life span engagements (regardless of the term on your service agreements).
It is important to make a determination for your IT services business sooner rather than later. MSP platforms are beginning to realize the limitations of managed IT Services. As a result, we’re seeing a big push in selling “SMB Cloud” in the form of products like Hosted Desktop. This creates more line items to sell, and a new set of business expectations.
Whichever path you choose, your success will be dictated by your ability to provide expert guidance to your clients’ business challenges. Set your expectations to exceed theirs and you’ll win more business.
Marc Winter is partner and chief marketing officer of the IT Solution Alliance, an innovative technology company built to transform imaging dealers into successful, next-level IT providers. Winter brings more than 25 years of sales and marketing experience working with clients in the office imaging dealer and OEM space as well as next-generation technology companies. Contact him at firstname.lastname@example.org