Technology Complexity Driving Opportunities in Managed Services

June 2, 2008

By Chris Talbot, eChannelline


Managed services may be the best revenue opportunity value-added resellers have right now, and while there are still a handful of VARs who may choose not to offer managed services to their customers, the overall feeling among vendors and distributors is that the vast majority of VARs either already offer some form of managed service or are looking into doing so.

With all of the various managed services currently available (with more launching almost daily), the biggest sellers are the ones that focus on core operation and functionality -- the ones that may not be sexy but are needed to keep a business up and running. According to Joe Quaglia, senior vice president of U.S. marketing at Tech Data, the services that are in the biggest demand right now revolve around network monitoring and management.

"In today's network space, the complexity of the technology in the networks has not gotten easier, so the more complexity that's added by the vendor community, it's better for us from a managed service standpoint because it makes it harder for the end-user to manage it," Quaglia said. That's why there are so many network monitoring and management services, he said.

Managed storage services also continue to grow at a rapid pace, even ahead of the market, Quaglia said.

"Managed print is actually a really hot application today," he added.

Another type of managed service that is gaining a lot of traction is help desk, said Justin Crotty, vice president of Ingram Micro's Services Division.

One type of managed service that has been getting a lot of attention lately is hosted Microsoft Exchange and e-mail management, Quaglia said.

"I think the one that's going to emerge very quickly here is hosted Exchange and e-mail management," he said.

However, even with the plethora of managed service offerings coming onto the market and the acknowledgment from channel partners that they need to sell services to stay profitable, there is some confusion about how to get into the business and how to be successful at it in a low-risk way, said Peter Sandiford, CEO of Level Platforms.

"I think we have definitely moved a long way from where we were last year," Sandiford said. "I think that there's no longer any discussion among the solution providers that I've talked to as to whether this is something that they should be doing." It's a question of what they should do, he added.

There's no longer money in just being a box pusher, Sandiford said, but services presents a fantastic opportunity for the channel. It does require a change in sales tactics, though. VARs are used to waiting for customers to declare their needs and then respnding, but with managed services, they monitor the health of equipment, do inventory on a real-time basis and should be proactive about going to customers with information justifying the replacement or addition of hardware, software or other services, he said.

VARs don't even need to offer many different managed services, Sandiford explained. Many VARs provide nothing more than basic monitoring services, which isn't very expensive and provides value to customers, he said.

The channel should look at managed services not as a business transformation, but as a way to help their businesses grow, Sandiford said. It's an evolution rather than a revolution.

"I think that's the way most people are going," Sandiford said.

In the end, it goes right to the bottom line. According to Mike Cullen, vice president of global sales at N-able Technologies, partners that offering managed services tend to get bottom line operating income numbers of 20 to 30 per cent.

"The managed service space over the last three years has been so hot that everybody is trying to get some connection to the space," Cullen said.

According to Mike Ellison, manager of partner development at N-able Technologies, customers have become a lot more savvy about managed services and technology in the last year. They're less willing to be led around blindly into whatever technology solutions a VAR recommends, he said. They're looking for solutions that are in alignment with their busiensses, and they want to know that a solution or service is a good fit.

"I would say that the biggest thing that we've encountered through our partners is that the end-customer awareness has really grown," Ellison said.

For resellers, it's a different business model from the traditional channel mode, he said. VARs that want to resell services will find ample opportunities, but it's not a cookie-cutter or fire-and-forget kind of sale.

"It's as custom-tailored as a suit. It has to be custom-fitted to that customer's needs," Ellison said.

While offering managed services used to be considered a risky gamble, that's not the case any more, said Sandiford. VARs don't have to build a big NOC; instead, they can work with managed service provider partners and resell their services. It takes the risky elements out of the equation and leads to a recurring revenue stream.

In addition to providing services that customers want, it also offers operational efficiencies and cost savings to the VARs, Sandiford said. He added that Level Platforms' VARs save five hours per customer per month just by using remote networking monitoring and management services.

"The dynamics of this are just win-win all over the place. It's just great," Sandiford said.

For channel resellers just now looking at getting into the managed services business, there are different ways to go about getting their feet wet -- from dipping a toe into the pool by offering remote network monitoring and management to building a NOC and custom-building services.

What's the best way? According to Sandiford, it's best to start by looking at managed services as an evolution of the business model. The very first thing to do is understand what managed services can do a VAR's business, he said.

A good place to start is with remote monitoring services, though. VARs have several choices as to which managed service providers they wish to work with. Sandiford said managed services can also leverage their own creativity. He added that every VAR he's seen get into managed services uses them differently -- and that's how they can differentiate themselves from their competitors.

"The way to get started in my view is to just get the technologies, which you can do very cheaply now," Sandiford said. Startup costs are often less than $300 per month.

He added, "Just get started and learn what it can do. And then start to provide some basic services, like some remote monitoring services."

That enables VARs to collect a lot information from their customers, which will open their eyes to what they can potentially do with managed services, Sandiford added.

"I would say that the technologies are pretty good from all the service providers, but the one that's going to give you the best value is the one that's going to help you transofrm your business," Cullen said.

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