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Managed services as a Trojan horse

November 07, 2017

Managed services as a Trojan horse

By Larry Walsh

The average solution provider today earns 40% of its gross revenue through managed services or remotely delivered IT administration, maintenance and repair activities. And that number continues to increase as more resellers divert their attention away from product sales and toward services with recurring revenue.

The 2112 Group expects managed services to make up at least 50% of the average solution provider’s revenue by 2018. For many Ingram Micro SMB resellers, in fact, that’s already the case. Companies participating in the joint Ingram Micro-2112 incubator program are generating, on average, up to 60% of their revenue from automated services.

The upward momentum of managed services revenue crowding out product sales is an industry trend. Resellers earn more through managed services and have a greater command of their destiny by selling and supporting their own services than dealing with the multitude of vendor requirements for selling hardware and software.

On the other hand, solution providers shouldn’t overlook the benefits and revenue of selling product. After all, managed services wouldn’t exist if there weren’t products in the customer’s environment. Many IT functions and resources are moving into services—cloud, managed or hybrid—but they’re all dependent on product resting in customer hands.

Rather than abandoning or minimizing product sales, solution providers should consider leveraging their managed services as a Trojan horse to identify product sales opportunities in their customers’ environments.

Using managed services as a sales catalyst isn’t a new idea. A core function performed by MSPs is replacing failed or obsolete equipment that causes maintenance issues, thus impeding operational performance and effectiveness. But MSPs have insights into their customer operations and can use their access to gain a greater understanding of customer needs and operational expectations.

This isn’t some clandestine exercise where you abuse your privileged access to gain intelligence. It’s actually quite helpful to the customer if you simply review performance data, go over maintenance records and take inventory of IT assets and applications. You can help them understand their strengths and deficiencies, while simultaneously opening product and services sales opportunities.

So what, exactly, should you be looking for?

  • Inventory infrastructure: Find out what your customers have and don’t have. In many cases, you can make dramatic improvements simply by filling in gaps in their IT infrastructures.
  • Goal alignment: Inquire about customer business goals and align IT capabilities to facilitate the attainment of those goals.
  • Analyze managed services data: Data collected while delivering managed services contains a wealth of information about faulty equipment and performance issues that can help identify product sales opportunities.

The services model will continue to expand and drive increasing volumes of revenue. Nevertheless, there’s no need to sacrifice good hardware and software revenue that creates the need for and facilitates managed services.