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Managed Services
According to Wikipedia, managed services are “the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations inclusive of Production Support and lifecycle build/maintenance activities.”
The definition goes on to add that the person or organization that “owns or has direct oversight of the organization or system being managed” is called the “client or customer,” and the “person or organization that accepts and provides the managed service is regarded as the service provider.”
My definition is a bit more basic and digestible: Managed services is where a third party provides services ranging anywhere from the procurement and installation of equipment and hardware, all the way to network management and monitoring.
Now that we're clear on what managed services are, I want to talk about how for value added resellers (“VARs”) to be successful selling managed services to small- or medium-sized businesses (“SMBs”), they need to focus first on educating the marketplace on these offerings. This is according to a July 2011 Technology Channel Outlook study conducted by CIT Group, Inc., in association with Forbes Insights.
The study gathered the views of more than 100 executives at technology value-added resellers and technology channel partners that sell to SMBs. All respondents worked for companies that have annual revenues of between $1 million and $100 million, and 45% were either owners of their business or a C-level executive (including CEO, COO, or CFO).
CIT conducted this study because managed services are a fast-growing and much-talked-about part of the industry. We wanted to understand the perceptions and views of managed services in the market.
Keeping with the theme of education, let's define that very word, because it's key to the findings. Wikipedia defines the term as:
Education: any act or experience that has a formative effect on the mind, character, or physical ability of an individual [or in this case, company]. Education is the process by which society deliberately transmits its accumulated knowledge, skills, and values from [one individual or company] to another.
The theme of education pulled from our survey extends across both ends of the spectrum. We found that for VARs to differentiate themselves in the marketplace, they need to further educate SMBs on what managed services entail and the benefits of such an offering.
What SMBs can learn from this survey is that they need to ask more questions about managed services ' what the various components are and how they apply to their particular business. Some of the benefits that managed services could bring to SMBs would be access to the latest technology and greater flexibility with regard to their operating expenses. Managed services could potentially turn a fixed expense into a variable expense. In turn, the SMB could then take that expense savings and invest it back into the business for future growth.
Managed Services Driving Revenue Growth
Even though VARs are increasingly focused on selling managed services to help SMBs monitor, manage and maintain their networks and equipment, and most feel that their business next year will have an increase in revenue from managed services, the study found that a small percentage of RFPs actually include a managed service component.
About a quarter of the VARs surveyed indicated that managed services will likely account for more than half of their 2011 revenues. And looking ahead to 2012, 64% of respondents said they expect their revenue from managed services to increase, with a sizable number (16%) saying it will increase by 20% or more.
At the same time, many VARs are making managed services a crucial piece of their SMB sales pitch, possibly as a way to set their bids apart from the competition. Almost a third of respondents (32%)
said more than half of their current bids now include a managed services element, and more than one in 10 indicated managed services are included in all their bids. That trend will continue: 58% said there will be an increase in the percent of bids containing managed services over the coming year.
To help their sales pitch, VARs may need to be sure that their RFPs are focused in such a way that the benefits are clear to the ultimate decision maker. In the survey, more than half of respondents indicated the primary decision maker is the business owner or corporate decision maker. VARs may need to ask themselves whether they are directing their pitch to this audience, or if they are focusing on technology issues more appropriate to an IT director. Depending on who the pitch is going to, it may need to be written with a more strategic view or focus on the benefits.
What we've found through our experience is that the most successful managed services programs are those that educate. The VAR clearly articulates the offering and quantifies the impact for the SMB. Likewise, when an SMB is educated and committed to implementing a managed services solution, the SMB soon realizes that it can play an important role in the growth plans of the company.
Understanding the Benefits
As further support of the need to educate, more than 60% of respondents agreed that most of their customers don't really understand the benefits of managed services. VARs further indicated that their top barrier to selling managed services is that SMBs just don't understand the managed service offering. They also noted that many smaller companies are concerned about the overall cost of managed services ' in direct contrast to the cost savings benefits VARs are touting.
With the global economy in turmoil, it's no surprise that it has created uncertainty for many businesses ' especially SMBs that express great concern with regard to capital expenditures of equipment. However, that's where leasing and lending can help. Leasing equipment provides not only a way to procure the equipment and pay for it over time, but also gives the flexibility to upgrade, particularly in the technology sector where the life cycle of that technology could be shorter than some of the other types of equipment.
One of the trends that we're seeing today is centered on service-based type products in the marketplace, such as providing hardware installation and services, as well as network monitoring and management. This trend continues to managed print services in the copy or print industry, where the manufacturers actually manage the print services for companies in a centralized space.
Now is a good time to consider vendor financing. It can provide the lending and leasing that allows your customers to procure equipment, to be more strategic with regard to their purchases and provide them the flexibility to upgrade their equipment. When looking for a company to partner with, be sure the vendor understands managed services and can support that model, consider the people and the service they provide to their vendors and customers.
The full survey and graphics are available for download at www.cit.com/managed-services.
Ron Arrington is the global president of CIT Vendor Finance, a business with over $5 billion in assets operating in more than 20 countries. He has 25 years of experience in providing intermediary financing for both commercial and consumer markets. Arrington may be contacted at 973-740-5605 or [email protected].
According to Wikipedia, managed services are “the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations inclusive of Production Support and lifecycle build/maintenance activities.”
The definition goes on to add that the person or organization that “owns or has direct oversight of the organization or system being managed” is called the “client or customer,” and the “person or organization that accepts and provides the managed service is regarded as the service provider.”
My definition is a bit more basic and digestible: Managed services is where a third party provides services ranging anywhere from the procurement and installation of equipment and hardware, all the way to network management and monitoring.
Now that we're clear on what managed services are, I want to talk about how for value added resellers (“VARs”) to be successful selling managed services to small- or medium-sized businesses (“SMBs”), they need to focus first on educating the marketplace on these offerings. This is according to a July 2011 Technology Channel Outlook study conducted by
The study gathered the views of more than 100 executives at technology value-added resellers and technology channel partners that sell to SMBs. All respondents worked for companies that have annual revenues of between $1 million and $100 million, and 45% were either owners of their business or a C-level executive (including CEO, COO, or CFO).
CIT conducted this study because managed services are a fast-growing and much-talked-about part of the industry. We wanted to understand the perceptions and views of managed services in the market.
Keeping with the theme of education, let's define that very word, because it's key to the findings. Wikipedia defines the term as:
Education: any act or experience that has a formative effect on the mind, character, or physical ability of an individual [or in this case, company]. Education is the process by which society deliberately transmits its accumulated knowledge, skills, and values from [one individual or company] to another.
The theme of education pulled from our survey extends across both ends of the spectrum. We found that for VARs to differentiate themselves in the marketplace, they need to further educate SMBs on what managed services entail and the benefits of such an offering.
What SMBs can learn from this survey is that they need to ask more questions about managed services ' what the various components are and how they apply to their particular business. Some of the benefits that managed services could bring to SMBs would be access to the latest technology and greater flexibility with regard to their operating expenses. Managed services could potentially turn a fixed expense into a variable expense. In turn, the SMB could then take that expense savings and invest it back into the business for future growth.
Managed Services Driving Revenue Growth
Even though VARs are increasingly focused on selling managed services to help SMBs monitor, manage and maintain their networks and equipment, and most feel that their business next year will have an increase in revenue from managed services, the study found that a small percentage of RFPs actually include a managed service component.
About a quarter of the VARs surveyed indicated that managed services will likely account for more than half of their 2011 revenues. And looking ahead to 2012, 64% of respondents said they expect their revenue from managed services to increase, with a sizable number (16%) saying it will increase by 20% or more.
At the same time, many VARs are making managed services a crucial piece of their SMB sales pitch, possibly as a way to set their bids apart from the competition. Almost a third of respondents (32%)
said more than half of their current bids now include a managed services element, and more than one in 10 indicated managed services are included in all their bids. That trend will continue: 58% said there will be an increase in the percent of bids containing managed services over the coming year.
To help their sales pitch, VARs may need to be sure that their RFPs are focused in such a way that the benefits are clear to the ultimate decision maker. In the survey, more than half of respondents indicated the primary decision maker is the business owner or corporate decision maker. VARs may need to ask themselves whether they are directing their pitch to this audience, or if they are focusing on technology issues more appropriate to an IT director. Depending on who the pitch is going to, it may need to be written with a more strategic view or focus on the benefits.
What we've found through our experience is that the most successful managed services programs are those that educate. The VAR clearly articulates the offering and quantifies the impact for the SMB. Likewise, when an SMB is educated and committed to implementing a managed services solution, the SMB soon realizes that it can play an important role in the growth plans of the company.
Understanding the Benefits
As further support of the need to educate, more than 60% of respondents agreed that most of their customers don't really understand the benefits of managed services. VARs further indicated that their top barrier to selling managed services is that SMBs just don't understand the managed service offering. They also noted that many smaller companies are concerned about the overall cost of managed services ' in direct contrast to the cost savings benefits VARs are touting.
With the global economy in turmoil, it's no surprise that it has created uncertainty for many businesses ' especially SMBs that express great concern with regard to capital expenditures of equipment. However, that's where leasing and lending can help. Leasing equipment provides not only a way to procure the equipment and pay for it over time, but also gives the flexibility to upgrade, particularly in the technology sector where the life cycle of that technology could be shorter than some of the other types of equipment.
One of the trends that we're seeing today is centered on service-based type products in the marketplace, such as providing hardware installation and services, as well as network monitoring and management. This trend continues to managed print services in the copy or print industry, where the manufacturers actually manage the print services for companies in a centralized space.
Now is a good time to consider vendor financing. It can provide the lending and leasing that allows your customers to procure equipment, to be more strategic with regard to their purchases and provide them the flexibility to upgrade their equipment. When looking for a company to partner with, be sure the vendor understands managed services and can support that model, consider the people and the service they provide to their vendors and customers.
The full survey and graphics are available for download at www.cit.com/managed-services.
Ron Arrington is the global president of CIT Vendor Finance, a business with over $5 billion in assets operating in more than 20 countries. He has 25 years of experience in providing intermediary financing for both commercial and consumer markets. Arrington may be contacted at 973-740-5605 or [email protected].
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