Business Trends: Replicating Revenue

“Our services revenue is going to take a while to ramp up, but we are going to see a 20 percent increase in box sales this year as a result of the promise of managed services,” said Pat Taylor, president of Proactive Technologies, a custom-systems builder and solution provider in Carrollton, Texas, specializing in digital infrastructure for prepress and publishing operations.

What&s launching Proactive into managed services is a more robust Intel Server Manager that now allows custom-systems builders to take the leap into the managed services at a relatively low cost. “All it takes is a $600 card and building the infrastructure for a network operations center,” Taylor said.

He explained that until recently, Server Manager was limited to monitoring basic system functions such as temperature sensing and CPU utilization. “Basically, it just monitored fans turning,” he said.

But now Intel has beefed up the product&s functionality to allow for monitoring and reporting proactive information that can prevent system failure. And that thrusts system builders into a whole new ball game.

“Now we become more than just a white-box builder,” he said. “We can become a true business partner. As a custom-box builder, we get paid to know the business, not just the machine. Now we can look at [our customers&] business and understand where they have problems with service and manage those services.”

With hardware margins declining, “this gives us an opportunity to demonstrate our value-add,” he added.

Proactive&s initial foray into managed services is with Enovation Technical Services, a division of Fuji Photo Film USA. Proactive has built Fuji&s digital prepress and publishing systems under an OEM relationship for the past seven years. Proactive will have Fuji engineers sell the managed services and provide the support, while Proactive will monitor systems for Fuji from its Dallas-area headquarters.

“We don&t charge for support and have never sold service contracts,” Taylor said. “But this gives our channel an opportunity to charge [for the service] and keep the revenue in-house. And I don&t have to hire support people because I&ve got a channel to do it for me.” What&s more, Taylor said the ability to offer managed services allows him to build relationships at a higher management level within his accounts.

“We have been working with product development guys, but this got us to the top. We have developed a lot of relationships [with CEOs] because they have embraced our approach to business,” Taylor said. “They know they have to be on Proactive platforms because we are the only ones that provide [managed services] to our vertical.”

Kevin Tubbesing, CEO of CIO, a custom-system builder in Shawnee Mission, Kan., said offering managed services to his customers translates into a substantial increase in hardware margins in addition to incremental revenue from services.

“We can double hardware margins by offering managed services,” he said. “When you are also going to deal with a managed service associated with the deal, you&ve already bought a little bit of trust factor, and the customer is willing to work with you even if you are slightly higher on the hardware.”

Tubbesing said he has been offering managed services to his small- and midsize-business customers for the past four years. He noted that small businesses either have low-level technical people managing their IT resources or nobody at all. As a result, that&s given Tubbesing an opportunity to fill the void.

“To get the hardware sale, we had to offer the services,” he said. “For close to 35 percent of our customers, we are their IT department.”

Tubbesing said he&s currently focusing on better managing his managed services offering. He said that there are a plethora of tools out in the market available to manage IT resources, but he hasn&t found one that offers all of the functionality that he needs.

“We need a tool that reaches out and touches every server that we install and feeds that information back to our central server,” he said.

Brian Deeley, manager of Graymar Business Solutions, a solution provider and custom-system builder in Timonium, Md., said he&s looking at new software tools that can help him expand the scope of managed services his company offers. “We just signed a contract with [LPI] Level Platforms and picked up their product line,” he said.

Ottawa-based LPI&s Managed Workplace remote monitoring and management software is targeted at IT service providers that support small and midsize businesses.

Deeley said he has long provided managed services to some of his customers, but those managed services focused on offering guaranteed service-level agreements. Graymar also offered network and security management to customers, but it was labor-intensive. “We would put a person on-site maybe once a week and do an evaluation of the system, look at the server logs and see if there was anything we needed to do proactively,” he said.

But Managed Workplace will allow him to centrally manage systems from a remote location. “This will allow us to bring that level of service to a much larger client base without a significant increase of staffing levels,” he said. “With remote management, you can have one person managing many more sites than putting someone physically on-site one day a week here and one day a week there.”

But Deeley noted that custom-systems builders hoping to capitalize on managed services can&t solely rely on remote management if they hope to expand their services revenue.

“To keep customers happy, you still have to put people out on-site,” he said. “You have to proactively look at things from time to time. This [software] might prevent us from having people out on-site as frequently as in the past, but one doesn&t displace the other.”