Managed Services 2.0: Are You Ready?

True managed services will go beyond monitoring customer networks and can include taking over an end user's entire network infrastructure. But you need to take the right steps to get to that point, said executives in the panel, moderated by CRN Vice President/Editor Heather Clancy.

Two solution providers on the panel said they still face challenges as they transition their business model to include more recurring revenue.

"One big hurdle, we had technicians resistant in the beginning. They thought they would be out of a job because hey wouldn't be on-site any more," said Jane Cage, COO of Heartland Technology Solutions, Joplin, Mo. "Second, we had to figure out how to download patches [to clients]. Our network went to a crawling halt because we were pushing patches out to so many machines. We learned a lot what not to do."

Frank Ballatore, president of The New England Computer Group, Ridgefield, Conn., said his company built its managed services business methodically, which allowed it to work out kinks along the way.

"We backed off our whole plan for a year and a half until the [MSP platform] products were really ready. That was one key. Now there are a lot of great products out there. And we're not selling to 50 or 100 clients at a time -- small baby steps to four or five clients at a time," Ballatore said. "We're also working with vendors, getting the rule sets to work. That's been our biggest struggle. We've changed our SLAs several times. Right now, we're only doing one-year agreements."

A successful managed-services practice rests on one basic theme, said Gary Gilliam, vice president of North America channel operations at Xerox.

"If you understand your customer and how to operate in their environment, you can increase productivity and stake a claim that you're the trusted adviser. There's a clear opportunity there," Gilliam said.

In many cases, end users still need to be educated on how managed services can benefit them, Ballatore said.

"They don't read CRN. They don't go to XChange conferences. Most have no clue, even if they try to describe it another way. How do you explain to a client that we used to see you twice a month, but now we're not going to come over anymore and that we're putting some software on your network that's your new IT guy?" Ballatore said.

Of course, it also depends on how you define the nebulous world of managed services, noted Jesse Trotter, director of channel sales at the Oki Printing Solutions arm of Oki Data.

"We don't see managed services as a destination. We all know why we're here. It's the opportunity to take a three- to five-point sale to a 35-point sale. In reality, this is a three- to five-year engagement document output strategy that vendors can help you with. It's not one size fits fall. Each customer has different needs," Trotter said.

Added Ballatore, "There are about 400 definitions of what managed services is. At one end, you have purely monitoring services. You're alerted to items that need your attention. At the other end, you take over the entire infrastructure of a client's network. We're slowly getting into more total managed services, but right now we're more in the middle."

Responding to question about making the business transition from products to services, the solution providers on the panel said managed services won't be -- or shouldn't be -- their only revenue stream going forward.

"Managed services is a piece of what we do. Our clients are happiest when we tell them your Exchange server is almost out of space, but we took care of it. That's not managed services; that's good business," Cage said.

It's important to be proactive with clients to ensure that managed services is more than break-fix prevention, she added. "We say tell me about your business processes, and here are the technology tools that apply. We're exposing them to new technology. We had a group of customers in recently who had never heard of Microsoft Groove for collaboration. We do those kinds of things all the time," she said.