VARs: Financing Options Fall Short For Managed Services Model

In a panel moderated by Robert Faletra, president of CMP's channel group, solution providers in attendance participated in an interactive poll on services, and 64 percent said they were involved in managed services.

But from that point, the discussion quickly shifted to money. Panelist Jane Cage, COO of Heartland Technology Solutions, Joplin, Mo., said that in a managed service model, she couldn't afford to pay for the hardware up front and then recoup her money on an annuity basis.

"Once you include hardware, it changes the whole deal," Cage said. "I need a leasing plan. I want to use Ingram's money, not mine."

In a second audience poll, 83 percent of solution providers said getting paid up front for managed services that include hardware and software is an issue. Upon seeing the results of the poll flashed on a screen, one audience member said, "I'd like to meet the 17 percent who say it's not as issue."

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Stacy Hayes, vice president of DS3 DataVaulting, a solution provider in Fairfax, Va., called financing managed services a huge problem. "I spend 65 percent of my time trying to track financing," he said.

Leasing arrangements are too rigid and don't offer the flexibility necessary to accommodate a managed services business, Hayes noted. "There is no financing model for managed services," he said.

Panelist Justin Crotty, who's set to become vice president of services for Ingram Micro's new services division, due to launch Oct. 1, said that offering financing for a service model is "basic blocking and tackling."

He added: "It's our position that the services supply chain is more important than the product supply chain."

Panelist Terrance Chalk, chairman and CEO of Compulinx, a White Plains, N.Y.-based solution provider, urged VARs to "lean on the credit worthiness of your customers" in the form of leasing to solve any cash-flow problems in the managed services environment. Crafting a financial solution to go with managed services is as important as the technology, he added.

"The money vehicles are not keeping up with the innovations in technology," said Robert Deshaies, vice president of Microsoft's U.S. partner group.

To offer bundled solutions that work with the evolving managed services model, vendors should work in cooperation with distributors and financing companies, said John Thompson, president and general manager of Hewlett-Packard's Americas Solution Partners Organization. "Ingram Micro and others can play a role," he said.

Vendors must be more aggressive and flexible if they want to succeed in the managed services space, said Donn Atkins, general manager of IBM global business partners.

"If you figure this out, you'll get more of my business," DS3's Hayes told the vendor panelists.