ConnectWise Partners See Big Payback From Managed Services

That was the message from many of the more than 400 ConnectWise partners gathered for the software maker/MSP's annual partner summit in Tampa, Fla., on Thursday. Naysayers decrying the MSP model as hype are putting their business at risk, ConnectWise partners said.

Tracy Butler, president of Acropolis Technology Group, a St. Louis-based ConnectWise partner, said his profits have at least tripled since he took the managed services plunge with a $100,000-plus investment two-and-a-half years ago.

"We have double-digit bottom-line profit now, and we've never had that before in the history of the company," he said. "I feel like the business is just in a better place as a whole. And the fact we have more recurring revenue rather than one-time project revenue means the business is worth more."

Butler added that his clients prefer the managed services model vs. the old, project-based time and materials relationship. "Our clients knew us when we did business the old way, and our clients know us now. And they tell us this is better," he said. "That's the litmus test."

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Kent Erickson, president of Pointivity, a San Diego-based solution provider, said he has moved beyond managed services to a total outsourcing relationship with his clients for all IT, including hardware and software licensing. He said his profits will be up more than 100 percent this year on an expected 80 percent increase in sales.

Pointivity is inking three-year, fixed-fee contracts with clients ranging from $9,000 per month to as high as $51,000 per month, Erickson said. "I'd be out of this industry if not for managed services," he noted. "It is getting tougher and tougher to make it as a systems integrator. You are getting pressured from everywhere."

Arnie Bellini, president of Tampa-based ConnectWise, which now has more than 650 solution providers running ConnectWise software, said VARs not moving to managed services are being passed by and are declaring it a "non-event to make themselves feel better."

Bellini said most VARs entering the managed services arena are looking at a steep risk curve. Yet once they reach a certain level of responsibility, the risk declines and the financial returns soar, he noted.

"When that risk starts going down, your recurring revenue per month dollars goes up," he told a packed hall of ConnectWise partners. "That's managed services at a mature spot. That's where you need to be."

Paul Dippell, CEO of Service Leadership, a Plano, Texas, consulting firm that has done extensive research on managed services, said the model is a much healthier business with stronger cash flow than the traditional solution provider model.

"It's like a nice, regular heartbeat vs. a heart attack," Dippell said. The traditional VAR business might have a great month with strong utilization rates but then do half that the next month and be out of business, he explained.

Richard Reiffer, CTO of Trivalent Group, a Grandville, Mich.-based solution provider, said his company is beyond the initial stage of adopting managed services and is seeing that it can manage a larger chunk of business with fewer engineers more profitably.

"This has improved our bottom line tremendously," Reiffer said. "You have to adapt, or you will die. I feel so much better about our financial health and being a stockholder in the company. I feel very good about it. It's great to see the profitability. I sleep much better at night now."

Eric Dykes, president of United Technology Group, a Buford, Ga., solution provider, agreed that his business has a much stronger financial foundation since it transitioned to the managed services model this year.

"We are now in a position to affect the bottom line in a way that we weren't before," Dykes said. "What is the alternative? The original VAR model, which is to sell hardware. There is no value there. That is going away. Time and materials shops may stay in business, but it will be a brutal existence. As they say in Georgia, that dog will not hunt."