Managed Services: Two Sales Forces May Be Better Than One

One of the key issues associated with moving into the managed services business model from traditional resale involves converting the sales force from a transactional orientation to one that is based on monthly recurring revenue streams. Many companies have grappled with this issue and have employed various strategies for dealing with it, with some proving more effective than others.

One option involves maintaining separate sales forces for each business model.

Such a strategy is being leveraged by Hargray Communications, a South Carolina-based triple-play local exchange carrier that in January announced an agreement to acquire a local managed service provider, Savannah, Ga.-based iTech, as part of an effort to add new services for its customer base of approximately 9,000 businesses in South Carolina and Georgia.

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Even though Hargray, as a service provider, is very much accustomed to dealing with annuitized revenues, the company's leadership decided that running two disparate sales forces would lead to the highest and most immediate results.

"We believe the opportunity is large enough to have two sales forces, and that's what we intend to do," said Andrew Rein, the company's vice president of sales and marketing. "We intend to keep the current sales force we have in place and bring on the data center services sales force that we are now acquiring. We will develop referral programs so encourage both sides to send leads to one another, but for the foreseeable future, we prefer to keep our sales people focused on the offerings with which they are familiar, as opposed to immediately starting to cross train them. The comp plans are compatible enough where each side has solid opportunity, and we will strive to make them more similar as time goes on."

Rein went on to explain that as customers approach a crossroads regarding how to handle their information technology needs, they need to be able to depend on sales people with expertise in that particular area of discussion.

"Customers are looking for help in dealing with their IT needs," he said. "We recognized that while we do a lot of things well, we did not have the DNA to be in the managed service business. So, we're really happy to find iTech and their team. Their sales team fully understands the managed services value proposition, and we want to fully leverage that."

The dual sales force underscores industry-level challenges that many companies have experienced as they moved into managed services, which typically require sales personnel to look at their day-to-day functions in new ways.

"Sometimes it's a situation where management likes the idea, but the sales team won't sell it," observed Justin Crotty, vice president and general manager of NetEnrich, a San Jose, Calif.-based provider of infrastructure management services. "If you ask your sales force to do things in a different way, there's often a little bit of fear regarding how the changes will impact revenue, profits and their own income.

"Companies need to acquire people dedicated to changing the model. Don't disrupt the applecart. Let those people continue to sell the way they like, but then bring on new people who will make the service business successful. And, success breeds success."

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In the example of Hargray, Rein sees his dual-force strategy as a means of optimizing talents rather than one of overcoming resistance. But, he also believes that moving into managed services from a local exchange business model gives his company unique advantages.

"Companies like ours have an advantage because we are used to recurring revenue models and annuitized revenue streams," he added. As things move more into a hosted environment, we can spread those investments over thousands of customers. This gives us economies of scale that others won't be able to reach. Plus, we are focused on the local area, which enables us to go in and customize the environments and be nearby when they need us. We are large enough to have scale but not too large to lose the local touch."

Combined offerings will include server hosting, monitoring and management, databases, IP telephony, hosted PBX, on-site servers and on-site phone systems and devices.

"I believe that our existing business is going to thrive as a result of being able to deliver to those customers that have been with us for such a long time and add to the equation," Rein summarized. "We're going to be rocket fuel for iTech. They used to be a small company with no network, and now they're going to be able to go to thousands of customers with a great network at their back, and I think that's something that we are really going to be able to capitalize on."