Making a move to managed services

The final area of discussion on the agenda was the move to managed services. With hardware prices and margins in seemingly terminal decline, vendors have been trying to push resellers into adopting managed services models for some time now. So what progress has been made?

Axxis Technology is a small SMB reseller based in the regional NSW town of Dubbo. It has an annual turnover of about $4 million and, according to its managing director, Mathew Dickerson, about half of its customers have now been transitioned to a managed services model. As a result, it is raking in about $1 million every year from fixed contracts that help alleviate the cash flow problems suffered by many smaller resellers.

"If you go back six or seven years, we were making 30 points on the hardware and could afford to do support. As time went on, and we started making less, it became increasingly important to get the right mix in the model," he explained.

"That means charging for the services you provide and the pain points we were hearing from customers was that they wanted a fixed price, guarantees about response times and to talk to somebody on a regular basis.

"The clients love it because they get fixed pricing and they know it is proactive. From a business perspective, we are getting paid in the right way - we make a little bit of money on the hardware and are then paid for our services. That's how it should be."

Sydney-based Tardis Services did an analysis of its services business about four years ago, according Phil Jones. Recognising that CPU power was becoming a commodity, it moved to a much stronger managed services model and is now reaping the rewards.

"Probably 50 per cent of our services income is now made up of contractual onsite visits and reporting while the remainder is still break fix," Jones said. "When it comes to running a business - staff allocation, paying the rent, cash flow - managed services makes a lot more sense and we have happier customers. "We don't sit down and explain why a server fell over; we talk about what we are going to do over the next 12 months. We did a five-year budget plan with a customer last year. That was fantastic. They are the discussions we want to have with customers."

But despite the obvious benefits, Jones pointed out that the move had not been an easy one. Correct Solutions is still in the earlier stages of developing a managed services model.

"We have been doing it for a little while now and generate about 20 per cent of revenue through managed services," technical director, Wayne Small, said. "We are still refining and don't have it right yet. "You want to be able to make something fairly structured, so your support team can use the model for a five-user or 50-user network, but we are getting to the point where we are wondering if one size fits all." For Tardis Services, the most successful managed services engagements have been where customer expectation has met the services it offers.

"It's important to spend time with the customer to determine exactly what they need because there is no point them having first-level helpdesk or two days on site if they don't need it or see value in it. You have to set the right expectations," Jones said.