Warranties, upgrades, maintenance services hot sellers in cold economy |  |  |
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Just as many consumers are keeping their current homes or cars, many businesses are holding onto existing technologies in an effort to outlast the poor economy.
As a result, savvy solution providers have the opportunity to sell services -- such as extended warranties, data-management services and maintenance contracts -- that keep clients' older systems up-and-running. By doing so, these VARs also are able to further cement their customer relationships and be the go-to solution provider partner once organizations are able to shake loose some additional IT dollars.
"We are seeing the services part of our business pick up," said Don Richie, CEO of Sequel Data Systems, in Everything Channel's annual State of the Market report. "The bottom line is that companies that have to cut back on their infrastructure are coming to us and asking if we can provide a person two days per week to manage their data center, and pay us $200 per hour vs. paying someone's salary."
Managed services, which give a solution provider responsibility for operating clients' data centers and networks, deliver recurring revenue to VARs and a lower, regular cost to customers, benefitting both parties during a difficult time.
"Are the projects smaller? We're seeing some of that, but overall we're seeing a lot coming through," said Greg Starr, COO of solution provider IT Works, in the report. "If you're busy with managed services, you're not waiting for the phone to ring..."
Service Success
In fact, revenue from professional, technical or managed services increased to 56 percent on average, compared with 49 percent last year, according to the State of the Market. Both small and large VARs are generating more sales from services -- including those solution products with sales of more than $20 million, which now credit services for almost half of their revenue, the study found.
Solution providers that deliver cost-containment services are successfully approaching small and midsize clients.
"Upgrades are being put on hold," said David Dadian, CEO of VAR Powersolution.com, during Everything Channel's "Selling Into The SMB" virtual trade show panel discussion. "We're working with clients to make sure their existing infrastructure is capable of getting them where they need to be."
The opportunities are ripe -- but the cost could overwhelm many solution providers looking to go it alone. Partnering with a larger service-oriented business allows VARs to deliver margin-rich services with the backing of a company with bigger pockets, larger staffs and more resources at their disposal.
Partnering for Profit
Obviously, starting from scratch can be a time- and dollar-consuming challenge for solution providers looking to add extended warranty and maintenance contracts to their portfolios. Offerings such as Ingram Micro's Seismic Managed Services, IT Labor Services and Warranty Contract Management eliminate duplicate steps and allow VARs to stretch their resources to meet all clients' needs.
"Our goal is to give solution providers the ability to access and leverage a comprehensive suite of recurring revenue service offerings that can be private-labeled by the solution provider and offered as part of their own service portfolio," Justin Crotty, vice president of services at Ingram Micro North America, told CRN. "We want to reduce the barriers for solution providers looking to offer recurring revenue solutions."
The distributor's Seismic Managed Services enable VARs to generate revenue streams for high-margin services; scale their services portfolios without related infrastructure costs; improve service business processes; improve customer satisfaction and service-level agreements; increase profitability through recurring revenue streams; become more well-entrenched in clients' operations and proactively recommend beneficial products, solutions or refreshes. The company's Seismic Warranty Contract Management features a Reseller Services Portal, Product Protection Plan and Manufacturer Warranty Information from key partners such as Cisco, HP, IBM and Lenovo. IT Labor Services includes On-Site Professional Services, IT Staffing, Business Continuity and Disaster Recovery Services and Virtualization Services.
Throughout the year, Ingram Micro and partners such as Cisco have webinars to educate solution providers about its service offerings. For example, Reseller Portal training is available online on Jan. 27 at 11 a.m. Pacific; Feb. 11 at 10 a.m. Pacific; March 11 at 10 a.m. Pacific; April 8 at 10 a.m. Pacific; May 6 at 10 a.m. Pacific and June 3 at 10 a.m. Pacific. Cisco's complimentary SmartNet ordering training is scheduled to run on Ingram Micro's site at 10 a.m. Pacific on Feb. 25, March 25, April 22, May 20 and June 17. Seminars on leveraging Ingram Micro's virtualization services to increase sales will go live at 10 a.m. Pacific on Jan. 27 and 1 p.m. Pacific Jan. 29. Visit http://www.ingrammicro.com/ext/0,,20698_19722_20699,00.html to register.
Solution providers also can take advantage of an array of taped webinars on Ingram Micro's site. Topics range from profitability to managed services technology, as well as professional services automation and case studies. These free webinars, some of which require an Ingram Micro customer account number, are accessible at: http://www.ingrammicro.com/ext/0,,20749_19722_20699,00.html.
Extended Warranties
Watchdog magazine Consumer Reports has a long-standing point of view against the value of extended warranties. While the debate continues among individuals, businesses can ensure more than peace of mind when they buy an extended warranty from a solution provider: They can count on business continuity, uninterrupted by hardware downtime, since their VAR partner often will provide a replacement within a preset period of time.
By offering extended warranties, solution providers also deliver predefined terms, conditions and pricing to their customers and a maximized return-on-investment on clients' technologies. As part of this service, VARs may offer an online registration process that is far less time-consuming than the traditional hard-copy registration cards -- a valuable productivity tool for many businesses. And, since the client's existing technology partner provides this service, it is not forgotten -- a frequent problem with extended warranties that span several years -- if a product acts up or dies during the warranty period.
As extended warranties generally cost between 20 percent and 50 percent of the initial cost, they are revenue-rich for solution providers, industry observers said. Businesses that expect to keep their products for more than two or three years are more likely to use a warranty and, in the current economy, this business "insurance" often is a sound investment since a well-written policy protects a company from unexpected expenses, both technology- and productivity-related.
Service warranties cover performance as well as the hardware, an invaluable resource for organizations whose lifeblood depends on their network of PCs and laptops. Some plans include batteries, a big saver for an office with a large percentage of mobile users. If a warranty does not offer a replacement or loaner device, solution providers should include an anticipated turnaround time for repairs to ensure customer satisfaction.
To generate more extended warranty sales, solution providers should be able to quickly outline the advantages of their offerings, perhaps by relating real examples of how particular clients benefitted from their warranty coverage.
Maintenance Contracts
Unlike extended warranties that may or may not be used, clients will use a VAR's maintenance contract on a preset basis, be it twice a year, annually or another predetermined frequency. Like extended warranties, these arrangements benefit both parties, since the solution provider is assured of a set amount of revenue and work, and the customer knows its IT partner will do agreed-upon work to extend the life of its technologies.
Solution providers that attract new clients or change break-fix customers to maintenance-service-contract customers generate steady income each month, while clients are assured their systems are working optimally. These contracts also give VARs another way to differentiate themselves from competitors, and add more value to their relationships. By offering multiple levels of support -- ranging from same-day, on-site support to less costly next-day remote coverage -- VARs can meet every clients' IT and budget needs.
Demonstrating the ROI is critical to winning a managed services contract, according to VAR executives. VAR Harris Computer Services -- which offers managed firewall service; spam filtering; network system administration; patch management; security configuration policy enforcement; VPN services; remote monitoring and server management; asset/inventory management; security vulnerability auditing and off-site data backup --recommends discussing expectations and writing a contract based on this discussion, investing in the relationship, keeping clients up-to-date on the VAR's work since a good managed services relationship is transparent, and measuring customer satisfaction.
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