Six Reasons Why a VAR Should Add Managed Services
As a value-added reseller of technology, you may have experienced some of the rapid changes in the VAR landscape. It's becoming increasingly difficult to achieve competitive margins, putting added strain on your company's bottom line.
Maintaining a competitive edge and positioning your company for growth requires immediate action. Looking outside of the traditional VAR business model to include managed services is an excellent place to start. This renewed effort is not merely a quick implementation with follow-up training or even offering support as needed. A managed service provider's role is to effectively monitor and manage customers' IT environments to create a monthly revenue stream.
Here are six reasons to adopt the managed services model.
Reason #1: Get More Sales & Increased Customer Satisfaction
We are witnessing exponential growth in technology and mobile functionality, leading to users requiring a dedicated managed services provider supporting their IT environment. They are careful in which provider they select. You have an advantage with clients that already rely on your purchasing and procurement services. They are likely to leverage their trust with you as their business partner, who can meet their additional needs. This relationship translates into other sales for your business and more satisfaction for your customers. It's a win-win situation.
Reason #2: VARs are Struggling to Realize Significant Profit Margin Increases
Margins on hardware continue to shrink. Consider a reseller with a mix of 90% hardware and 10% services. That reseller is likely to be looking at a 6% profit margin, or even lower. On the contrary, it is not unreasonable to estimate margins as high as 15% for an MSP. So, while the upfront expenses of adopting and maintaining an MSP offering may discourage you at first, it is worth the investment with the uptick in margins.
Reason #3: Predictable Revenue Streams
VARs are susceptible to uncertain revenue flow. You are more likely to secure a one-off deal with the opportunity for large deals being sporadic, with a per project, per contract, "one and done" experience more common than not. If you are footing the expense of keeping highly skilled techs around to support set-ups and training, that in-between-contracts downtime can further dig into profit, on top of low margins. On the other hand, an MSP model maximizes revenue potential by creating contracts for ongoing customer monitoring, maintenance, security, and more, setting up a flow of predictable monthly payments.
Reason #4: Value to Your Customer
A traditional VAR business model is inherently limited to single customer interactions, for example, implementing a solution or training users. It may also extend to sporadic, reactionary touchpoints, like performing product support. Unlike a VAR, an MSP's ongoing interaction with its customers is innate and leads to a more cemented business relationship. You have the opportunity to become a trusted IT advisor who offers an understanding of "everything IT" that matters to their business. This value-building relationship enhances your services and grows to become more consultative. Such a relationship builds value in your services and eventually increases customer retention.
Reason #5: Financial Stability
Every owner aims to eliminate financial independence. The success of a business, however, is earmarked by other long-term benefits. This includes the ability to attract investors or buyers when the timing is right or secure financing or capital injection to boost operational growth. Being profitable enables a business to opt for either scenario. A reseller's expense increases simultaneously through company growth, which may erode their net income percentage and overall financial appeal. MSPs are more attractive to lenders, investors, and purchasers because they are more likely to generate higher net incomes, which provides a safety net to meet the needs of increasing expenses.
Reason #6: Offer More Than Product
As a VAR, you are likely not the only business from which your customers source their products. Having a managed service can give you a competitive edge. Furthermore, partnering with ConnectWise broadens your potential to provide best-in-class solutions. It proves to your customers that you are serious about taking your business and theirs to the next level.
For more information about ConnectWise solutions, contact your Ingram Micro Sales Rep or Bill Capone - ConnectWise Channel Account Specialist at firstname.lastname@example.org, 905-755-5000, ext. 55604.