Channel Chat: Offering managed services as a networking solution provider

Offering managed services can give business a boost, but only if the service provider understands managed cloud services. Learn about offering managed services, including understanding demand and how to market as an MSP.

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Businesses from SMBs and enterprises are increasing efficiency and slashing costs by transitioning to managed cloud services for their usual IT needs. A networking solution provider could stand to boost business and increase profits by offering managed services, but only if the provider understands the ins-and-outs of the cloud.

In this podcast with Lauren Robinette, analyst for ACG Research, learn about the role of the network in managed cloud services, as well as best practices for offering managed services. Robinette explains the demand for networking managed services, and how managed service providers (MSPs) can market themselves to customers. She also touches on the managed services cloud training program offered by ACG Research.

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The following is a transcript of the podcast.

Elaine Hom: Welcome to this edition of ChannelChat, the podcast series from SearchNetworkingChannel.com. This is Elaine Hom, associate editor, and our guest for this week is Lauren Robinette, principal analyst at ACG Research. Thanks so much for joining us, Lauren.

Lauren Robinette: Thanks, Elaine. It's great to be here.

Hom: Lauren, you specialize in managed services. Please give us a basic idea of what you mean when you say managed services in relation to networking. How are managed services and clouds related? How does networking play a part in all of this?

Robinette: Actually, Elaine, network is key in managed service. The whole ability to deliver a high-quality, high performance service is dependent on the architecture. The partner you choose when building out a scalable network will allow you as a managed service provider  to grow.

Now as customers, as managed service offerings grow -- and that's generally because of the result of the economic downturn -- has caused a movement towards the cloud. It's taking an interesting journey. Customers originally have coveted their on-premise devices because it offers them security. The pressure to ensure backup for customers have become more and more prevalent. That means that they have now come to rely on the fact that their backup is probably a little less expensive to maintain in their on-premise device. They migrate quickly to the cloud and give up that on-premise security.

Finding out that they don't have to have the resources to manage, it costs a lot less from a heating and green aspect, they make that financial decision to move to the cloud. There's kind of a journey, a product manager told me -- Andrew Sharpe of Exponential-e, out of the UK. He's a managed service provider, and he says it best: "Customers start as server-huggers and then they move to backup junkies and then finally migrate to be cloud lovers." I love that quote, because it really shows the story of how the network and the cloud play together.

Hom: What are some things to take into consideration when deciding if you want to be a managed services provider?

Robinette: The investment to move into this model can be significant. Estimate's upwards towards $500,000 range.  So to just build a knock in the 24/7 staff, the standards to meet the needs of the customers expecting up-time, call center support and monitoring can be pretty significant for an average VAR or SI.

Robinette: There are other methods partners and system integrators might take. Most talk to your service providers, offer reselling commission-based compensation. Adding a host on top of a top-tier partner, a solution, really makes a great marriage. It allows VARs and SIs to get into the renewable, annuity-based managed service business by selecting partners to partner with.

No knock, no problem. That's a kind of offer. It's a win-win relationship for the MSP to reach VARs and SIs that give them additional reach into the market. It also adds great offers to take advantage of the new landscape offered up by the economic conditions and the realities that we face today.

Hom: What is the demand for networking managed services? How can managed service providers profit from this?

Robinette: Think of the network as the data center investment. Most managed service providers offer a range of offers on-premises or CPE, a hybrid that might include a managed and a hosted services and then ultimately the cloud.

The offers in the market should solve customer problems. This has really been a struggle quite a bit for managed service providers in the market. The customers generally are focused on their mobility needs or their communication messaging needs or their cloud or data center needs. MSPs that understand that the customers are not looking for a technology but for solutions to meet their needs can tune the service offerings to solve those needs.

The industry struggles with this, as I said, and examples of successes are still forming. Once an MSP selects a technology and then invests and creates the offerings to go to market with, many of the times the customer's offer is described as a technology and not what it does for the customers. We've seen the consumer-focused MSPs tune their offers to be easy to understand, like the cable companies with the triple pay, for example.

The margins in the service area done right can be upwards 50% margins. Figuring this out is key to gaining customers to offer. ARPU, or average revenue per user, is a key measurement of a success of an MSP. That's what you really want to tune to. How do I get my offer understood and to market very quickly?

Hom: Could you give our listeners a couple of tips on how to market themselves as MSPs?

Robinette: Definitely. That's one of my backgrounds and capabilities. Knowing where you are in the cycle of customer development is very key. There's a continuum or marketing life cycle of customer awareness to preference to purchase that requires different methods of touch to be used. It takes all elements of the process to move the customers into a constant funnel of sales.

You start with the offer. Make sure that offer is tuned to the market, and make sure it's reaching the profile of the buyer for the service that you're trying to sell. Know about the care about's of the customer, the influencer or the buyer. Initially, education and why you should care is really important.

How does it solve the customer needs? White papers targeting technical buyers. What are the product and service decisions that go through the person's mind that would help them understand it? Education venues, like seminars, white paper fulfillment, loyalty clubs, so that they can get access to more rich content, always is a very important part of the model.

Now that you've touched them a number of times: the ability to move them along the cycle. That can include a basic offer that says, "What are the savings over on-premise investment as a basic offer? What have you put together as an offer to solve customer needs?" Based on the profiled customers that you have in your loyalty group, targeting multitouch campaigns that reach them through email or things like a mail drop and then a telemarketing campaign, move them from cold calls into interest into identifying their purchase time frame. And then depending on the offer, is it a transaction closed, or is it a service solution with a longer sales cycle?

The customer transformation to managed service from product in-house is a migration over time. Each offer has a very different go-to-market process that I focus on in this area.

Hom: What is the managed services cloud training program that you are offering at ACG Research?

Robinette: ACG Research focuses on the managed service provider and the vendors selling their technologies to managed service providers. Through a set of several modules, we have the life cycle of service creation to offer creation to host go-to-market modules as well as top affiliates to recommend to quickly get your offer to market and close business.

We have a module on supporting vendors provided professional services and how these professionals can help you with advanced technology and closing large deals. We have a module focusing on creating a channel through development of a VAR or SI program, giving MSPs reach into channels they don't own today.

We have a module that takes apart the process for a self-definition of your service offer and the transaction to value-added service that matches up with the program and go-to-market model that you might need to reach each buyer.

Each of these modules are customized for the MSP as needed or can be purchased in a generic form -- white paper and PowerPoint format -- for self-learning. Each of these are available on our website and a rich set of successful tested programs that are running today in high-tech vendors working in the network space today.

Hom: That's about all we have time for today. Thanks so much for joining us, Lauren.

Robinette: Thanks, Elaine.

Hom: Be sure to check out SearchNetworkingChannel.com for all of your networking channel professional needs. This has been Elaine Hom and thanks for joining us.

This was first published in November 2010

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