“Seismic” Events in IT Services


The Elephant In The Room by Justin Crotty

The managed services market is growing rapidly and has strong, long-term potential for many who are pursuing it.  It is changing the way IT services are consumed and delivered.  It is helping many of us diversify and strengthen our value propositions and balance sheets.  We are all bullish about the future and the opportunity in front of us. 

There is one significant hurdle, however, that nobody seems to want to acknowledge – the proverbial elephant in the room.  For those of us who target the reseller, solution provider, or managed service provider market as our customer base, this issue is top of mind.  Selling managed services is hard, but not because of the technology involved. 

Not enough end users are consuming their IT services in a “managed service” form factor yet.  There is a very real, and very problematic growth bottleneck at the point of sale with end users of these services.  We, as an industry, are simply not getting the penetration into the end user base that is required to grow and scale this market quickly.  And for many of us, that growth is not happening fast enough. 

In fact, the technology sale is not the problem.  The bigger issue here is the selling itself – how do we take our offerings to the next end user?  And the next?  And the next?  If you ask several solution providers how many customers they have and then ask them how many managed services customer they have, you will find that the managed services penetration into their overall customer base is low.  Why? 

We, as an industry and a channel are still not investing enough in the sales and marketing capabilities of our respective organizations.  Everyone is to blame – vendors, distributors, solution providers.  Nobody invests enough in developing their sales and marketing capabilities. 

When I hear a VAR ask a vendor how much margin is available for him to sell a managed service, I know we are not evolving.  The margin in any managed service is how much you can get, not a number determined by a vendor or application provider.  Yet we continue to ask those around us, or blame each other, for margins we can or cannot get out of any particular offering.  The reason that this concept is so hard for us to grasp is that we simply don’t understand how to sell value and differentiate ourselves from one another.  And until we recognize that and take steps to resolve it, we will always struggle to provide the value proposition that customers demand from us. 

If you find yourself fortunate enough to have some dollars to re-invest in your business, where are you going to focus those dollars?

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