a guide to selling managed services -...

A guide to selling managed services VoIP and unified communications

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A guide to selling managed services: VoIP

and unified communications

Contents

How to become a managed services provider

How to sell managed VoIP services

How to offer hosted unified communications and collaboration services

VARs, like the technology vendors they partner with, are under increased pressure to find new revenue streams as their customers are stuck with flat IT budgets. So it's no surprise that a growing number of VARs are considering the transition to managed service provider (MSP). Whether by building out new technology to offer remote network and application management or reselling a distributor's managed services, VARs are working to launch annuities-based businesses as quickly as possible. The good news for VARs is that despite the fact that today's macro-economic indicators are distressing to most businesses, MSPs find this economy to be unusually favorable. As IT organizations downsize or are expected to do more with the same staff, they have no choice but to turn to third parties to help them accomplish their requirements. But VARs have to approach the market swiftly and strategically since the MSP business model is attracting more and more companies, and competition is becoming more intense. It's crucial for successful MSPs to stand out from the crowd by offering a full suite of services, from the most basic to the most advanced. In this guide, we'll take a look at the reasons for becoming a managed services provider and some advice for adding managed services to your offering, then drill down into some specific advice for offering managed VoIP and hosted UCC.

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The transformation from VAR to managed service provider can seem

daunting, especially for the smaller, more specialized reseller. Before

considering the move, VARs need to understand the business drivers behind

an organization's decision to use managed services and which services are

in demand (read "most profitable").

There are common triggers and business drivers that lead companies down

the managed services path. One major trigger is the need to control costs in

response to decreasing budgets and staffs. Companies are scrutinizing IT

expenses and find benefit with the predictability of managed services.

Managed Services Triggers

Reduction in Staff Reduction in Budget

Application Complexity New Technology

Increased Number of Virtual Workers Change in Management

New Business Initiative Hardware End of Life

Merger or Acquisition Increased Regulatory Requirements

Figure 1: Managed Services Triggers (Source: Nemertes Research, 2009)

What managed services are customers seeking?

Nemertes Research recently conducted a benchmark study in which we

spoke with more than 200 IT practitioners regarding their organizations' plans

for managed services. Among those using managed services, the top five

services of interest were:

Storage, back-up and disaster recovery

Network monitoring

Security

IP telephony

Software as a Service (SaaS)

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Other services of interest were managed desktop/help desk support,

managed UC, and managed network optimization.

We've watched adoption of managed services rise dramatically over the last

few years, to 33% of companies in 2008 from 6% in 2005, 14% in 2006 and

22% in 2007. Organizations that would not have considered outsourcing

even a year ago are evaluating, and those that were using these services are

extending them to more of the organization. Also, many companies using

managed services have grown to use an average of four services.

Turning to your vendor for help in becoming a managed services

provider

Until now, various managed services have fallen to specific segments of

providers, usually for technical reasons -- or sometimes because they

seemed a better business model fit. Carriers, for example, frequently offer

network-based services such as router management, WAN management and

implementation. System integrators focus heavily on design and

implementation, whereas outsourcers address network, security or

application management. Vendors and their resellers typically offer

assessment, installation, training, break/fix/truck rolls and ongoing

management.

But as VARs look to expand into offering a variety of managed services, they

may be able to turn to their existing vendors for help. Some vendors such as

Cisco and Microsoft have partner incentive programs specifically based

around offering managed services.

Others, including Cisco, Avaya, Juniper and Microsoft, have strong programs

in place to help MSPs with training, marketing and financing. Training

focuses on both technical (often including certifications) and sales. These

vendors also offer marketing funds typically based on volume. More recently,

some vendors have extended financing programs beyond hardware and

software, to include services. That way the MSP is able to extend various

finance options to its customers.

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Reselling services: An easier transition to becoming a managed

services provider

Distributors and master MSPs also offer programs to ease the transition from

VAR to MSP. Ingram Micro Corp. offers the Seismic Managed Services

program, an online platform and back-up service that MSPs can use for

remote desktop monitoring, management and other select services. Synnex

also offers an on-demand solution for multiple areas -- business continuity

and disaster recovery, security, VoIP, managed help desk, and more.

These solutions and others like them are an easier, turnkey way of getting

started with little up-front investment because they offer a monthly pay-as-

you-go subscription model. Normally, with this type of partnership, VARs pay

the standard license costs for use of the application, along with an additional

monthly hosting fee. VAR markups then vary widely but typically range

anywhere from 20% to 80%.

In another business model, Do IT Smarter offers an Instant-MSP program

that allows VARs to sell managed services to their customers while Do IT

Smarter runs the backend infrastructure. When partnering with a master

MSP, VARs typically manage their daily customer relationships and handle

situations that call for onsite remediation. This allows them to build up trust

as they build out their offerings. This type of relationship is similar to working

with a distributor, as the MSP will pay a monthly fee that it will mark up when

passing along to the end customer. Also, some master MSPs will charge a

onetime sign-up fee.

Building out your own system to become a managed services provider

VARs that choose to independently pursue managed services need to select

a delivery platform. These platforms consist of the hardware and software

used to deliver network-based services and applications and allow providers

to remotely monitor and manage hardware and software (including upgrades

and patching). They also often include very detailed reporting capabilities

that allow customers to easily access reports via the Web.

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Carriers and larger systems integrators typically use their own platforms for

remote monitoring and management, whereas thousands of local and

regional VARs tend to use management products from the vendor-

manufacturers, as well as third-party management tools and platforms from

companies such as Kaseya, N-able and Level Platforms. These tools can

provide information on multiple vendors.

Depending on the types of managed services offered, MSPs may use a third-

party platform along with a combination of specialty management tools. For

example, MSPs often have a standard platform they will use for basic remote

desktop/server management, and they will then add additional specialty tools

for VoIP management, optimization, and so on.

Understanding the differences between platforms and assessing which will

best suit your needs will take time and effort, but you don't have to go it

alone. There are numerous excellent resources for MSPs, including the MSP

Alliance and MSP Partners, which offer training, certification and guidance to

VARs making the leap to managed services.

The keys to success as an MSP include solid customer service, technology

expertise, fair pricing and flexibility. Never assume that a one-size-fits-all

approach will go very far. While it's acceptable to package some common

service types, it's imperative to be flexible and customized in the service

offerings available.

The market is ripe, and it will become more competitive as it continues to

grow. The cream of the crop will focus on differentiating their service

offerings by providing a full menu of options, from the most basic service to

the most advanced mix of services. Be sure to reach out to vendors,

distributors and master MSPs for assistance with partnerships, training,

certifications and support.

Navigating the Public Sector

Let the experts at Comstor help you navigate the Public Sector market.

As Cisco’s original federal distributor, Comstor has been selling into the

Public Sector since 1993. An authorized GSA Schedule holder for Cisco

products, Comstor offers a fully integrated Public Sector marketing

team with experts in each of the applicable sub-verticals: State & Local,

Education, Federal, and Healthcare.

For more information, please contact:

Rich Bue, Comstor Federal Business Development Manager

[email protected]

Ph: 703-403-1577

Government Contract Department has over 40 years combined experience in government contracting

How We Do It

• Comstor has been an authorized GSA Schedule holder for Cisco products since 1997. Go to www.gsa.westcon.com for more information.

• We have an average of 10+ years of experience on our Government Contract and Public Sector Marketing teams.

• Our Cisco Certifications/Specializations courses include: Step Up to Cisco Select, Step Up to Cisco Premier, Step Up to Cisco UC, and Step Up to Cisco Express UC.

• Comstor Consulting Services for Public Sector Partners include: Healthcare Grant Writing Initiative, EDU Opportunities, Discovery/ Development, Federal Capture Management.

• We generate leads and uncover opportunities through: – Tier 3 and 4 Marketing Enablement

– Funded Lead Identification

– E-Rate Lead Identification

Comstor provides marketing support for the following sectors: State & Local, Education, Federal and Healthcare

Public Sector is in Our DNA

Public Sector Enablement

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The past year has been a growth year for managed service providers (MSPs)

despite the troubled economy. In fact, unlike vendors and pure-play

hardware resellers, many MSPs experienced growth because of current

macroeconomic trends.

One of the top growth areas for MSPs is offering managed VoIP services.

Among organizations using MSPs, 33% used them for VoIP services, up

from 22% last year, 14% in 2007, and 6% in 2006.

Why the need for managed VoIP services?

Most businesses are in the process of evaluating, implementing, or operating

IP telephony systems and VoIP throughout their WANs. But while they're

aggressively rolling systems out, they face huge challenges when it comes to

effective monitoring and management. That's because as enterprise demand

for communications support increases, IT budgets remain flat or even

decrease. What's more, headcount within the overall IT department is

stagnant or decreasing, forcing companies to do more with less.

The problem is that when it comes to VoIP, there must be telephony-style

quality of service (QoS). There is no time for lost packets and stalled

communications. Previously, companies addressed IP telephony

performance problems by assigning more staffers to monitoring and

management. That was when these companies had budgets to hire experts

and staff to troubleshoot problems.

With flat budgets, companies generally adopt one of two approaches: Some

buy specialty IP telephony management tools to make sure the existing staff

can isolate and resolve problems accurately and efficiently. Others rely on

third-party MSPs to monitor and manage the system and troubleshoot user

problems.

MSPs are in a particularly good spot now because many enterprises are

realizing it's not so easy to manage VoIP networks and applications in-

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house. Network managers are often shocked to discover how many tools are

required. Companies typically buy anywhere from one to six additional

monitoring products (with the average being two) to effectively manage their

IP telephony services. These include tools to address configuration, network

and application performance, asset and change management, and event

correlation.

What's more, network managers find that while many IP PBX vendors such

as Alcatel-Lucent, Avaya, Cisco, Mitel, Nortel, ShoreTel, and Siemens offer

varying levels of management and monitoring with their products, customers

must still supplement these with third-party tools. Making matters worse,

customers often come to this realization 24 to 36 months after going into

production.

What kind of MSP do customers want for managed VoIP services?

That's when customers tend to turn to MSPs. And they tend to depend on

smaller, regional MSPs to deliver managed VoIP services. In fact, 60% of

organizations with fewer than 1,000 employees turn to regional MSPs. Why?

They prefer the local presence and security of knowing an expert can be on

site quickly. Furthermore, they view the MSP as an extension of their IT staff

-- which isn't always the case with large, global MSPs.

MSPs must offer diverse tools to manage multi-vendor networks

Regardless of whether MSPs are regional or global, they must be able to

monitor and manage multi-vendor networks and applications.

Many MSPs, including global carriers such as AT&T, BT, Orange Business

Services and Verizon, as well as large systems integrators such as EDS and

IBM, use their own platforms to remotely monitor and manage IP telephony

and unified communications (UC) systems. For example, Verizon uses its

own Impact platform to remotely monitor and manage not only the WAN, but

customers' UC systems.

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Often, they augment those systems with third-party tools from vendors such

as Fluke Networks, Infovista, Integrated Research (Prognosis), NetIQ, and

NetQoS. Smaller local and regional VARs tend to use management products

from the vendor-manufacturers, as well as some of the third-party

management tools that can provide information on multiple vendors.

The ability to monitor multiple vendors' systems will become critical, as it is

unlikely that businesses will use only one vendor's system forever. Also,

large organizations may never have a single vendor. Though some

companies are staunch single-vendor shops, as IP telephony becomes only

one component of vast unified-communications architecture, multi-vendor

systems will become unavoidable. In addition, mergers and acquisitions often

bring along a new set of vendors, and while they may be supplanted by the

standard platform, the next acquisition just restarts the cycle.

Bundling VoIP and unified communications services

Because VoIP is such an integral part of UC, it is likely that MSPs will do well

by combining service offerings for the two sets of applications. We expect

more organizations to rely on service partners to assist with the monitoring

and management of their UC infrastructures. In fact, half of the IT

professionals we work with state that UC-professional services are vitally

important because UC adds more network complexity, and real-time

applications bring along requirements for increased bandwidth and stringent

QoS guarantees.

MSPs have the opportunity to create competitive advantage by exceeding

enterprise management and reporting requirements for VoIP and UC. To do

so, they should promote and bundle network services to support

collaborative applications and application optimization.

The bottom line is that providers should be comfortable with multiple vendors

that arm themselves with tools allowing them to offer better QoS to improve

the experience for users. Their offerings should enhance services, not just

manage the application.

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Offering hosted unified communications and collaboration services is a

strong opportunity for MSPs as they evolve their portfolios, but there are

challenges too. MSPs often must scale hosted unified communications and

collaboration (UCC) services to the large enterprise and provide the kind of

customizable applications available through on-premise solutions.

What's clear is the potential demand for hosted UCC. Recent research from

Nemertes shows that 52% of organizations are interested in Software as a

Service (SaaS), suggesting that now is the perfect time for MSPs to expand

their hosted offerings.

Companies looking to save money will turn to hosted UCC services since

they offer all the technical advantages of on-premise UCC applications

without the large capital investment. In the hosted scenario, the hardware

and applications software sit at the provider's data center, where all of the

management and monitoring also take place. For customers, that means no

need to purchase equipment except for VoIP phones or cameras for video

conferencing. Even then, some service providers lease all the hardware.

What's more, hosted UC services enable enterprise users to take advantage

of redundancy and backup that would be costly to maintain on premise. As

the service provider, you handle implementation, configuration and

customization, and then updates and enhancements over time. Your

customers simply pay the monthly bill.

Hosted unified communications and collaboration services for the large

enterprise

In the past, Nemertes saw primarily small and medium-sized businesses

(SMBs) under 1,000 seats buying hosted UCC services. This wasn't for lack

of demand from large enterprises but because most of the hosted services

available didn't scale to meet their demands. Those that did provide services

to the enterprise often did not have the global coverage required. We expect

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that to change and already see more large enterprises evaluating and

adopting services as providers expand their offerings and global reach.

Conferencing leads the way in collaboration services

Although organizations of all sizes can be slow to adopt some hosted

services, such as VoIP, that is not the case when it comes to audio, video

and Web conferencing. Sixty-one percent of the organizations that Nemertes

works with use hosted Web conferencing. There is also much interest in

hosted audio and video conferencing.

An organization's decision to use a hosted Web conferencing tool instead of

operating its own Web conferencing server is often based on cost and the

ability to easily support external participants. This is especially true for SMBs

that may have limited staff and budget to manage an internal server.

Easy roads to hosted unified communications and collaboration

services

Within the past couple of years, software-centric providers began making

forays into offering hosted UCC applications -- and asking partners to drive

sales. Microsoft, IBM and Google have expanded their collaborative email

and calendaring offerings to include additional communication services. To

attract and assist resellers, they've designed strong training programs. All

three companies have developed on-line tools and resources and offer

training to support MSP sales efforts.

The problem with hosted VoIP

There has been strong enterprise interest in hosted conferencing and other

collaboration/communications services, but we still haven't seen anywhere

near that level of interest in hosted VoIP. Hosted VoIP is used by only about

12.2% of organizations overall, while about 20% of SMBs say they're using

the services.

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SMB uptake may be flat because of an increased number of VoIP-technology

vendors that now have in-house solutions aimed at smaller companies.

SMBs that were once scared off by the seemingly complex VoIP systems

now have choices that are almost plug-and-play solutions.

For larger enterprises, cost is often the biggest drawback to using hosted

VoIP, followed by lack of service in their geographical locations. The average

cost per user per month for hosted VoIP is $45. When comparing that with

the cost of purchasing and operating an on-premise solution, it becomes

apparent why most large organizations do not find it cost effective.

For that reason, many regional MSPs do not sell hosted VoIP solutions, nor

do they want to. The bigger moneymaker for them is selling an on-premise

solution and wrapping managed services around it.

Best practices in offering hosted unified communications and

collaboration services

MSPs that want to offer hosted UCC services for both the SMB and

enterprise market must understand user concerns and the perceived

drawbacks of SaaS. Nemertes recommends using the following best

practices to address these concerns up front with potential clients:

Flexibility and customization: Often a hosted service has less

flexibility and fewer options in configuring the system. Also, upgrades

usually wait until the provider is prepared to offer them. Differentiate

yourself with customization and integration services.

Global coverage: Many hosted providers (especially VoIP

providers) still do not offer the coverage area required for companies

with global locations. Success with dispersed organizations will

depend on your ability to offer services for all locations.

Security: Concern regarding security is still cited as one of the

primary drawbacks to a hosted solution. As the customer's trusted

adviser, an MSP needs to build customer confidence and ensure the

reliability of the SaaS applications, while also ensuring data security

and availability.

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Whether you're new to managed services or ready to expand, remember this: The successful MSP will build on the SaaS offering to develop solutions for implementation, integration, customization, migration and training, as well as provide ongoing management to build recurring revenue opportunities.

Katherine Trost is a research analyst at Nemertes Research, where she focuses primarily on professional services.

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