Procurement as a Service Gains Traction with MSPs

It seems the more IT services you provide to customers, the more they want you to sell them hardware and software. That is what many managed services providers find as they gain the trust of their customers.

But some MSPs have little to no interest in messing with product procurement, which is time-consuming and generates razor-thin margins. After all, the MSP model centers on delivering services remotely as a continuum and getting paid on a regular basis, be it monthly or quarterly, for it.

For MSPs that would rather not deal with one-off product deals, there is Axis Business Solutions, a Portsmouth, N.H., business that handles product procurement and logistics for IT channel companies. Axis, which calls its model procurement as a service, or PAAS, has focused its recruitment efforts over the past year on MSPs.

The efforts are paying off. Joe Paquet, Axis vice president of alliances, says the company is signing up an average of two partners monthly, and the total of MSP partners has topped 30.

Paquet says MSPs are the best prospects for Axis’ services because they prefer to focus on their core service offerings.

“When we deliver our message to MSPs, it really resonates,” he says. The message revolves around eliminating the costs associated with the process of procuring technology from suppliers such as distributors and vendors.

The slumping economy also is playing a role in the recruitment, as budget-conscious companies look for ways to control overhead costs, says Paquet. “Part of our conversation with them now is related to the economic conditions,” he says.

But the economy is only a piece of it. Procurement as a service just happens to fit in nicely with the managed services model and with the channel’s ongoing efforts to automate its operations.

Paquet says the Axis service is integrated with the PSA (professional services automation) software of ConnectWise and, soon, Autotask. Both vendors’ automation technology also integrates with the platforms MSPs use to remotely monitor and manage their customers’ IT assets.

That means the software MSPs are using to run their own businesses now also allows them to initiate the Axis procurement process.

Axis handles product research, order fulfillment, invoicing, accounts receivables, shipping and product returns for MSPs such as Denver-based Allen Technology Advising, which Axis signed up last week, and Greystone Technology Group, also in Denver, a partner since November.

Procurement is best handled by people employed specifically to do it, but MSPs typically hire high-priced technicians and engineers to focus on delivering services. Assigning them to procurement, therefore, is costly and ultimately results in little to no profit from product sales. Yet, Axis can make a profit because that is all the company does, and as such, the process becomes more efficient and cost-effective.

Dave Sobel, CEO of Axis partner Evolve Technologies, of Fairfax, Va., says handing off procurement to Axis has reduced the time it takes to give customers quotes for product purchases from days to hours. Evolve’s engineers, he says, were only too glad to shed the procurement burden.

“We’re in the services business,” he says. “I always wanted to be in the services business, and product was something I had to do rather than something I wanted to do. Now I don’t do procurement anymore.”

Putting a quote together, he says, can cost Evolve as much as $300 just in labor. Over time, you put enough quotes together and the costs add up.

Evolve’s partnership with Axis predates the current economic downturn, but Sobel says having the partnership helps get through the leaner times.

Paquet says MSPs can use the Axis partnership as a competitive advantage. Axis partners can tell customers that because they have a partner handling product procurement, they are better able to focus on delivering services.