Company Urges VARs to Push MaintenanceBy Pedro Pereira | Posted 2006-01-24 Email Print
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IT services management company MaintenanceNet wants VARs and integrators to put more effort into maintenance services, which generate higher margins than product sales.
Unrelenting margin pressure on IT product sales should make channel companies more diligent in providing maintenance services, but that often is not the case, according to IT services management company MaintenanceNet.
The number of companies capitalizing on maintenance contract opportunities is far lower than it should be, the company said in a report released this week. As many as 50 percent of renewable service contracts are never renewed, the report said, quoting research firm IDC.
MaintenanceNet, Carlsbad, Calif., sells a web-enabled application that allows companies to manage maintenance contracts involving multiple partners such as vendors, distributors, VARs and, ultimately, end-user customers.
The report, "Developing a Profitable Services Annuity Business," promotes the concept of repeatable business, which generate double-digit profit margins that product sales rarely ever allow anymore.
Though written from a neutral perspective by Shayne Skaff, MaintenanceNet's vice president of Business Development, the report's implicit goal is to lure VARs and integrators to the company's technology.
The report, nevertheless, points to a predicament that others in the IT channel are seeking to address. The trade organization CompTIA, for one, has assembled a team of industry experts to develop resources that will guide product-centric channel companies to a solution model with a greater emphasis on delivering services.
The Oakbrook Terrace, Ill.-based association's goal is to provide vendors with a more reliable channel and improve the prospects of VARs and integrators, 40 percent of which, according to research firm Gartner Inc., will go out of business in the next two years.
"Business partners who want to be around in three years know they need to make changes to their business models and they need help in doing that," said Kurt Yeager, a council member and director of global channel strategy for Avaya of Basking Ridge, N.J.
Skaff said channel companies have heard for years about the need to add value by offering services but many remain hesitant to make the necessary adjustments because of the challenges involved.
"The primary hesitation is it costs money to make money," said Skaff, who before joining MaintenanceNet two years ago worked for distributor Avnet Inc. "It takes different resources. You've got to bring in new tools and you've got to bring in new resources."
MaintenanceNet, which markets its technology to manufacturers and channel companies, hopes through its report to steer companies in the value chain toward strengthening customer relationships, become indispensable partners, work less for higher margins and establish annuity-based businesses.
Companies spend too much time on winning new customers while they should be strengthening existing relationships with customers by "showering them with services and value-added solutions," Skaff said.
Skaff also encourages channel companies to take a consultative approach to understanding a client's environment and how it is maintained, and then use that knowledge to provide tools and services that help the client make business decisions.
That way, the VAR or integrator becomes an indispensable advisor while also boosting profit margins. Working instead to double sales takes a lot of effort and produces less margin, Skaff said.
With the right tools in place, channel companies can provide maintenance services that can play a major role in strengthening the client relationship.
"If you're not selling maintenance today, first of all you've got to start selling it," Skaff said. "If you are already selling maintenance, you've got to make sure you follow through."