How to Fight Managed Services Commoditization

As distributors carve a role for themselves in the smoldering managed services space, some proponents of the model have reason to worry.

Those proponents include the reasonably exclusive group of solution providers that since the turn of the millennium has negotiated the frustration and reaped the advantages of pioneering a business model.

On the one hand, pioneers enjoyed the distinction of differentiating themselves from the crowd by offering a fresh approach to IT customer relationships. On the other hand, getting folks to understand how the managed services model works and benefits the end user was no easy task.

But as the model has gained attention and its benefits become well-known, promoting it becomes easier. For vendors of managed services tools, it becomes easier to recruit channel partners. And as the IT channel as a whole gains a better understanding of the model, explaining it to end users and winning over customers is less problematic.

Inevitably, greater acceptance by the market begets covetousness by distributors.

Customers are confused about managed services, and so are some in the industry. Read more here.

It’s the way of the IT world. Distributors, after all, exist to move technology into the hands of end users with the greatest possible degree of efficiency and speed. They do so on behalf of vendors and the channel partners that effectively represent the vendors to the customers.

As with any relationship held together by interdependence, tension points are inevitable. Each player recognizes the value of the other players but, nonetheless, works hard to protect its turf.

Now that distributors have figured out how to play in managed services, through which solution providers remotely take over some or all of their customers’ IT functions for a fee, a new tension point starts to throb. The providers of managed services that have toiled over the years to create the market have reason to view the distributor incursion as a threat.

While such providers may feel confident enough about their customer retention abilities, they fear that the distributors’ approach to managed services will cheapen the model. They fear commoditization as a result of the distributor approach to managed services.

That’s because distributors extend the option to those solution providers that have not made infrastructure investments in managed services to resell a set of services. While acting as the interface with the customers, the providers rely on the distributors to do the actual remote monitoring and troubleshooting.

In other words, the distributor hosts the technology and performs the backroom technical duties on behalf of the provider. It’s an approach that Access Distribution has employed with Klir Technologies. Ingram Micro will use this model with Level Platforms and Bell Microsystems with SilverBack Technologies.

This of course is a perfectly valid model, and it will attract legions of VARs and integrators to the managed services space.

Some will fail. Those will be the companies that bungle the pricing or fail to recognize that even though they rely on the distributor to do the heavy lifting, they must maintain communication with the customers, attend to their needs and anticipate future requirements. They also must maintain constant contact with the distributors, or they won’t know what to communicate about with customers.

And that’s where the rubber meets this potentially hazardous road—the interaction between provider and customer. Managed services pioneers already know something that the providers who work with distributors will inevitably find out if they haven’t already: No matter how robust the technology and how much they do to keep their customers’ systems humming, success hinges on how you manage the customer relationship.

While distribution may bring commoditization to managed services, pioneers of the model need not worry much about that prospect so long as they have the customer management piece figured out.

Pedro Pereira is editor of eWEEK Strategic Partner, contributing editor to The Channel Insider and a veteran channel reporter. He can be reached at ppereira@ziffdavis.com.