IT Support Services for Legacy Systems - A lasting legacy, for now anyway
Change the Business Model Through IT Support Services
For resellers who have based their businesses on selling new hardware and new systems, the changed economic climate means difficult choices. Resellers can cut prices and continue to look for new deals that are likely to be increasingly elusive, or they can turn themselves into an IT support services business.
But selling IT support services is not easy. Reseller sales teams are used to selling the features and benefits of particular products, rather than the longer-term consultancy needed to justify a service contract. There are other costs involved: a highly qualified network engineer expects a salary of £70,000 plus overheads; more than most resellers are willing to pay.
Some resellers are turning to third party service providers likes Crewe based Comms-care, which is a channel-only based business that offers resellers a wide range of IT support services, round the clock system monitoring and service desk facilities that are often beyond the range of the ordinary reseller.
“We are multi-vendor, and can consolidate a range of service contracts under one contract,” says Comms-care sales director Ben Davies.
“Resellers can decide what level of service they would like to offer their customers, ranging from a four hour response, eight hour response or next day,” he adds. These outsourced IT support services makes sense when a customer has kit from three or four different vendors, all of which may have supplied hardware under different terms and different warranty periods. Comms-care will centralise those vendor warranties into one agreement, serviced by one telephone number and a central service desk.
Good margins and new business opportunities are on offer for resellers, maintains Davies, especially when the reseller is able to offer the customer cost saving incentives to sign up for a service agreement that lasts for more than one year.
Panacea Services, another reseller, says that although it would employ a third-party company to supply IT support services where it has no geographic coverage, it makes sense to supply services direct to the customer. Commercial strategy director Alan Brown has noticed customers making more of the systems they already own.
“People are sweating assets longer than they would normally do. We are definitely seeing that,” he says. “Customers have said that rather than refresh their kit, they would prefer to take out another year’s warranty from the vendor, or take out an extended warranty with us.”
Brown says there is increasing demand from City-based financial institutions that want to use third parties such as Panacea to service and monitor networks, cutting down on their own internal support staff. He says the rewards for getting a successful service business right can be substantial. If the company is able to sell one network engineer’s skills to several clients, then it can expect to make up to 55% margin on the engineer’s costs.
“We have a pretty straightforward formula: we multiply an engineer’s salary by 1.84 to allow for our overheads, and then divide that figure by the number of days he works every year. We then have to sell engineers at that daily rate,” he says.
Panacea says its services are popular because they simplify back office administration.
“It is unusual to find servers, desktops, laptops and workstations from different vendors that have warranties that end at the same time. We will package up different warranties so that they all end at the same time,” says Brown.
