IT Support Services for Legacy Systems - A lasting legacy, for now anyway
Essential IT Support Services
For others the focus is on improving business processes for customers despite a reduction in budgets.
Nottingham-based Quantix, a managed IT support services provider, believes there are business opportunities even when companies are cutting back on capital expenditure.
“I think our business model benefits from a downturn. Customers want to reduce costs, but they still have to maintain their essential services and databases,” says managing director Richard Salmon.
Quantix is in a fortunate position: in 2007, private equity firm ISIS backed the company in a £10m management buyout.
One of the reasons the company looked a safe bet was that its IT support services model brings in recurring revenues from clients who will usually pay upfront for the annual maintenance and service of their Oracle and Microsoft databases. Quantix revenues grew from £6m in 2007 to £8.25m in 2008, and are forecast to reach £9.5m in 2009.
“We expect margins of 20% to 30% on packaged software services, and 40% to 50% on enterprise software services,” says Salmon.
Customers will pay for managed services because they fear their financial audits may not be signed off unless they can show their systems are well serviced and maintained. The main attraction, however, is the 50% reduction in IT support overheads that Quantix claims to offer.
Attractive as the IT support services model appears, there is a risk that customers will not renew their contracts, or will try to negotiate monthly payment terms, rather than paying in advance for annual services. Teneo’s Hall says resellers may have to offer an added extra, such as a free system audit, to close a service renewal contract.
Even so, the IT support services model that shows customers how they can make the most of their legacy systems is a more tempting argument than new capital expenditure.
“Operational budgets, where service contracts are generally drawn from, are still healthy,” says Hall.
“Being able to offer competitive service agreements alongside new hardware deals is what the forward thinking reseller should focus on. If your business model is ‘pile them high and sell them cheap’, then you should look at service contracts that can add value to a customer’s bottom line,” he adds.
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