January 2012 Feature

How to Tackle the Mid-Market Managed Service Opportunity

by Anna Johnson

It’s no secret that the channel community is moving rapidly to a managed services provider model (MSP). Partners are anxious to convert from a traditional onetime sales model, to tJanuary Imagehe recurring revenue stream the MSP model provides. But many will struggle along the way. The emergence of the Cloud and SaaS solutions offered through the channel are fuel for the fire, but as Hardware-as-a-Service emerges, hardware vendors are scrambling for a solution. Questions like: Who owns the client? Who is responsible for invoicing? How will post-sales support requirements change with the end-user and the partner within an MSP business model? What’s more, each market segment—enterprise, mid-market, and SMB—share very few traits, making it difficult for vendors to scale their managed service offerings across these segments. However, at least one such vendor seems to have figured it out. Channel Management Insights sat down with Jason Oliver, vice president of Xerox Managed Print Services to discuss the evolution of managed services specifically for the mid-market and how vendors can work with the channel to capitalize on this opportunity.

The Challenge

For decades, the channel partners that serve the mid-market have relied on reselling hardware and software and adding on their own services to create custom solutions. That’s been the formula and it’s worked out for everyone involved. However, in the last five years, channel partners have seen their margins shrink as quickly as their customers’ capital budgets. Operational budgets haven’t taken as much of a hit, and VARs in particular are left scratching their heads trying to figure out how to provide similar solutions at a reduced cost or a cost that can be paid through annual, quarterly, or sometimes monthly recurring fees. “It’s precisely these pressures that incentivize the channel to work with vendors to sell managed services,” says Oliver. But how to market and sell managed services is a new challenge worth investigating.

The Managed Service Opportunity

“It’s the mid-market segment that has the complexities and needs of their enterprise competition but with limited budget,” says Oliver. “This large market segment is quickly maturing and in order to address the number of prospective customers both from a sales and operational perspective, it’s the channel that is the bridge that connects vendors to the mid-market prospects,” Oliver continues. “In order to drive down costs, provide customizable solutions, and address the size of the market opportunity, vendors and their channel partners have to work together in new ways that benefit their customers. Change is never easy but the rewards are there for the taking.”

Customer Market Segment

Sales Channel Fulfillment
SMB, SoHo Online, distributors, resellers Vendor
Mid-Market VAR, IT service providers, system integrators Vendor and Channel
Enterprise Direct Vendor

 

Old Habits Are Hard To Break

One of the most challenging areas for providing managed services to the mid-market is selling collaboratively with channel partners. Developing a technical solution that meets the mid-market needs is easier because you can draw from the technical strengths of VARs and IT service providers. However, the selling and buying process is a more challenging problem to address. The problem that most vendors and partners run into is the habit of selling products versus solutions. “Habits are hard to change but with a new formula for selling and training to implement, Xerox and our partners were able to close new business faster than before,” says Oliver.

Customer Market Segment Sales Channel Fulfillment
SMB, SoHo Online, distributors, resellers Vendor
Mid-Market VAR, IT service providers, system integrators Vendor and Channel
Enterprise Direct Vendor

 

The Six-Step Selling Solution

“We developed a six-step selling process, borrowing what worked from selling services to large enterprises, and trained our channel partners to help them to be successful,” says Oliver. He continued, “We also considered the perspective of the channel partner and knew it was important to collaborate with them to ensure it was their brand, their process, and their service to sell.” While the specifics of the Xerox sales process below may not work for your company and partners, the lesson here is to pay a fair amount of attention to the sales process and determine what habits need to be changed in order to be successful at closing opportunities.

  1. Identify – Determine which current channel clients have the pain that the new service could solve. For Xerox Managed Print Services, prospects interested in cost reduction, reducing complexity, or who had a green initiative were good candidates for the managed service.
  2. Engage – Determine who the stakeholders are and who the decision makers are. Many times for the mid-market, there are multiple people involved in deciding on a managed service contract.
  3. Connect – Connect to the drivers that are important for the stakeholders/decision makers. This often means asking questions and listening to the prospect.
  4. Gather – Gather the data required to develop the solution for the customer. For example, storage-as-a-service would need to know how much data and at what pace the data is growing.
  5. Solution – This is the opportunity for partners to demonstrate to prospects where they can consolidate to improve efficiencies and reduce costs.
  6. Proposal – Finally, meet with the prospect to share the proposal. Address concerns and sign contract.

Conclusion

As capital budgets shrink and mid-market enterprises turn away from the complexities of building and maintaining their own solutions in order to be laser focused on their core business, managed services are more appealing than ever before. Vendors like Xerox and their channel partners that serve this market make a compelling play for the mid-market business. But the road to get there isn’t easy to navigate. Especially when old selling habits are hard to break.