Making money on managed services

DELRAY BEACH, Fla.—Attend a few security conferences and you're bound to hear the term “managed services” tossed around. Most of the time you'll be advised that managed services is the way to go. But, how do you get there? How long will it take and can you really make money offering managed services?

At TechSec 2014, held here in Jan. 26-28, three very different independent systems integrators—Sam Shalaby, GM of the Ottawa branch and managed services director, Convergint; Rob Simopoulos, president, Advance Technology; and Wayne Smith, VP of sales, Tech Systems—talked about how managed services is a cornerstone of each of their businesses, and why they believe it's the best model for integrator and end user alike.

There are several keys to making managed services work smoothly and be profitable. You've got to have the right products, infrastructure and customer service, they said, but the most important element to success is being committed to managed services.

“What we're doing is building a culture, a managed services culture. That means educating your team from the ownership [and] executive level down to every single technician—educating them on the benefits of managed services for the customer,” said Simopoulos.

Simopoulos is president of a small but rapidly growing integration firm based in Scarborough, Maine. When he joined the company five years ago, “it was operating like many systems integrators. We were selling and installing and providing support when the customer requested it.

There was absolutely no focus on RMR. “I didn't think that was a good way to run a business, [and I also] didn't think we were providing the best level of service to our customers,” he said.

Working with PSA Security and Integrator Support, he spent a year developing Advance Technology's managed services offerings, pricing, personnel, compensation plans, and educating the staff.

Advance Technology offers proactive systems monitoring and health checks, remote help desk and support, cloud-based solutions, managed services and administration and pro-active video monitoring.

Before joining Tech Systems, a 200-employee firm that operates in many states across the country, Smith had served as a chief security officer for a global financial firm.

He said that when he worked as a security professional, “I don't think I would have considered outsourcing security [via managed services].” Advancing technology and an economy that has “everyone looking for ways to increase security and save money” has changed the landscape for managed services, Smith said.

He believes managed services is profitable for the integrator and provides cost savings for end users. “Overall, we think it strengthens enterprise security.”

Tech Systems' customers are varied. They include three Fortune 100 companies and many smaller companies. It did about 50,000 credentials as part of its managed services in 2013.

He believes every business, regardless of size or specialty, is a potential customer for managed services.

Tech Systems' staff includes “gold certified” experts on the physical security and IT security side. It has a 24/7 security operations center (SOC) and offers preventative/predictive maintenance inspections, repairs/replacement of parts and labor, guaranteed response time and system functionality, and unlimited system training and professional system/security analysis and assessment.

Shalaby has been doing managed services since well before it became vogue. He started in 1989, but at that time and for several years afterwards “technology was sluggish.” He ended up developing his own managed services technology and spinning that off as a separate company. He is the founder of FSC, an Ottawa-based integrator that was acquired in December 2013 by Convergint.

Together, Convergint and FSC offer a 24/7 SOC. The company provides managed access services, system administration, data base maintenance, alarm monitoring, ID credential production, virtual security desk alarm monitoring and remote access with video verification data base maintenance.

Its primary vertical markets include property management companies, professional office, federal government, and high tech firms.

All three integrators expressed frustration with manufacturers. Smith said many manufacturers are “not developing products with managed services in mind.” It will take pressure from integrators and end users to push manufacturers along.

Shalaby said it was his frustration with manufacturers that led his company to decide to develop its own technology.

Simopoulos observed that some manufacturers “are getting into the managed services business space themselves, … “doing proactive monitoring and health checks … directly for end users.”

Where Tech Systems and Convergint have SOCs, Advance Technology does not. Does that make offering managed services a challenge? Simopoulos said no—it just takes a different form. “We have inside dedicated engineers to support our customers. So in a sense we have an operations center, it's just not the same size [as a SOC],” he said.

Shalaby agreed that a systems integrator does not necessarily need a SOC to be a successful managed services provider. “What you need is customer service,” Shalaby said. He noted that there was a lot of talk at TechSec about cloud technology. “The cloud is where it's at. You need to embrace it,” he said. “If you decide you want to get into [the managed services business] you can host the data [elsewhere] you don't have to have a 24-hour data center, but you do need tech support and services available.”

The integrators agreed on bundling services—including products, repairs, upgrades and service—for one price. Smith and Simopoulos offer long-term contracts, but Shalaby is an advocate of month-to-month contracts.  “We are that confident,” he said.

What about getting the sales staff on board with managed services? Smith said that Tech Systems does “consultative selling.” Not every sale is going to involve a full suite of managed services, he said. “Our method is to educate the client on what the services are and how they might benefit [the end user] day to day.”

With FSC having just become part of Convergint, Shalaby will be going out to evangelize managed services to 36 Convergint branches that do not currently offer those services. He believes that all sales reps should be selling managed services. “If you show [sales reps] how to make money from RMR, they are there,” he said. “You have to develop a passion [for the services among sales reps] and help them understand what managed services are.”

Simopoulos said selling managed services is a requirement for his sales staff, and he “incentivizes them significantly. … If they sell a 60-month agreement, they are paid the full amount of revenue upfront.”

“We show them how to make money and why it makes sense,” Simopoulos said. “It's culture, it's education, and it's customization.” Not all customers want all the possible services. Maybe they want one piece, or two pieces.