The Importance of Selling Managed Services - AvNetwork.com

The Importance of Selling Managed Services

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Question: do you sell products or solutions? The answer is probably both. But when you’re selling, what is your main focus? Selling products, or selling solutions?

Julian Phillips, executive vice president at Whitlock, an AV and UC solutions provider headquartered in Richmond, VA, evangelizes that the AV industry should be focused on selling solutions—more specifically, platforms that drive overall solutions. Why? Because it’s the platform that serves to improve how customers do business. “You have to have a solid platform to base your solutions on, because the complexity is actually in the configuration and customization of that technology that meets that customer’s individual requirement, rather than sticking all the boxes together and making them work,” he said. Where integrators prove their value is in how the solutions they provide drive business outcomes.

Solution-based selling achieves several things: it contributes to establishing integrators as the go-to guys for streamlining business. It provides AV firms with a way to recover margins lost due to the continual commoditization of product. It responds to the challenges associated with projects involving owner-furnished equipment, whereby corporate buyers procure their products directly, rather than going through an AV integration firm. What’s more, when done right, solution-based selling lays the groundwork for ongoing client relationships and a recurring revenue stream through the offer of managed services. (Which, in turn, keeps AV integrators top-of-mind when clients have new projects up for grabs.) “The days of just installing a turnkey system, getting paid, and walking away are over,” said Cliff Ennico, a contracts lawyer based in Fairfield, CT and author of Small Business Survival Guide. “What a lot of organizations are doing is they’re cutting back to their core competencies.” Hospitals, for example, want to spend their resources on providing healthcare—not managing the AV/IT systems that enable their employees to communicate with one another.

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Bob Sharp, director of international sales at SVSi.Cliff Ennico, contracts lawyer based in Fairfield, CT and author of Small Business Survival Guide.Julian Phillips, executive vice president at Whitlock. So what does a managed-services model look like for AV? For starters, it presumes that the systems that integrators are installing are on a network. “When your AV assets and your AV connectivity is on a network, a network is very easy to maintain and manage remotely,” said Bob Sharp, director of international sales at SVSi, a networked AV solutions developer based in Huntsville, AL. This means that the bulk of service calls don’t involve sending a technician out with a truck to perform troubleshooting and maintenance. And, because clients often want managed services to be on a 24/7 basis, it eases the pain for the service techs who are on call. “[The system] can detect a non-communicating box, and it will send you an email. Even a small integrator can have service people who are on call who will receive these emails on their mobile devices, even if they’re sitting around the house.” This network component, however, requires AV firms that offer managed services to be IT centric.

Sharp pointed out that remote monitoring and management capabilities also enable AV firms to proactively identify issues at their clients’ sites—something that customers see as truly valuable. “If you can proactively offer monitoring of that system and say, ‘we won’t wait for you to call us up and say something’s not working, we will preempt that and say we detect a problem with Conference Room 25,” he illustrated, “that’s when the CFOs at these facilities perceive the value-add. Because there’s not much value-add if they’ve still got to call you up. If you can preempt that by monitoring that system, then that’s a recognizable value-add that you can charge for.”

Because managed services is a solution-based sale, it requires integrators to get in front of the right people—and that usually means C-level executives. This means integrators need salespeople experienced enough to be comfortable negotiating at this level, but it’s well worth it: when you have the CIO’s attention, not only do you stand to sign a managed-services contract, you also tend to be brought in earlier on new projects. “It is the converging with IT that should bring the value of AV to the forefront,” said Sharp, who came to AV from IT. “In terms of the convergence on the network, AV should take the lead, not be the follower. It’s up to consultants and integrators to say [to CIOs], ‘you’re responsible for IT, but this is where we can come in and help you.’ ”

Carolyn Heinze is a freelance writer/editor.

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AV/IP: Managed Services and the Fine Print

While managed services offer AV firms a potentially profitable revenue stream, they often add a level of complexity to your business, especially when it comes to contracts. While it’s not surprising that Cliff Ennico, a contracts lawyer based in Fairfield, CT, and author of Small Business Survival Guide, emphasizes that integrators seeking to incorporate managed services into their rosters should seek out legal expertise when drawing up these agreements, he’s got a point: without counsel from a good attorney, you risk losing your shirt.

As Ennico explained it, managed-services contracts involve two separate agreements: the “master contract,” containing all of the legalities pertaining to indemnity, warranty, and limitation of liability, and a series of schedules (sometimes called a “Statement of Work”) detailing the terms for each specific service that’s being offered. It’s this latter portion of the overall agreement, he said, that tends to be more complex. “[The schedules outline] what the services are, what the hardware and software components are, who’s doing what to whom, and who is responsible for what,” he explained. For example, your firm may be capable of handling 80 percent of the contract in-house, while you outsource the other 20 percent to another provider. In this case, your warranties need to match up: if you guarantee a two-hour response time, your outsourced provider needs to promise the same thing.

One important section of managed-services contracts is the termination clause. Ennico noted that this presents a number of questions: When customers decide to end their agreements with you, what rights to they have to the system? Are you obligated to help them transition to another service provider? Ennico said that generally, when it comes to software, the company providing it to you will usually keep the IP rights to itself. Accordingly, there is the issue of whether or not customers can get continued support of the old software version until they’ve fully transitioned to their new provider. “These termination clauses tend to be a bit trickier than they are in normal installation contracts, because of all the different moving parts,” he admitted.

Another clause to pay attention to is the assignment clause—one that Ennico said many write off as boilerplate, when it actually isn’t. For example, he illustrated, what happens if your hospital client is acquired by a major aggregator that has 50 hospitals throughout the country, and they want to ensure that your system conforms with those that the other 49 facilities are running? “That can be a major, major job, and it may be a job that you cannot do,” he said. The clause should stipulate that any merger, acquisition, or other assignment requiring a change in the “scope of work” will have to be renegotiated, and that any additional integration work will be billed based on a separate contract. “At that point, the whole deal has changed, the whole environment has changed, and you don’t want to be locked into your old fee structure.”

But it’s the issue of “who is responsible for what” that Ennico counsels AV firms to put a lot of thought into, “because you do not want to sign up for things that you cannot do.” He also pointed out that your attorney, no matter how good he or she may be, cannot help you with that, as they are not as familiar with your business as you are. Integrators need to establish how many managed-services contracts they can realistically support, based on the projects they have in the pipeline, and how much bandwidth their staff has available. “Because the thing about tech support is that you never know when someone’s going to need it,” said Ennico. “You cannot schedule it—it’s totally out of your control. So you’ve got to have staffing to deal with those kinds of things.”
––C.H.

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