From Microsoft Corp. to managed service platform providers, everybody is taking aim at small business IT opportunities. But small businesses may not be willing to open their wallets very wide for IT, according to a new survey by CDW Corp.
Overall, the big product reseller said IT decision makers are somewhat more optimistic now than the were in December. CDW offers some deeper details in a press release. But mainstream media companies like Reuters see the glass half empty, reporting that:
Only 30 percent of small U.S. businesses plan to increase technology spending in the next six months compared with about two-thirds of larger companies, according to a survey released on Wednesday.
Still, I think CDW and Reuters may have missed the mark, because they didn’t consider key managed services trends.
Indexes and IT spending barometers like CDW’s can help us all to see the road ahead. But I wonder if the CDW index is a little off the mark with regard to small businesses. Within our own small business, most of our technology budget goes to IT services rather than IT products.
Before we spend a dime on technology, we ask ourselves one question: Will the IT investment help to increase our sales? Generally speaking, we pump money into Web site development, search engine optimization, e-mail marketing services, online advertising systems, managed services, etc. Buying a traditional piece of hardware through an online reseller like CDW isn’t a big priority for us.
Reality Check, Please
I suspect the situation is similar within many small businesses. Entrepreneurs want predictable refresh cycles for their hardware, software and services. They don’t want to spend big dollars at unpredictable intervals. In short, they want true managed services with hardware as a service bundled in.
With this in mind, it’s hardly surprising that CDW says only 30 percent of small U.S. businesses plan to increase IT spending in the next six months. What they really want to do is keep IT spending flat each month, and pay a monthly fee to their MSP.
Posted In: CDW | Hardware as a Service | IT Spending | MSP | Managed Service Provider | Managed Services | Sales | Small Business | Software as a Service and Hardware as a Service
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Even though it is bad for us (MSPs) but I would say that small businesses should expect that IT would work for at least 10 years on old hardware/software combination. And it can and is working. The problem is that software/hardware manufacturers pushing people to buy new toys. Here is an example. We have a high end E-Commerce system. It sustains 1000 concurrent users. It is built on MS Commerce Server 2000. Which runs on Win 2000 ONLY. Now DELL does not support WIN2000 anymore (WHY??? It is good OS…) So we cannot get better hardware and consolidate processing power (now site is running on about 10 servers). I would run the system for 10 more years. When original system was built and architected it was planned for 2000 users. We can grow twice on it. So it is still good. Why do we have to change things if they work? Most of us don’t use 20% of MS Office featuers but everybody rush to upgrade.
Our roles as MSPs is to show HOW TO USE TECHNOLOGY better and not through away money. We have to show them how better to use what they already have.
I agree, although being that we are MSPs that is the only reason we need to advise clients to upgrade their software/hardware etc.
Proactive upgrades in order to keep upto date
Not all of a sudden when something is not supported under Windows 2000 or equivilent, say oops Now we have to upgrade that is not the MSP way.
And for higher learning we need to keep our own systems upto date, not just the clients. Otherwise when they do finally upgrade you have no idea what to do!!
I would say we have to learn their businesses more so we can offer solution regardless what bigger players are pushing. Be driven by business demends but not by vendors offerings…
I’m not an MSP. I finance tech purchases for SMBs and work with lots of MSPs. Do you guys think the HAAS model has traction?? We have a program that refreshes hardware every 24-36 months and in return the client pays cheaper than OEM financing (and cheaper than the Prime lending rate) for that.
I am wondering if MSPs that want to do HAAS would find this a good fit where the MSP would buy and then markup and rent out to their customers. What do you guys think? Any advice is appreciated since MSPs are a big focus for us and I’m trying to learn more about you guys.
The HaaS model is quietly gaining traction, Stu. Companies like Xerox (PagePack HaaS program) are lining up VARs to embrace HaaS. And the trend is similar for other multi-function printer makers.
However, many MSPs don’t want to “buy” hardware because they don’t want to outlay the money. The trick is finding a way for MSPs to receive creative financing on the hardware they offer in the HaaS model.
I can put you in touch with some MSP industry leaders who have HaaS programs, if you’re interested in learning more about their strategies and current customer reaction.
The HaaS trend is probably real, but I think the barriers at this point are limited financing options and difficulty in pricing the deals to the end users.
The problem is that MSP’s don’t want to or cannot outlay a huge sum of cash to purchase hardware upfront and then charge a monthly fee to recover that hardware cost over a 2 or 3 year contract. They want financing options that allow them to bundle the hardware and services costs into a single monthly fee to the client but get paid upfront for the hardware portion of the sale.
Financing options need to be structured such that the VAR can price a monthly fee to the client that includes all hardware, services, and refresh over a contract term, pays the var for the hardware portion immediately (like a traditional leasing vehicle), and then allows the var to collect monthly for the services portion of the monthly fee paid by the client. The leasing company would then collect the hardware portion of the monthly fee over the contract term.
Seismic offers such a vehicle: http://www.ingrammicro.com/visitor/servicesdivision/seismic_solutionfinancing.pdf
Thanks for the great comments Joe and Justin.
Justin, Our program is in fact a standard lease/purchase arrangement. So my initial thought was no upfront cost to the MSP or VAR and since the rate is so low, there’s alot of room for markup between their lease pmt (since they are technically my client) and what they’d charge their client for the rental with the 2-3 year refresh. The markup on the spread should easily be more than the standard markup on the sale of hardware since margins are so thin there. Then when the refresh takes place its a new agreement for the MSP and a new payment with spread they can pass on to the client. So no large purchase or infrastructure investment is required.
We are one of only 30 independent financing companies that offers this program, even GE Capital doesn’t have it as its only offered through independents.
Joe, I’d be very interested as I think what I have can enhance what those current HAAS programs are doing…..
It seems like a format like that of knowing exact hardware cost upfront would allow for quoting of X for ongoing hardware cost, Y for ongoing services costs for a total of Z overall cost to maintenance the client’s network.
Stu: You should reach out to the hardware providers (XRX, Oki, Dell, HP, Lenovo, etc.) and bounce some ideas off them. Let me know if you want to chat offline about who to reach out to. You’ve already met Justin, and he’s a great resource to engage, debate and brainstorm with.
Best
-jp
Joe, I’d like that offline conversation very much as so far, I’ve only gotten access (through my industry contacts to date)to the MSPs and others who have the direct client access rather than to the channel managers/partners. Thanks for the good advice you’ve given me so far and please email me your contact info to Stu@southernlendingsolutions.com so I may get in touch with you and ask you about who to contact. Thanks again and I love the site. So far, I’ve learned alot.
Stu