David Brisbin
Med Tech Solutions

My typical customer is 25-100 users. We do still sell hardware to them and typically look at 20-30% margins. They know they aren’t getting Wal-Mart pricing, but they also know we stand by every decision/purchase we recommend. If a solution ends up being a wrong fit, we take the whole thing back and work it out. I brought HP/SuperMicro/Asus customers into my Dell relationship and they will just as easily retreat with me. I brought them over because I was sold a vision of a company that was working many angles to make deployment and management much easier than how I was doing it. A vision that, practically speaking, has laregely gone unimplemented since it was cast roughly 18 months ago.

I don’t, however, mind the ProManage offering at face value. I felt it was coming from Dell’s first communication at the Silverback Partner Conference in 2008. Their efforts in this area will only help educate my smaller (25) prospects to the managed concept. The Dell message will be broad and lack personalization critical to a SMB without internal IT. The awareness Dell creates will continue to legitimize the MSP model to owners who have better things to do than read about my industry. Sales engagements continue to show me that Officers in 100-300 user companies are aware of the MSP model. The 15-50 aren’t so informed. For my business, margins are 3x higher for 25 users than 100 users. I look forward to Dell buttering up my future clients.

Mark Shipman
TekServ1, LLC.

So looking at some pros and cons:

Pros:

1. As Dell and the other big boys enter the market, they will lend validation to the Managed Services model. In the short term this will raise awareness of Managed Services with end clients and provide a larger prospect base for everyone.
2. Another pro is if I am not an MSP today. If I am an ISP, ISV, single man consultant, print supplier or just like to sell something, I can pickup Dell’s managed services to augment my primary income making more money from each client relationship I have. Sorry Akash, but I think I will have my wife’s company sell IT services now too.
3. I really don’t see many positives if I am an MSP.

Cons:

1. Was it a mistake for Dell not to have a channel partner included in their announcement? Sure it was a mistake if you are committed to working with partners and a channel. I think you are too kind Joe saying it was a mistake they need to correct. The fact is they simply didn’t think about including a partner because they are not channel focused. As an overall organization Dell is about Dell. Frankly, their whole channel program was mentioned as an after-thought in their announcement because it is an after-thought (intentional or not).
2. Also look at Dell’s model. Are they really committed to the service and being a service company? I really don’t believe so. I could be wrong, but my opinion is that the move into managed services is just so they can keep their hardware business going. It is no different than Microsoft moving into the SAAS market as they work to salvage their own model against players like Google and Salesforce. I can tell you that as the big players take off their gloves to fight each other they will crush many of us in the middle and on the sidelines.
3. Next, I have listened to the debate for the last 3 years or more about Dell and other big players entering the market. The response I most often heard or got from people was that Dell, Microsoft or Cisco can’t provide the service right. They won’t be able to provide a high quality personal service. This is true but not the point. The real point is as Dell’s pricing hits the street all MSPs and aspiring MSPs will find it harder and harder to get new deals, close new business and, most damaging, will begin to feel huge downward pressure on their margins. Are we all so naïve as to forget 10 years ago what happen to hardware margins as Dell and other large players entered the market? How many of you are still white box builders? How many of you even think about selling hardware? Bottom line is each of you will eventually, sooner than later, have to have a managed service offering close in price to what Dell or Microsoft markets or you mid-as-well not market because clients are not going to call you. Think about it. I send you a $45 dollar marketing slick and I get one for $9 dollars. Personally, I am calling the $9 one first. It simply is what it is.
4. 15% simply is not sufficient to sustain a services business. Many of the smaller MSPs out there managed 300 or so desktops and the best ones 2500-5000. At 15% you get to make $1.35 a desktop. On 300 desktops you make $405 dollars. I know many MSPs managing 300 desktops with 2-3 employees. How do you sustain that on $405? I know I know. You have other services you can provide to the client. So now you are the break fix arm for Dell or Microsoft. What do you do? Let the big boy collect his money, send you your little piece and you, the MSP, now write a service agreement the end client signs to cover issues onsite as needed. MMM…… sounds like Break Fix to me. And all of this is perfect timing for Dell to announce: the economy down, businesses more and more sensitive on pricing, and now the compounded issue of Dells’ pricing.

Bottom line is the Golden Age of Managed Services is just now beginning and the big players are going to start slugging to get their share. As an ecosystem and as managed service provider we will have some great years ahead of us but we need to begin searching our souls for the next business transition we need to make. Whether it is Dell, Microsoft, Cicso or any other big boy coming into the managed services market, they are going to sell and make money. Where does the money come from? It has to come from all of our margins. Simple as that. Dell is not creating a market. Microsoft is not creating this market either. It is already there, we all make our living there and the money they bring in is the money the channel makes today. I believe managed services is very close to repeating the history of the hardware business 10-12 years ago. Like George Santayana said, “Those who cannot remember the past are condemned to repeat it.”

But we do watch the site to make sure rivals aren’t taking shots at each other anonymously. All constructive comments are welcome. But we prefer they not be posted under generic/anonymous names…
-jp

Joe Panettieri
Editorial Director
MSPmentor

What is interesting is that Dell purchased Silverback Technologies about 2 years ago. If you read through the “Weekly Scorecard”, this is actually a reduced version of what us loyal SilverBack customers have had for years. I was hoping to see the culmination of Silverback and Everdream come up to be a great product. Alas, I’m glad I started implementing Kaseya which kicks Dell’s @$$.

(Sorry for the rant… Just got off the phone with a long-time customer who has been swallowed up by Dell. So much for the rules of war.)

Call me. We can do what you are looking for and we don’t sell to your end customers. What a concept.

Justin Crotty
Ingram Micro Seismic
714-382-4836
justin.crotty@ingrammicro.com

I don’t have all the answers (hopefully, the conference panel will). But I do think Dell introducing managed services directly to SMBs is a bit like AT&T introducing local calling service. Yes, long distance providers experienced some success in the local market. Completing that thought, I think Dell will get their share of “local” SMB customers.

However, look at all the disruptive technologies and companies that moved into the local/long distance space as well: Skype, Vonage, VoIP service providers, Asterisk options, and dozens more. MSPs will continue to find, explore and promote disruptive technologies. And as long as they hold onto those local customer relationships — through face-to-face interactions — the small business MSPs will do fine.

Another thought: IBM manages to compete AND cooperate with Microsoft, Oracle, Dell, HP, etc. I think MSPs should get used to a similar coopetition mindset.