My wife and I have spent the past few weeks meeting with home improvement contractors and Home Depot. We may — or may not — remodel our aging kitchen. We’re still weighing the potential project “components” and costs. Call me crazy, but the process reminds me of a potential sales engagement in the managed services market.

Consider these three scenarios:

1. Contractor one is well-spoken and comes with numerous references. His work for some of our neighbors is stellar and he has incredible vision for how our kitchen could be remodeled. But we’ve met this contractor twice and we’ve asked him — multiple times — for a project estimate. He originally told us the sales quote would arrive in two weeks. It has been a month. We’ve yet to see an estimate from him.

2. Contractor two has a well-regarded team — rip-and-replace specialists, plumbers, electricians. We suspect he could handle the entire job. He’s a project manager of sorts and extremely personable, spending considerable time on-site making sure home renovations meet customer expectations. Here again, we’ve asked multiple times for a job quote but we’ve yet to receive one.

3. Contractor three is a tag-team involving Home Depot and a local contractor that is part of Home Depot’s outsourced “service provider” network (no joke). Here’s where things get really interesting:

• Home Depot has essentially given us 20 hours of free in-store consulting. A Home Depot employee has sat with us two or three hours per weekend, designing kitchen layouts and then using the layout software to generate a real-time price quote for all the “hardware” (cabinets, etc.). Each time we change a cabinet or a design point, the sales quote is updated dynamically — in real time.
• The local contractor, potentially working in combination with Home Depot, visited our house with a laptop. Using (1) our kitchen dimensions, plus (2) some custom requests (from us) plus (3) the Home Depot “hardware” quote, the contractor was able to generate a price quote for us during his first visit to our house. The quote covers installation services.

Also of note: We don’t have any “personal’ experience or “personal” references yet from Home Depot and the contractor, but we’re impressed by what we’ve seen so far. If we work with Home Depot and the associated contractor, all of the cabinet installation would be guaranteed for 25 years. And, the Home Depot service provider network leverages some sort of customer survey — making sure contractors have at least a 90-plus percent approval rating to stay in the service provider network.

Information Technology Projects and Managed Services

Now, apply our home improvement example to the managed services market. As Big Box retailers (Best Buy, Staples, etc.) continue to push into managed services, you can imagine the Home Depot price quoting model taking hold.

First, Best Buy can offer some basic hardware quoting services to small businesses — generating on-the-fly cost estimates for a 25-node small business network running email, for instance. Next, perhaps mindSHIFT — Best Buy’s managed services arm — could further customize the quote to blend in managed services and cloud services.

Get Moving

Where does that hypothetical scenario leave independent MSPs, VARs and IT resellers? The short answer: To compete with the big guys and with entrenched MSP rivals, you’ve got to generate accurate, comprehensive price quotes far more rapidly. It’s not enough to sit down with a customer, offer sound advice and great customer references. You need to follow-up rapidly and seal the deal with a compelling proposal.

That’s where sales proposal and price quoting software enter the picture. Two of the best-known options are Quosal and QuoteWerks. I’ve also heard some buzz about BigMachines, CIS QuoteBuilder, CNet ChannelOnline, QwikQuote and VARStreet (which Autotask recently sold back to VARStreet’s employees).

I wonder: How many incomplete sales proposals are sitting on your desk? And how many of your customers are choosing alternative IT service providers simply because they received a timely price quote?

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A recent report from Aberdeen Group, “Cloud Invoice Management and the SMB,” details the key pressures driving SMB interest in AP improvement, as well as their AP technology preferences. A brief review of the study’s findings will help illuminate what types of services and benefits MSPs serving an SMB client base should include in their managed AP offerings.

Operational Efficiency Beats Cost as Top Pressure

Although they are somewhat interrelated, SMBs cited stakeholder demand for operational efficiency as a pressure driving interest in AP improvement (64%) at a rate roughly 20% higher than corporate mandate to reduce costs (53%). The only other pressure mentioned by more than one in five SMB respondents was lack of predictability of cash flow (26%).

This is good news for MSPs. While obviously cost reduction is a key consideration of any managed services implementation, SMBs are more likely to be focused on operational efficiency, giving MSPs some leeway to focus on solutions that provide the best efficiency possible without having to sacrifice functionality in order to cut costs.

AP areas where SMBs see the most benefit from improvements include automated approval, e-payments, paperless supplier communications, AP/procurement collaboration, and automated invoice matching.

SMBs Most Likely to Focus on Document Imaging

When asked what AP technologies they are adopting, almost half of SMB respondents (49%) said document imaging, while another 42% said scanning. This shows that automation of electronic image creation and storage is of the highest importance to SMBs in terms of AP improvement. Smaller percentages cited technologies such as electronic approval workflow (34%) and electronic procurement solutions (25%).

Almost 1 in 3 SMBs Prefer Hosted AP Solutions

A combined 28% of SMB respondents prefer their AP solutions hosted by a third-party or dedicated single-client server (10%), hosted as part of a networked service (10%), or hosted by a third-party or shared multi-client server (8%). Another 49% prefer AP solutions that are installed in-house or on-premise (49%), while 24% have no preference.

These numbers offer more hope than they may appear to at first glance, as MSPs can still play a vital role in implementing, integrating and maintaining in-house solutions. In addition, the current and preferred rates for in-house AP solutions are identical, while there are substantial gaps in the current and preferred rates for hosted AP solutions (6% vs. 10% for dedicated single-client servers, 3% vs. 10% for networked services, and 2% vs. 8% for shared multiclient servers). Thus the growth potential is much greater for these hosted solutions.

So MSPs servings SMBs should not overlook the potential for providing managed AP services. Sometimes the simplest things in life are best.

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First, a little background: We’ll unveil the complete MSPmentor 100 global list on February 15 during a webcast. At that time, we’ll also unveil regional lists for North America, EMEA (Europe, Middle East, Africa) and AANZ (Asia, Australia, New Zealand). And, for the first time, we’ll offer a glimpse at up-and-coming MSPs in Central and South America.

Among the preliminary data points worth noting…

1. For the MSPmentor 100 Global List:  The top 100 MSPs managed 2.70 million desktops and mobile devices as of the close of 2011, up from 1.79 million desktops and mobile devices in 2010. But here’s the wild part: Two of the 100 companies are managing 1.8 million of those desktops. Big players are growing fast but we’ll also zero in on small MSPs as part of our report.

2. For the top 250 MSPs in North America: Combined annual recurring revenues topped $1.07 billion in 2011 — up 32 percent from 2010. The number of desktop and mobile devices under management topped 4.2 million in 2011, up from 3.1 million in 2010.

3. For the top 50 MSPs in EMEA: Combined annual recurring revenues were US$191 million in 2011 — up 53 percent from 2010. The number of desktop and mobile devices under management topped 164,000, up 41 percent from 2010.

4. For the top 25 MSPs in AANZ: Combined annual recurring revenues were US$102 million — up 44 percent from 2010. The number of desktop and mobile devices under management was 137,679, up 37 percent from 2010.

But who are the MSPmentor 100 companies? And what about regional honorees from North America, EMEA and AANZ? We’ll share all the details February 15 on our special MSPmentor 100 webcast.

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In his conversations with MSPs contemplating the cloud, Michael Marks, senior advisor, Business Development at CA said answers tho those three questions have stymied even the most established MSPs. But deconstructing each element can make the process simpler for MSPs to enter the cloud space in a relevant, effective way.

Marks offers deeper details in this FastChat Video:

Click here to view the embedded video.

“When it comes to services, it’s really the four C’s — customer base, competition, core competency and your current service offering,” Marks said. “We see a lot of MSPs starting off with infrastructure as a service, because it’s easy to do and high-growth, but you have to worry about competing with Amazon Web Services. Others are getting into software as a service because it’s the bulk of the cloud market, but again there are big players there like Microsoft and Google and Salesforce.com.” CA’s most successful MSP customers, he said, are taking SaaS “sweet spot” strategies, focusing on particular applications that are unique to the vertical markets within their core competency. Good examples, Marks noted, include geospatial software, gaming or web conferencing.

Financially, building out the necessary infrastructure to support a cloud services play can be challenging, if not bank-breaking. And, Marks said, a number of MSPs don’t take that into consideration when jumping in to the cloud. “[MSPs] need to consider both hard costs and opportunity costs. The hard costs are largely driven by your choice of cloud platform … your data center power and space costs will largely be driven by your choice of hardware, and your operational and software costs are driven by the complexity of the underlying cloud platform.”

Opportunity costs, he said, depend largely on the time to market for both the initial service launch and in rolling out additional new services to your customer base. “The longer the implementation time, the higher those costs,” he said.

CA’s AppLogic cloud computing platform, however, addresses both the hard costs and the opportunity costs, Marks noted. Because it is was built to run on commodity, x86-based servers, it reduces the cost associated with many “big iron” cloud platforms. Plus, it was designed to get MSPs up and running within 90 days. “And we’ve seen some MSP customers reduce the time required to roll out additional services by up to 90 percent,” he said.

But what of marketing? “Cloud is new for everyone, so there is a learning curve in marketing and selling,” Marks said. “We say MSPs should expect help from their vendors in marketing and selling the services that are being launched on that cloud platform.”

That’s the approach CA is taking with its Cloud Market Acceleration Program for service providers, which Marks said covers everything from pricing, packaging and marketing to sales enablement, awareness and lead generation assets. “In addition, you’ve got to have a vehicle for selling your cloud service, whether it’s your existing customer portal or it’s a cloud store,” and CA is also covering that mark with its recently launched Cloud Commons marketplace, aimed at CA’s ecosystem of ISV developers, MSP customers and their customers to develop, market and sell AppLogic-based services.

CA’s comprehensive portfolio is gaining speed in the marketplace as more MSPs discover the opportunities offered by the cloud. “We are seeing a lot of success,” he said.

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Canfield Computers claims its revenues grew 65 percent in 2011 vs. 2010. The company’s managed services clientele includes a range of health care and insurance agencies. Meanwhile, Steel Valley Computers’ clientele includes numerous insurance agencies and law firms. In a prepared statement, Canfield Computers President George McDonnell said the deal will allow Canfield to grow its internal help desk while extending the company’s sales and marketing reach across the region.

McDonnell remains president of the combined company, while Steel Valley leader Brad Murphy joins Canfield as director of business development. The two companies did not disclose how many employees the combined Canfield will have, though I believe Canfield had about six employees prior to the merger.

This is the second MSP merger or acquisition MSPmentor has spotted since the New Year began. On January 1, Network Depot confirmed its buyout of Evolve Technologies, bringing together two well-known MSPs serving SMB customers in the Washington, D.C., metropolitan area.

MSPmentor is aware of at least one of MSP deal — a substantial business combination — that’s expected to be announced in mid to late January 2012.

Note: Find a complete list of MSP mergers and acquisitions here.

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Under terms of the deal, Network Depot takes on Evolve Technologies’ staff and will continue to serve Evolve Technologies’ customers. Evolve Technologies CEO Dave Sobel and Network Depot CEO Rich Forsen have indicated that the deal was finalized on December 31, 2011. Chatter about the potential deal emerged about a week or two ago, when Evolve Technologies informed its staff and customers about Network Depot acquiring Evolve.

Financial terms of the deal were not disclosed, but it sounds like the agreement involves a potential earn out tied to long-term revenues, profits and/or customer retention. Sobel and Forsen declined to describe specifics, but they said the deal has built-in variables that will keep Sobel and the veteran Evolve Technologies team focused on a successful M&A execution.

Behind the Scenes

It sounds like Network Depot and Evolve Technologies have had off-and-on discussions about a potential business combination multiple times — with the latest discussions heating up at ConnectWise‘s IT Nation conference in November 2011. The two companies are located less than 10 miles away from each other. And their respective staff members run in similar circles.

• Forsen and his team have built both Network Depot and Virtual Administrator, a master MSP that gives VARs and resellers an on-ramp into the managed services market.
• Sobel, in addition to building Evolve Technologies, is active on the MSP speaker circuit and helped HTG Peer Groups to organize an MSP peer group in Europe. Sobel also works closely with CompTIA to educate resellers, VARs and MSPs.

Going forward, it sounds like Sobel will pursue new opportunities in the IT channel even as he works to help ensure the Network Depot-Evolve Technologies deal executes against its business plan.

More MSP Mergers, Acquisitions Coming

The Network Depot-Evolve Technologies deal kicks off the 2012 MSP merger and acquisition season — which will certainly include a mix of small, midsize and large deals. MSPmentor is aware of a cloud-centric MSP deal that should be announced within weeks. Plus, Best Buy is expected to complete its buyout of mindSHIFT within days.

Still, not all MSPs are selling. For instance, ETG, an MSP focused on the health care vertical, recently declined multiple buyout bids in order to focus on continued growth.

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10. Do You Need Account Managers or Salespeople?: This guest blog, from ConnectWise President David Bellini, struck a chord with MSPmentor readers. Bellini described which business scenarios call for account managers, and which scenarios demand salespeople.

9. Nimsoft Launches Service Desk Software: Roughly a year after CA Technologies acquired Nimsoft, the Nimsoft team unveiled service desk software for enterprises and MSPs.

8. Fifteen Trends at Managed Services Conferences: This blog offered insights from the Kaseya Connect User Conference, HTG Dallas and the Managed Print Services Conference.

7. Cloud Computing is Big Business for Small Business: This guest blog, from Ingram Micro’s Jason Bystrak, described how cloud adoption in small business is growing faster than enterprise adoption.

6. Digital Signage Meets Managed Services: This blog dates back to February 2008, but readers keep coming back to learn how digital signage and managed services are converging.

5. Synnex MSPs Pursue $100 Million Managed Services Opportunity: At the Varnex conference, MSPmentor gains a behind-the-scenes look at how Synnex — the big IT distributor — plans to work more closely with MSPs.

4. HaaS: Equus Countering CharTec and More: A former CharTec employee jumps to Equus and promotes a hardware as a service strategy to Synnex partners.

3. Five Tips for Managed Services Marketing: This blog dates back to December 2008 — a healthy reminder that MSPs want marketing information and guidance.

2. Per User vs. Per Device Prices – The Managed Services Debate Is Ending: At the TruMethods Schnizzfest conference, I thought I found a clear answer to the MSP pricing debate. But in late 2011 I learned that I might still be off the mark.

1. Nimsoft: Chris O’Malley Named CEO of Managed Services Software Co.: Roughly a year after CA Technologies acquired Nimsoft, a carefully planned executive transition is completed. Nimsoft Founder Gary Read exits. CA veteran  Chris O’Malley — the executive who helped CA to target Nimsoft — steps into the Nimsoft CEO slot and business continues to accelerate.

So there you have it: MSPmentor’s most read blogs of Q2 2011. We’ll be back on Dec. 29 with the most read blogs of Q3 2011.

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More than a month ago, an MSPmentor 100 company signed a letter of intent with a cloud services provider on the U.S. east coast. Sources close to the deal say it will likely be announced in early January if not sooner. Just my own estimate, but I suspect the combined entity will generate more than $10 million in annual revenues. It also sounds like there are existing synergies between each management team. As soon as official details surface MSPmentor will share them.

Meanwhile, two MSPs serving SMB customers on the U.S. east coast are also finalizing an M&A deal. I believe the MSPs’ employees have already been informed, disclosures to customers are under way, and an official deal could be announced on our about January 1, assuming this chatter is accurate.

MSPmentor will continue to track both apparent deals.

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According to sources close to each company, a handshake deal is in place and a closing date could occur in late December 2011, with an official announcement in early 2012. Under terms of the proposed deal, employees from company B will join company A, and the combined entity will be managed by company A (sorry for the generic descriptions; trying to protect my sources.). Both companies at the negotiating table focus their managed services efforts on the SMB market. Sources close to the negotiations did not disclose valuations or potential earn-out scenarios.

M&A activity in the managed services market was strong in 2011, but the bulk of the activity happened in Q1, MSPmentor believes. Many MSP CEOs are small business entrepreneurs who consider their long-term exit strategies each Q4, triggering a flurry of M&A activity early the following year, MSPmentor theorizes.

MSPmentor believes M&A activity will be strong in Q1 2012 — but not all MSPs are in a selling mood. ETG, for one, recently declined multiple takeover offers and decided instead to continue expanding its managed services business, which focuses on the health care vertical.

MSPmentor will update this story if/when the two east coast MSPs have completed the apparent M&A process.

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MSPs and VARs use quoting and sales proposal software to help develop customer sales proposals. The market for such software has often lived below the media radar but it’s filled with potential options such as Autotask VARStreet, BigMachines, CNet Channel Online, Quosal and QuoteWerks (though no two options are exactly alike).

Key Moment

The channel spotlight for such software and online services grew brighter when Arnie Bellini, CEO of ConnectWise, discussed quoting software at length during the IT Nation conference in November. Roughly 1,600 channel partners and channel leaders were in the audience. ConnectWise Capital has an investment in Quosal, but Bellini also mentioned how third-party options like QuoteWerks integrate with ConnectWise’s PSA software.

• Yes, the ConnectWise-Quosal combo could create more competition for QuoteWerks.
• But ConnectWise is ultimately growing the market for such software, which could give QuoteWerks a long-term lift; roughly 25 percent of ConnectWise partners already run QuoteWerks, Lewe says.

Continued Growth

QuoteWerks’ Lewe sounds upbeat. He says November 2011 was the best month ever for QuoteWerks, and 2011 as a whole is the best year ever for the 12-person company, though he didn’t discuss specific financial results with MSPmentor.

Lewe positions QuoteWerks as “the other half of CRM. Everyone is always talking about CRM. On the flip side, your proposals and quotes, by definition, make you money. What do you do with your list of customers in your CRM platform? You sell them stuff.” That’s where QuoteWerks enters the picture.

Lewe began writing the software in 1993 when he was a reseller. At the time, he had accounts with Ingram Micro, Tech Data and other distributors. Lewe used to build Excel spreadsheets to try and organize his customer proposals. But ultimately he wanted a more organized, scalable way to proceed. Hence, QuoteWerks was born. Most recently, QuoteWerks has been busy integrating its platform with roughly a dozen different CRM packages.

Closer Customer Interactions

Now that the CRM integration work is largely done, QuoteWerks has been shifting its attention to QuoteValet. According to QuoteWerks:

• Rather than attaching a PDF file to the quote and emailing it to your customer, QuoteValet will create a personalized web page to present the quote on quotevalet.com.
• QuoteValet lets VARs and MSPs know when the customer has received and viewed the quote.
• Customers can change quote options dynamically and ask questions through the customized quote page. Plus, customers can electronically accept and sign the quote.

I believe Quosal’s Order Porter solution offers somewhat similar capabilities, though I have not tried either solution.

The Bottom Line

Despite the recent economic turmoil, Lewe expects 2012 to resemble most years for QuoteWerks. “Every year we steadily grow,” said Lewe. “We’ve never had to downsize.” That’s pretty impressive for a two-decade-old software company that serves the channel.

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• Related posts are coming soon