Channel players are taking a harder look at IT maintenance contracts as a way to keep existing customers, boost revenue and add value in a tough market.
Case in point: E-Safe Technologies, a Pittsburgh, Pa.-based solutions provider. The company, which sells a lot of IBM gear, lost a couple of accounts to rival VARs that moved in on its maintenance business. Gary Sharp, vice president of sales at E-Safe, said a competitor that sells a single server into one of his accounts is considered by IBM to have a footprint there. At that point, IBM lets its business partners slug it out for that business.
"If they have a footprint in an account, everything is in play including the maintenance that I sold originally," Sharp explained.
To counter the threat from other VARs, E-Safe last year decided to elevate maintenance. The company created a maintenance practice and hired a third party to handle its renewal operation. The move isn't only defensive, however. Sharp said he sees the potential to grow the company's maintenance business.
"We're going to keep what is ours and take more," he said.
Beyond competitive interests, the still-challenging economy also compels resellers to unearth opportunities in maintenance contracts. Jason Beal, director of sales for Ingram Micro Inc.'s Seismic managed services portfolio, said solutions providers over the last 18 months have left no rock unturned.
"They have become more sophisticated and diligent in how they track and ... go after renewal opportunities for both hardware and software," Beal said.
He pointed to another development that makes resellers more mindful of contract renewals: the growth of managed services and cloud computing.
"Companies that have offerings in managed services and cloud services ... have also had to become sophisticated and focus on the renewal of those contracts," he noted.
Minding IT maintenance
To the extent that resellers kept tabs on service contract renewals at all, they typically relied on spreadsheets and in-house resources. E-Safe's Sharp said a reseller can add the task of tracking maintenance contracts to a salesperson's or an office staffer's list of duties. VARs can also hire someone to do maintenance, but doing so lengthens the "time to impact," he noted.
For its part, E-Safe tapped Managed Maintenance Inc. (MMI) as its maintenance partner. The company advises channel partners on best practices for service contract management. It also offers a hosted portal for keeping tabs on renewal opportunities. Resellers can outsource the maintenance sales function to MMI, as is the case with E-Safe.
"MMI is basically my maintenance sales person," Sharp said.
MMI and other companies that focus on renewal management report increased interest from the channel. Frank Casillo, executive vice president at MMI, said end customers are lengthening the technology refresh cycle, a situation that has piqued resellers' interest in the maintenance opportunity.
"The renewal opportunities for VARs and distributors are increasing," he said. "So instead of going in and doing a tech refresh, they keep and retain that customer through renewing maintenance agreements or license support agreements."
"The channel partners are out actively working those opportunities to bring in additional revenue and additional gross profit," added Shayne Skaff, vice president of business development at MaintenanceNet Inc., a provider of warranty and service contract management services.
The story is similar at ServiceSource Corp., which focuses on service performance management.
"I do believe that we see the channel community more focused on support and maintenance contracts," said Natalie McCullough, senior vice president, go-to-market, at ServiceSource.
The importance of renewal management
Renewal specialists may offer a range of services. Initially, they may help channel companies sort through sales data, which can provide clues as to where the renewal opportunities lie. A reseller may sell hundreds of hardware units and software licenses to a given account, but may not have a firm grasp on when the equipment was sold, where it resides at the customer's site, and what particular support contacts cover it.
"They have the data but they don't know how to make heads or tails of it," Casillo said.
MMI captures a reseller's raw data, which may be stored in various databases, spreadsheets or CRM applications, pulls it together and cleans it up so it can support business development activities.
The data aggregation task can be challenging. Jay Ackerman, chief services officer at ServiceSource, cited one customer that had data coming from more than a dozen systems, which were all critical for creating an accurate view of the gear sitting in an end-user's operation. Projects always involve pulling data from multiple systems and reorganizing it so the customer can leverage it, Ackerman said.
The gig doesn't end with data cleansing, however. Companies in the service contract management business typically offer a portal through which resellers gain visibility into contract renewal opportunities. A tool resellers can use to create customer quotes may also be provided. And in a fully outsourced engagement, the management vendor serves as the reseller's renewals sales force.
The management vendor works directly with resellers in some cases and supplies their portals and renewal automation technology to OEMs and distributors, which, in turn, offer those tools to resellers. Smaller resellers, in particular, may access renewal services that way.
MaintenanceNet's technology, for example, stands behind Ingram Micro's Reseller Services Portal, which provides warranty contract management. Beal said more than 2,000 VARs access that tool every month.
Casillo of MMI said his firm works with both VARs and large distributors. ServiceSource, meanwhile, provides its services to VARs of various sizes and reaches more through arrangements with OEMs such as VMware.
John Moore is a Syracuse, N.Y.-based freelance writer, reachable at email@example.com.
Dig deeper on Technology Vendors-OEMs