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What are the biggest pitfalls of managed services to avoid?

Managed services can provide recurring revenue for a solution provider, but this can also become a difficult endeavor without the proper organizational makeup, technical infrastructure, financial setup or sales effort in place.

What are some of the biggest pitfalls of managed services that a solution provider should avoid?

I'd say there are three big pitfalls for the solution provider playing in the MSP space. First, they have to have the right makeup as an organization (the right mindset or "DNA") to establish that business model and integrate it into their existing business -- or even run it as a separate business. Technology limitations also come into play here, such as inadequate bandwidth, insufficient back-end processes and so on. You see a lot of companies take runs at this and then close their doors because it wasn't mapped out well; they didn't have the right mindset to get it done.

About the author
Paul Myerson is the senior channel analyst at Enterprise Strategy Group. Listen to more from Paul in our top VAR business concerns podcast

The second problem is the financial model. Seeing and hearing the plan is one thing, but having the plan mesh with your bottom line in terms of contracts and recurring revenue that adds up over time may simply not fit into the company's model.

The third pitfall is weak sales or poorly planned sales arrangements. Some organizations think that paying the sales force over time based on annual or multiyear contract sales will get their attention. But if a salesperson can make more selling traditional services (or more conventional blends of hardware, software and services) than managed services, that's exactly what they'll do. That's been a huge issue for solution providers, so you'll need a good plan in place to address sales incentives if you want to play in the managed service space.

Return to the top VAR business concerns guide and read the rest of Paul's expert responses.

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