Why managed services fail

It seems like nearly every IT/network supplier and service provider is adding managed services to its portfolios. Yet almost every supplier and service provider I talk to admits that selling managed services has been harder than expected. Why the disconnect? Bad packaging, pricing, positioning and salesmanship.

My organization defines managed services as a set of turnkey services that assume responsibility for the deployment and ongoing administration of specific IT/network functions. These services tend to be delivered remotely and generally are packaged and priced on an annual, subscription-fee basis.

Originally, telecom carriers offered managed services to support their largest customers' complex WAN management requirements. Today, managed services appeal to companies of all sizes because they address a wider range of IT/network management issues. Managed services also are more attractive than traditional outsourcing arrangements because they can be acquired on an incremental basis.

Growing interest in managed services is attracting a broader array of IT hardware and software vendors, value-added resellers, integrators and outsourcers. The first problem these managed service providers face is packaging. Many of these companies merely are renaming their maintenance or outsourcing capabilities rather than offering genuine managed services. Others are creating complicated managed service portfolios that confuse potential customers.

The second issue is pricing. Rather than provide a simple fee schedule for their managed services, many providers have created complex pricing algorithms that frustrate prospective customers.

The third challenge is positioning these services properly. In most cases, managed services are simply promoted as a way to reduce staff and lower operating costs. While these benefits are essential, few managed service providers can clearly differentiate themselves or show how they add value to their customers.

But the biggest obstacle to selling managed services is poor sales skills. Many managed service providers rely on traditional, transaction-oriented salespeople to sell managed services. These salespeople generally are good at selling relatively standardized products or services but inexperienced at selling ongoing managed service relationships.

Unlike traditional products or maintenance services, managed services can't simply be sold and left behind with limited support from the supplier. The fundamental value of a managed service is that the supplier is promising to monitor and mitigate potential risks proactively.

Rather than simply selling the cost savings of managed services, salespeople must learn how to convince their enterprise customers of the potential business value of their offerings.

The good news is that the proliferation of managed services has created a buyer's market for managed services that can alleviate many hassles associated with day-to-day IT/network operations. The bad news is that few managed service salespeople know how to properly sell their managed service capabilities and potential business benefits.

Copyright © 2005 IDG Communications, Inc.

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