Should You Sell Networking as a Managed Service?

A recent study commissioned by the World Bank Group estimates there are between 365 million and 445 million small to midsize businesses (SMBs) in emerging markets around the world. These businesses increasingly seek managed service providers (MSPs) for outsourced IT services. The same study also indicates that in the next three years SMBs expect up to 75% of their IT infrastructure to live in the cloud. This reliance on the cloud puts increased pressure on the network infrastructure needed to run the business, and MSPs will be top of mind to assist with this challenge.

For years, networking technologies have been a constant for IT service providers, resellers, value-added resellers (VARs) and MSPs. However, networking has typically been sold and supported on a project basis, with support being delivered as needed and billed hourly. However, the idea of proactively managing networks and delivering networking infrastructure as a service is getting an increasing level of interest and attention. In this article, we outline key components and considerations for MSPs to successfully deliver networking as a service.

Sell Based on Value

To be successful in selling networking as a service, it is essential to pitch the value of networking rather than focusing on the individual networking devices–access points, routers and switches. Imagine yourself as the client. Why is having a reliable network important to you? How would it impact your day to day if your networking service did not work? The goal of these businesses is not to purchase a device or own a particular brand, but to solve a business challenge. If you can answer those questions and address their goals in detail, you can begin to help your clients understand how much they rely on connectivity to run their businesses successfully and the value you bring in helping them achieve these goals.  Focus on understanding their needs and positioning the experience they can expect from your deployed networking solutions. Stay away from speeds and feeds. Sell your expertise, and don’t be afraid to charge for it.

Choose a Go-To Marketing Strategy

The strategy you choose to sell networking as a service will be based on several factors, including how you deliver other managed services, your market, and financial concerns such as cash flow, margin targets, etc.

The classic managed services strategy is to sell networking hardware along with an ongoing monthly service fee for that hardware. In this model, it’s difficult to avoid the discussion of hardware because it is sold as a line item. It’s also a challenge to drive margin because the recurring component is limited to licensing or service per each product.

Selling networking as a service is another option worth considering. In this model–similar to hardware as a service–the customer pays a single monthly fee that is inclusive of both service and hardware. It’s positioned as a one price, all-inclusive networking service and focuses on delivering the service experience and not the hardware. This model enables you to avoid tactical hardware sales, brand discussions, and specifications, and to deliver a monthly service that meets your client’s needs  This model removes the challenge of negotiation around hardware pricing that often creates the opportunity for a competitive MSP into the conversation.

Whether you opt to sell hardware and additional licensing or offer networking fully as a service, networking technology that enables you to deliver effective services should be a top priority.

Focus on Your Pricing
MSPs use a variety of pricing strategies today, and yours will ultimately be dictated by your business’s specific needs and market demands in your region. Per-user or per-device pricing is the most common, while others opt for a fixed-price model or a hybrid of the two. Offering networking services is no different. Consider the value you’re adding and align it with a model that’s easy for your clients to understand and profitable for you. When setting your price, always consider your costs. From there, you can add your margin (cost plus pricing) or you can price based on the value you are delivering to the partner. Remember, you are selling your expertise and value. That’s why your clients hire you. Charge accordingly.

We live in an increasingly connected world. Businesses of all shapes and sizes are dependent on the network and are looking to managed service providers to deliver fast, reliable connectivity. To learn more about this opportunity and gain insights from your peers in the MSP channel, download Datto’s eBook “Selling Networking as a Managed Service.”

John Tippett is VP of Product, Networking, Datto.

This guest blog is part of a Channel Futures sponsorship.