As more companies begin to leverage managed services in their transition to a more outcome-based business model, developing the right sales strategy is at top of mind. However, due to longer sales cycles, higher cost of sales, and higher risk/reward opportunities, selling managed services is quite different than selling any other kind of technology. (Tweet this!) Providers can no longer take the “same old sales” approach if they’re to achieve their ROI, but must ensure they have the right processes and people in place to properly sell managed services.
Types of Managed Services Sales Models
Industry-wide, services revenues have become more important than product revenues. To learn more about how companies are selling services, TSIA conducted a first-of-its-kind Managed Services Compensation Study that gets a deep-dive look into the way companies are selling managed services, focusing both on their processes as well as their compensation models.
Based on what we’ve learned from this study, here’s a glimpse of the most common models for how managed services are sold and the different ways sales teams are being organized.
General Sales Team
More than half of our members that responded to this survey use their general sales team to sell managed services. This is the same team that sells technology, whether its hardware, software, or subscription, and is also responsible for selling services. They own the revenue against each individual client.
Dedicated MS Sales Team
24% have a dedicated managed services sales team, and we see this happening in two different models. In the first version, no one else touches the managed services opportunity except for the dedicated managed services sales team. In the second, the deal is shepherded by this team if it is found to be a managed services opportunity. This is an overlay team of specialists who truly understand the differences between general sales and managed services and know how to properly structure these deals.
Some companies choose to lump all of their services together and have created a sales team based on services value propositions. This team is also responsible for selling maintenance contracts and professional services as well as managed services.
There’s an interesting channel play starting to develop in managed services, as we are seeing an increase of companies that are offering their managed services through an indirect private label model, other managed services providers, value-added resellers, and so on.
Which Model is Right For You?
Looking closely at this data, we can get a better idea of which model drives a better increase on KPIs like revenue growth. We’ve found that companies that use a dedicated managed services sales team have, on average, a 50% total recurring managed services revenue growth rate. (Tweet this!) This includes not only net new, but also base revenue.
In short, if you really want to drive the highest topline and base revenue growth for your managed services business, it is really worthwhile to invest in a dedicated managed services sales team.
More Tips for Developing Your Managed Services Business
Managed services continues to be one of the fastest-growing segments of the entire technology industry, and if you don’t already have a managed services strategy in place, you’re already behind the curve. But for those who still need a little guidance, be sure to check out my newest ebook, “How to Avoid the 5 Most Common Mistakes Made in Managed Services,” where I offer insight and tips for avoiding some common challenges companies face on their road to establishing a successful managed services business.
Also, I hope to see you at our upcoming Las Vegas conference, TSW 2015 Service Transformations, where I will be delivering my Power Hour session, “Growing Managed Services: The Gift that Keeps on Giving.” See you there!
About the Author
George Humphrey is senior director of managed services research for TSIA. He is a networking and communications industry veteran of over 20 years with extensive experience in managed infrastructure and application services. Keep the conversation with George going. He may be reached at firstname.lastname@example.org.