Services represent huge opportunity, but money being left on the table 11 March, 2008 By Chris Talbot

The services market is very robust and is key to channel revenue and profitability, especially as hardware margins continue to drop, said Justin Crotty, vice president of services at Ingram Micro. Unlike with hardware sales, selling services is not a one-time revenue generator but an annuity that continues to bring in revenue on a regular basis. However, it has been difficult for partners to chase what are basically low-dollar renewals on warranty contracts.

"There's a lot of money being left on the table by the channel," Crotty said.

When a service contract is coming for renewal, partners often aren't chasing those opportunities. Crotty estimated that hundreds of millions of dollars are being left on the table every year by the channel.

In the past few years, though, Ingram Micro and other distributors have been partnering with companies like MaintenanceNet, which can offer services or solutions to help track service contracts, send reminders to partners when it's time to renew and help keep data integrity as it relates to service contracts.

Ingram Micro's biggest challenge in services has been the limited visibility of warranty contracts, Crotty explained to the Webinar attendees. Through its reseller customers, Ingram Micro sells hundreds of millions of dollars in warranty maintenance contracts every year, but once those contracts are sold, the distributor had little to no visibility regarding where the contract was, when it was registered, when it was activated and when it expired. Ingram Micro had no idea when it was time to renew contracts because they had been registered properly.

"The challenge we had is we had to go out and resell several hundred millions of dollars worth of contracts from scratch," Crotty said.

Partnering with MaintenanceNet has helped to solve that problem. MaintenanceNet provided a single platform for which to register, track and notify Ingram Micro and its partners about contracts and renewal opportunities. The goal wasto fix the "broken ecosystem" surrounding services.

MaintenanceNet tries to make it easy for resellers to register what service contracts they are selling so they can be tracked. The company makes it possible to track and manage those contracts, and when the time is right for renewal, resellers are notified. It not only reduces the cost of doing business and getting the renewals, but it also maximizes renewal opportunities, Crotty said.

There was a misconception that manufacturers had a 90 per cent renewal rate, but the truth is the percentage of renewals is between 20 and 50 per cent, said Scott Herron, CEO of MaintenanceNet. The key to making renewals work is registration of contract sales, he explained.

It's also vitally important to track changes in contracts, as well, he noted. It's not a one-time action.

"Assets move. Contacts change," he said.

An online software-as-a-service (SaaS) solution is the only way to go about managing a services ecosystem, Herron said. It enables everyone to interact with the information in the most fluid way possible and, ultimately, drive revenue back to the manufacturer through the supply chain, he said.

"We really believe the channel is this huge force that needs to be leveraged," Herron said.

In building a services business, Crotty said there are four key elements -- attach, register, renew and refresh. He used the example of Best Buy for a good method of attaching service, in that with any purchase, someone tries to attach service contracts. A customer can't leave the story without someone trying to sell them service contracts, he said.

"That attach has got to go up," he said.

If the attachment of services is declined, that's that, but if it's accepted and the customer buys a service contract, then the reseller has to register it to ensure data integrity and to make sure they get notified about renewal opportunities. When it comes time for renewal, they have to pursue.

Eventually, the lifecycle of the hardware being serviced will come to its end. At that point, resellers have to be ready to jump in with a refresh pitch, Crotty said.