Increase Revenue By Selling Support
Integrator sells maintenance support plans to 70% of his clients and increases annual revenue by 25%.
Business Solutions, January 1998
This employee, however, also holds another position at the company. While this employee is acting as a de facto information technology (IT) director, the time dedicated to the primary job at the company decreases.
Diversified Computer Solutions, Inc. (DCS) seeks out small- to medium-sized businesses which find themselves in this situation. The Atlanta-based integrator, which installs networks and imaging systems, offers a long-term solution to companies which do not have full-time IT personnel on staff. That solution comes in the form of a maintenance support plan. DCS customers can choose from four monthly retainer packages, which feature scheduled maintenance and consulting. Since its founding in 1991, DCS has completed 85 installations. Of this total, 60 clients have purchased and remain on monthly support programs. The company posted $1.4 million in revenue in 1997 and $350,000, or 25%, of that total came from maintenance support plans.
The Market For Support Plans
DCS has learned that most small- to medium-sized companies do not have an IT person on staff for various reasons. "Most companies this size can't afford to hire a full-time IT person or don't have enough work to justify a full-time IT position. There is a lot of expense associated with keeping an IT person well-trained and fairly compensated," states Peter Minetos, president and founder of DCS. "We sell companies the benefits of an IT staff at a fraction of what they would have to pay an in-house IT person."
Minetos explains that the IT profession has attracted a lot of talented, motivated people. This can be a double-edged sword for employers. "A company should have no problem hiring an IT person who can do some very creative and good work. However, after a couple of years that person will often start to look for other opportunities and move on to a new job," states Minetos.
The Four Stages Of Support
DCS offers its customers four plans to choose from. The plans are scaled, in price and services, to meet the requirements of different-sized businesses. "If you offer only one plan, it might not be affordable to smaller businesses. Also, larger companies might think the plan doesn't offer them enough support," states Minetos. "We try to provide an option that fits a company of any size."
- Plan A - Recommended for companies with less than 10 users on the network. A DCS technician will come to the site for two hours every other week for scheduled maintenance. This includes checking system logs which contain a record of computer activity. Additional service hours are billed at $100 per hour (the standard DCS rate is $125 per hour). The cost of Plan A is $425 per month.
- Plan B - Recommended for companies with 10 to 20 users on the network. A DCS technician will come to the site for four hours every other week for scheduled maintenance. Additional service hours are billed at $95 per hour. The cost of Plan B is $825 per month.
- Plan C - Recommended for companies with 20 to 40 users on the network. A DCS technician will come to the site for four hours every week for scheduled maintenance. Additional service hours are billed at $90 per hour. The cost of Plan C is $1,550 per month.
- Plan D - Recommended for companies with more than 40 users on the network. A DCS technician will come to the site for eight hours (full day) each week for scheduled maintenance. Additional service hours are billed at $85 per hour. The cost of Plan D is $3,000 per month.
Short-Term Contract, Long-Term Gain
The maintenance support plans are signed on a monthly basis. DCS has found that a customer is more apt to sign a monthly retainer than a one-year contract. This is especially true if DCS is replacing a previous VAR which performed poorly. "If a company has just had a bad experience with a VAR, that company does not want to jump into another long-term contract," states Minetos. "You have to be confident in the work you do. We believe that once a customer sees our work and develops a relationship with us, that customer will continue to sign the monthly support plan."
The majority of DCS clients will agree to the maintenance support plan recommended by the integrator. However, some larger companies will choose the lowest plan in an effort to save money. While this is a company's prerogative, Minetos has seen it backfire. A mortgage broker contacted DCS to have its network expanded by five users. While DCS did the installation, technicians discovered some potential problems with the broker's NT server and Web site server. "We told the company that this situation needed to be monitored and corrected. We recommended the broker sign a four-hour-per week retainer agreement. However, the company chose to retain us for only two hours every other week," explains Minetos. Two weeks later, the NT server crashed. The server was down for three days and DCS spent 48 service hours getting it up and running. "The broker spent about $5,000 in labor costs for us to get them running again. That total doesn't include the money the company lost from not being able to do business when the server was down," states Minetos. "The cost of the Plan C retainer is a fraction of what they spent in solving this problem."
Shortly after this incident, the mortgage broker upgraded its support program to the Plan C agreement recommended by DCS. Minetos uses this story as a cautionary tale for customers who might try to save money on system maintenance. "What happens in most cases is that little problems go unchecked until they add up to a major problem. With a support plan, the little problems are solved before they can amount to anything serious," adds Minetos.
DCS does not pitch the maintenance support plan as part of the overall sale to the customer. "Customers do not usually want to hear that they have to spend a certain amount each month to support a new system they just paid for. This is another reason we don't sell long-term maintenance contracts," states Minetos. However, DCS will sometimes do an installation for a lower price because the company knows a maintenance agreement will pay long-term dividends. "We take a risk that some customers will choose Plan A and then cancel after one month, but that has never happened," adds Minetos.
Most DCS installations are for companies that are expanding in terms of employees and revenues. Minetos says these companies have come to value the consistent support and consultation that a maintenance agreement offers. Scheduled service calls also give DCS a chance to increase sales by offering upgrades to customers.
A law firm hired DCS to install a network for 20 users and also agreed to a Plan B support program. DCS sent the same technician to the firm for four hours on every other Tuesday. As part of the maintenance, the technician checked system error logs, made sure all of the connections were working properly, applied software patches, and responded to user questions that he had received by e-mail since the last service call. As part of the retainer, the technician and the managing partner discussed improvements to the present system. "This law firm was spending $200 each month to have West Law (an online service which compiles court decisions) on one terminal. We eliminated the single dedicated terminal and connected the entire firm to the Internet. Now, each attorney has access to West Law at their desk for about $100 per month," states Minetos. DCS also procured a CD-ROM copy of the Georgia State Annotated Code which contains all court decisions in the state. The Annotated Code is updated quarterly and DCS places the most recent version on the server which every attorney can access.
The law firm is currently discussing the possibility of a document imaging system. "When a client sees the same technician every other week and the system is running flawlessly, a relationship is formed. A client tends to trust the integrator when advice is offered," explains Minetos.
An Edge Over Consulting Firms
DCS is one of the few integrators in the Atlanta area which offers a comprehensive maintenance support plan for small- to medium-sized businesses. Minetos claims his company's hourly rates are competitive, but the customer's real advantage is knowing how much support and consultation will cost each month.
According to Minetos, a lot of integrators and consultants in Atlanta require customers to purchase blocks of time. This means a customer will agree to purchase a specified amount of hours to have a technician on site. This kind of time is purchased on an "as needed" basis. For example, a customer will have to pay for six hours of support even though the technician solved a problem in four hours. The remaining two hours will then be credited to the customer's account and used in future service calls.
"A lot of consultants need to charge this way to keep cash flow at a higher level. With this type of payment system, a customer is inclined to only call a technician when there is a serious problem, " explains Minetos. "We explain that the customer is better off with a proactive maintenance schedule on a payment plan which is predetermined."
Don't Lose Touch
Not every customer will purchase a maintenance support plan or continue to sign on the dotted line each month. DCS still keeps in regular contact with these customers even though an agreement is not in place. Constant communication serves three purposes. The first is that a customer may be looking to expand its present system and DCS wants to be the first integrator to be considered. The second reason is to get referral business by maintaining a close relationship with the client. Finally, a past customer may eventually sign a monthly support retainer after previously deciding the maintenance agreement was not necessary.
A large maintenance company with a full-time IT staff contacted DCS for assistance in configuring a new network system. A DCS technician worked with the company's IT personnel to install the system. Following the installation, the company did not sign a maintenance plan with DCS because it already had an IT staff. Lacking this formal agreement, DCS still talks regularly with the company. Maintaining this relationship has led to referrals for other installations.
"It is important to remember that technology people at one company will talk to their counterparts at other companies. When a company has a problem with its system, the IT director will likely ask other people in the same field for advice or names of integrators who can help," states Minetos.
A Big Opportunity
The reason DCS concentrates its marketing on small- to medium-sized businesses is because these companies want and will pay for professional services, according to Minetos. "Most companies this size don't have IT personnel or have been approached by small consulting firms that tend to overcommit," states Minetos. "I believe that a lot of integrators fail to realize the need that exists in this market and the potential for revenue that is here."