As-A-Service Business Model Gains Traction On RetailNOW Stage
By Jim Roddy, president, Business Solutions magazine and Integrated Solutions For Retailers magazine
I was thrilled the as-a-Service business model was discussed often during the final day of RetailNOW 2014 on Aug. 6 in Orlando, FL. The concept was featured prominently in the 8:00 a.m. “View From The Top” leadership panel — dominated by hardware vendors and distributors — and was the sole topic of the 9:00 a.m. session that followed in the conference’s main auditorium.
That session was led by Arnie Bellini, co-founder and CEO of business management platform provider ConnectWise, and included extensive input from two solution providers. Aaron Hamp, president of POS of Michigan, and Chris Rumpf, CEO of Rumpf Computer Solutions, are both IT solution providers who generate most of their revenue from the as-a-Service business model.
Bellini confidently made the case for this business model and using PSA (professional services automation) software. “Automation tools are necessary to compete going into the future,” he said. “As-a-Service forces you to become a better company because the customer pays their bill monthly. What will happen if you’re not performing? They won’t pay.”
Bellini shared with the audience five best practices related to automation:
- Everything is a ticket. That way, every action performed by your company becomes accountable.
- All roads lead to Rome. Any customer contact (phone calls, emails, alerts) ends up in the system. This enables solution providers to have a complete picture in one location.
- Paint tomorrow green. A downfall of many solution providers is failing to schedule their technicians’ daily activities. A schedule ensures everyone is busy and billable.
- My life is my schedule. Living by a schedule allows solution providers to “get all the clutter out of the way,” Bellini said. “Make the job simple for them to comply with what you need them to do.”
- All time all the time. Ensure your technicians enter every minute of their billable time. Your software should make this process easy.
Bellini also mentioned two resources his company created that I’ve reviewed and would recommend all retail IT VARs. The Modern Retailer poster and The Ultimate Guide To As-A-Service are available on BSMinfo.com.
After Bellini established that foundation, Hamp and Rumpf carried the session with memorable quotes about their experiences as managed services providers to retail and hospitality customers.
Cash flow — Rumpf: “Recurring revenue takes care of 90 to 95 percent of our monthly expenses the first day of the month. We reduced the peaks and valleys from our revenue cycle and turned them into waves.”
Pricing — Rumpf: “We are expensive on the services side, but we can do that because we can provide so much value. We can do everything in restaurant IT.” Rumpf said his rate for a typical one-terminal installation is approximately $250 per month while a two-terminal installation is around $450 per month. “We can get to breakeven on the deal in eight months,” Rumpf said. “Long-term is where you get the greater margins.”
Partnering — Hamp, who has a general IT integration background, talked about his partnership with two longtime POS dealers. “I didn’t have to learn all the nuances of POS. Pick a few things you can do really well, and then partner with someone who can provide additional value and expertise. Do only what you do great.”
Staffing — Rumpf: “Automation has taken away us needing to hire an expensive accountant. The software tracks everything, so we just pay a $22,000 admin. Automation software makes that possible.”
Referrals — Rumpf: “The service-model customer refers us to others because they are the happy ones.”
Transitioning customers – Hamp: “I’ve had a challenge with existing customers and Hardware-as-a-Service (HaaS) in general. Packaging everything is the ultimate goal eventually.” Rumpf said he bundles the total solution; Hamp said he sells the hardware outright to his customers but sells everything else as-a-Service. “Just do the hybrid approach,” Hamp recommended. “For example, you can take $10,000 off the hardware’s up front cost if they sign up for the as-a-Service model for everything else.”
Selecting customers – Rumpf: “Don’t rent equipment to crappy customers. We haven’t lost any equipment yet. Do your homework on the customers.” During the audience Q&A portion of the session, Rumpf was confronted by a self-described old-time cash register dealer who said, “I have a lot of crappy customers. I tried being my own leasing company five years ago, and it didn’t work. I would never finance a $30,000 deal. The vendor is charging me $18,000.” Rumpf responded, “I wouldn’t do a $30,000 hardware deal on the as-a-Service model now. Try it on an $8,000 deal because that will limit your risk.”
It was also noted that several hardware vendors and distributors on the RetailNOW show floor offer leasing programs to their resellers, and other providers are beginning to sell hardware to their resellers on a subscription basis. One reseller I talked with after the session said over the past year they have sold several solutions as-a-Service and have yet to outlay one dime themselves to finance those deals.
RetailNOW 2014, hosted by the Retail Solutions Providers Association (RSPA), was conducted Aug. 3-6 at the Gaylord Palms Resort and Convention Center in Orlando, FL. For more information on the event, go to www.BSMinfo.com/solution/InsideRSPA.