Q&A | October 9, 2013

Mercury's 7 Steps For Retail IT VARs Transitioning To The As-a-Service Model

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Bernadette Wilson

By Bernadette Wilson, associate editor, Business Solutions magazine
Follow Me On Twitter @bernadeditor

Kathy Conrad - Mercury

Restaurant payments can be tableside, loyal customers get to skip ahead in line, and a regular deli shop patron is identified by analytics and is rewarded by having a sandwich named after him. Merchants are increasingly creative — VARs have to be, too. Providing POS solutions in the “smart device era” presents a new challenge to VARs:  what do you do to meet new demands?

Kathy Conrad, senior director of marketing for Mercury, presented “Becoming a Merchant Service Provider: Trends, Transitions, and Triumphs” at Business Solutions magazine’s Channel Transitions MSP/VAR Conference on October 7 in Philadelphia.  She offered seven steps to help make the transition.

  1. Bundle your offerings. Conrad said according to a Mercury survey, the top requirement for a new POS system is the ability to manage costs, both upfront and in total. She says bundling hardware, software, and support into a fairly priced bundle is a good strategy. The industry standard is 15-20 percent for support, 25 percent for hardware, and 55-60 percent for software. Conrad suggests, instead, building “good,” “better,” and “best” bundles and explaining what each offers and which best suits your customer.
  2. Reset your pricing. Conrad said an easy entry point to changing your business model to managed services is to use the “Rule of 78. Simply put, the rule states, if one salesperson sells a contract for $1 in recurring revenue each month for 12 months, at the end of the year you will have $78. With multiple salespeople, selling hundreds of dollars of services each month, it is easy to see how a significant recurring revenue stream can be established.
  3. Leverage new promotional strategies. Online sales are growing faster than those in brick and mortar stores. The Internet can be not only a new “storefront,” but also a way to connect with customers through promotion and social media. Conrad said also to check with vendors for help with promotion. Mercury offers campaigns for its partners to use — free of charge.
  4. Expand your network. Conrad stressed the importance of networking — commending Channel Transitions attendees for meeting new people at the conference and looking for ways to work together. She said to look to vendors as well, to see what they can offer to help grow your business.
  5. Reduce business expenses. Referring back to the “Rule of 78,” Conrad said while ramping up recurring revenue, it might be necessary to take measures such as decreasing overhead and inventory and taking a look at job descriptions and schedules to reduce costs and increase efficiency “to weather the storm” until recurring revenue is sufficient to cover expenses.
  6. Change support model. The annual service contract probably will not best serve you or your clients during a transition to a recurring revenue model.  Conrad listed other options to consider for support such as pay-as-you-go, month-to-month, no-wait “cut the line” plans, or leveraging e-support.
  7. Update your contracts. A transition to a new business model necessitates taking a look at your contracts. Conrad reminded conference attendees that the Retail Solutions Providers Association (RSPA) offers best practices and sample documents that you can tailor to your business.

Conrad told conference attendees that Mercury has seen many VARs successfully make the transition from break/fix to managed services as a way to evolve with the changing market.

Channel Transitions is sponsored by: AVG Managed Workplace, Mercury, OKI Data Americas, GFI MAX, ModernOffice Suite, and Harbortouch with industry association partners The ASCII Group, CompTIA, and the Retail Solutions Providers Association (RSPA).