ScanSource's Burns: Managed Services A "Changing Paradigm" For VARs
Following is the transcript of a conversation between Business Solutions president Jim Roddy with Mike Burns, president of ScanSource Services Group. The discussion took place at the ScanSource Worldwide Partner Conference for POS and Barcoding, March 16-18, in Greenville, SC.
Roddy: Mike, just so we’re all on the same page, what is the ScanSource Services Group? Services is a pretty vague term, but can you talk about what the ScanSource Services Group actually does?
Burns: We’re a group within ScanSource that really provides the value adds. That’s sometimes an overused term, but basically what we’re trying to do is listen to our resellers, work with our resellers, to complement their businesses.
Our sales reps and our business development teams are out talking to the owners of the business and within their operations, trying to find out where they have gaps, where they don’t have resources or geographic reach, or where we can add more to their portfolios. That’s what we try to look at: what service offerings do we have to complement their business and more or less make it easier for them to hit their goal that they want to do?
Roddy: Can you talk about where the ScanSource Services Group came from, and how it morphed — how it came to be and what need its filling?
Burns: ScanSource bought a company back in 2001. That was primarily services and more in the communications space, but it was very similar to things that we can leverage over into point of sale and into security and other business units.
In the last two or three years or so, we’ve been working really hard to integrate into the other business units, specifically the point of sale and bar code business. It’s been more of a push-pull type scenario. In the past, we came up with offers and ideas on what we think partners would need. More, now, the businesses are starting to ask us, “Hey, could you do this for us?” and they’re starting to pull us in. We’re creating solutions and creating service offers. It’s really to make their jobs easier for them.
Roddy: Some of the areas of your services group are cloud services, marketing, network readiness assessment, and Wi-Fi services. I’m curious, among those four in particular, what one or two are the fastest growing or the most utilized by your reseller group?
Burns: When you get into all the new solutions for the more complex mobility or wireless — our wireless or assessment-type business is becoming more and more active with the resellers. The reason that is is because most of them don’t have the skill set, or they typically haven’t been exposed to that piece in their business, so they haven’t made investments. To get into that, you have to have proper tools, you have to have headcount and resources that know how to use those tools and interpret them, but then also have to be able to speak to customers.
That’s some of the heavy lifting we do for our customers. As these products now come on the network — on the LAN, on the WLAN — we can then step up and help our resellers. That crosses a broad range of products that we sell. That’s been accelerating.
The other one is our CCC, our Custom Configuration Center. That’s actually grown, even though it’s a hidden gem in our business. We have a huge opportunity to expand that to more customers, but over the last two years, it’s grown in double digit percentages of customers that are using it.
It’s starting to get traction, because our resellers are telling us, “We’re out there fighting, there’s a lot of competition, and our margins are shrinking, so what can we do?” They’re listening, and this is something that either helps them grow their businesses, helps improve their cash flow because we can get things done quicker for them and they can get installs quicker, or it helps their margins. They’re taking costs out of their model, which makes it more profitable for them. It’s a win-win all around.
That’s one I always talk about. It comes from a couple different perspectives. It’s a financial perspective, an operations perspective, and a customer satisfaction perspective. Financial is the easy one, when you start talking to the CFO and the owner. You talk about, “Hey, how is your cash flow? Let’s look at your statements, your balance sheet, your P&L. How can we help improve your cost of money?” A lot of them are borrowing, so we can bring that rate down, because their financials look better, because they brought their inventory down, increased their cash flow as far as getting more jobs completed sooner. That’s a win all around.
The operations piece is headcount — just being able to get more efficient with the teams that they have. I always say, let’s not have your top engineers in the back room, let’s have them in the front room with your sales guys. If you can make one more sale a month, you have one more sale a quarter, what does that do to your bottom line?
Roddy: It’s funny you say that, because listening in the general session yesterday, about the configuration, that’s what I thought. You’re really enabling the VARs to not just be turning the screwdriver all the time, but really creating demand generation and really becoming representatives and selling services, as opposed to having to build the entire thing from scratch. Is that accurate?
Burns: Absolutely. I was a sales guy way back early in my career — thinking back, if I had a top engineer to go out and see customers with me, could they believe that engineer more than they’d believe the sales guy? He’s the guy that has to do the work. Well, if we have that person, your sales rate is going to go up. Your construct’s going to be increased, and that’s a win for everyone, especially the overall business.
The flipside is, you’re right. The easy things that are in the background, I don’t need that top engineer doing that work. Let us take that off the plate, and it’s now ready to go. It’s a win-win deal.
Roddy: When you think about a services-oriented solutions provider, I know I first pictured a managed services provider [MSP], someone who’s not so much hardware based, but it’s really a software-based situation. How are you seeing the progress of the more traditional point of sale and bar coding VARs towards services? Are you seeing their migration to become total solutions providers, as opposed to just hardware guys?
Burns: I think we are. Just like with the MSP, and I’ve talked about this before, it’s a changing paradigm for them. I think they’re finally realizing that we need to do something different to succeed, to progress in business in the future. They’re reaching out for services, but I think they’re looking to become more of a total solutions provider, just like you said, in that they want to provide not just the hardware, not just the software, but whether it’s one-time services or managed services.
We’re trying to look at that down the road, and also on what could we do to help them — the Hardware-as-a-Service offers, cloud offers, maybe even just basic support offers, help desk, those types of things, both for the reseller or the end user, to help them. It’s a change for them, it’s a change of process, and they don’t know how to get to that. That’s why we’re trying to educate them and show them, “Here are some success stories, here are some ideas on how you can get to that point, and here’s what it does to your bottom line.” Then you get their attention.
Roddy: It sounds like you’re actually seeing some traction, because a lot of times, we get a reseller who signs up for our magazine or our website, they list themselves as a managed services provider. We talk to them and they’re like, “Well, that’s something I’m more aspiring to than actually what I am. I’m hoping to be that someday.” But you’ve seen traction, especially in point of sale and bar coding, with VARs making the shift to being managed services providers?
Burns: Absolutely. They’re starting to move towards it — in the past, they were in and out, in and out, with a customer refresh five, six, seven years down the road. Now, it’s, “Okay, let’s sell the services, let’s do the services, and how can we help them do that?” It keeps them engaged with their customer, and then it also opens up the doors to other possibilities in the business.
I think I mentioned before, network assessments and wireless-type work. That opens the door to not just the solutions they’re selling today, but what’s best for their end user? What’s their customer looking to do three, four, five years down the road, so the services provider can become more of a consultant? All of a sudden, that changes their business model and their business plan and their customer relies on them more.
All of a sudden, they’re selling not just the basic solution, they’re selling network gear, they’re selling things like servers and switches, that they didn’t a year or two prior, and they’re locking into the customer. It’s a good plan, and that’s what I see so far.
Roddy: So progress, but what obstacles are they encountering, and can you share with us how are some of the successful resellers that you’re working with overcoming those obstacles?
Burns: I think the biggest obstacle is their skill set and their knowledge in some of these newer technologies. It’s not that they can’t learn it, they’re just not sure what direction to go, or if they’re very entrenched in their processes, that’s the hardest part for them to get to change their process, because it works today. Especially in a small to medium business, they don’t have time, because they wear so many hats during the day.
It’s almost like we have to work with them to show, “Here’s how you do it, here’s a good process that works,” and we’ll teach them and team with them and then we’ll figure out what pieces we can do, what pieces they’re good at doing, and get them on the go.
A great example of someone that has been trying to do this is a traditional point of sale and bar code provider. They’re starting to expand more and more in the wireless space, more in the mobility space. They found out that we provided certain services and surveys, which then took it even further. We would give them the bill material, we’d get them an installation quote, and then we could do the install for them. It really took that all off their plates, because they were looking for someone else to do that, anyway. They were just selling it. Now it’s easy, a one-stop shop, and they can stay in front of their customers.
As we did more and more of this, we started talking to them about the things are they talking to that same customer about. We were involved with two big, major roll-outs for them, and I just saw a ton of opportunity around what’s going on in the network. Long story short, we started helping them learn about assessments, why it’s needed, where it would be needed, and then started to do webinars with their customers, so that they could learn it and they could start selling that on their own, and then we just provided that support for them. There are the traditional problems and then there are some good success stories. That partner is here at our show today.
Roddy: That’s an important message with the shift to managed services – to resellers who are more traditional –that it’s incremental. Everything doesn’t have to happen at once. I know when I talk to folks who have been selling, maybe they’re a second- or third-generation point of sale or cash register dealer, or they’ve been selling some scanners and transportation or warehousing for a quarter of a century, they say, “It’s easy for you to say to change my business, but it’s a lot harder.” Is that really the lesson to start the process now, one step at a time, do something new each quarter, and then you’re going to be there before you know it?”
Burns: Yes, you definitely have to have a plan, and we don’t want to boil the ocean. If you expand any certain field, whether it’s a vertical or into a certain technology, what are you selling these customers today, and what does it look like most of them would need?
If we touched on the cloud, for example, most businesses need a — we call it a DR, a disaster recovery plan, a backup plan, or virtualization plan. Now, a lot of times, they think, “Well, I don’t have too many disasters.” Well, the disaster is did you have a flood? Did you have a fire? Did somebody spill coffee on your server? Or, flat-out, did the server get old and break? What happens to your business?
Typically, in their businesses, you should ask customers what that server was providing, who was in their customer database, or who was in their CRM or their workflow? All of a sudden, they realize they’d be out of business. They can now easily see the need to virtualize that, so if there is a problem or an event, they’re back in business in an hour.
That’s something our customers didn’t look at before. Now, all of a sudden, their eyes are opening and they start looking at monthly recurring revenue. Their business is starting to change. That’s a little step, and all of a sudden, next month, it’s a couple more. Then eventually you look into other cloud solutions. You’ll typically move into two or three of them, and before you know it, two or three down the road, they’ve got a thriving business again.
Roddy: Yes, shifting to cloud services first is a shorter step than starting off with hardware as a service.
Burns: Exactly.
Roddy: Then it gets a little more difficult.
Burns: Right.
Roddy: The last topic I wanted to ask you about is marketing which is under your services umbrella. Not many vendors are going to go on the record and say this, but I am told all the time that they feel the vast majority of resellers are weak marketers – and I think weak is probably a kind word – from what I’ve been hearing. Can you share some marketing success stories, actions some resellers are taking in marketing, that’s helping their business? What are you seeing?
Burns: Well, let me address the weak marketer part. I would say, especially in the small and medium space, it’s not that they’re weak marketers. It’s on their list. It’s on their priority list to do, but it falls to the bottom of the list, because they wear so many hats in their businesses.
You go in with the great intent that I’m going to put together a good marketing plan, whether it’s a strategic plan or promoting their brand — what they look like to their customers. And all of a sudden, things happen. Salespeople have problems. They have to deal with customers. Issues happen during the day, and before you know it, it’s 4 or 5 o’clock in the afternoon, and they’re tired. They need to get their real job done before 7 or 8, before they turn the lights off and go home at night.
What we provide, from a support standpoint, is we offer marketing for them. We’ve got some great examples, where we’ve worked with resellers. For example, we have some customers that have huge challenges on how to upgrade web content, case studies, and blogs. We’ll sit down with them and we’ll go through some plans. Our team will work back and forth with their ownership or their marketing team or whoever has that role in their business, and come out with usually a 12-month to a 24-month plan.
Typically, we have great results. I have results of one with me here where corporate website visits increased 22 percent in the first year. Blog content increased 590 percent in the first year. These are good statistics — and it really gets down to leads. They have over 90 direct leads from the blog hits that they’ve received. That’s all the result of sitting back and talking with them, talking with our resellers, and they reached out and said, “Hey, we know we need help. Can you help us?”
We have a team that does that, and they’ll put together a plan, we’ll go back and forth several times and fine tune it. We’ve got multiple examples of that. It’s all around how can we help them accomplish what they really need to get done. Again, it’s taking it off their plate.