Jack Gerbs, owner of Ohio regional VAR Quanexus, has strong views about the real value proposition of managed services for his clients.

Who is Quanexus?

We are a leading regional networking and telephony integrator based in Dayton, Ohio.

How do you define managed services?

When most people say "managed services", they mean the provision of remote monitoring and management services. And this is certainly a very important piece of the puzzle. But in a broader sense, managed services is more than that. It's all about assuring the availability of critical IT systems and networks and the continuity of the business activities that depend on them. The key is the SLA (service level agreement) that guarantees the customer will have a certain level of uptime. Managed services in the narrow sense is a tool you need to implement the SLA. But you have to do a lot more to meet a really demanding SLA. There's a big difference between taking a week to restore the customer's data to the state it was in a week ago, and taking only one hour to restore it to where it was five minutes ago. It's a lot harder to reach that second level of availability. You need a complete plan in place for getting the system back up within a certain specified amount of time after it goes down. That's managed services in the broad sense.

How did you get into managed services?

We've been around as a solutions providers for about 15 years. But over the past three years we've been focusing our business more and more on the practices that revolve around disaster recovery (DR) and business continuity services (BCS) for our clients. The managed services model is a natural and in fact necessary extension of those ideas.

Why did you decide to use Ingram Micro's Seismic to deliver managed services?

We had already decided to use the LPI software before Seismic, and we have rolled it out to a few beta clients. We are also currently in beta test mode on the Seismic platform. There are two fundamental reasons why we went with Seismic. First, I don't want to manage a NOC (network operations center) myself. That's not my job, that's not a benefit to me or our customers. So I'd much rather delegate that job to Ingram and SAVVIS. Second, and even more important, Seismic offers redundancy for the LPI management server, in other words guaranteed availability. If the server in the SAVVIS datacenter providing service to us goes down, they have a backup copy of the LPI software that is already loaded with the data for my customers. So there won't be any interruption in my ability to service my clients. This is something that I couldn't do if I ran the LPI software myself. The likelihood of one of my servers going down is just as high as for one of my customers' servers. I pay a little bit of a premium for Seismic, but it's worth it.

Why are your customers interested in managed services?

Our typical customer has anywhere from 15 to 50 or 60 PCs. They are customers for whom data and the continued availability of data are critical. We have a lot of medical practices, both independent and managed. We also have some regional banks and some midmarket manufacturing companies. For these customers, if the servers go down and they can't access their data, then their basic business activity immediately grinds to a halt. They can't serve patients, they can't handle financial transactions, they can't run the production line. They are literally out of business. That's why we focus on customers with needs like these. If you are a bait shop, data is not critical. You don't need managed services.

Will you look to Seismic for services beyond the Level Platforms software hosting?

Yes. I hear they might offer a help desk service. I don't offer help desk services now and I don't want to run one on my own. If Seismic does it, I'm looking forward to it.

Are you considering moving into Hardware as a Service (Haas) as an adjunct to managed services?

Yes. HaaS is an interesting idea, we're taking a look at it. It makes hardware into a utility for the customer. They no longer own the hardware on their site. We arrange financing to take it off their hands and charge them a monthly fee to use it. Then if they need a new server or some new workstations, we provide them and their monthly fee goes up. If they need less equipment, we remove it from their site and their fee goes down. We choose the equipment, control it, and take responsibility for making sure it is up and running. One of the things you have to do before putting an SLA in place is make sure the customer is running stable systems that can support the SLA. So HaaS is a natural complement to our SLA-based concept of managed services.

How fast will you migrate your customers to managed services?

Our goal is to have 60% or more on managed services within three years. We're still in beta, but we're ready to roll out the service now. We've got the contracts in place, we've been building our disaster recovery and business continuity practices, and we've changed our methodologies to do network assessment and stabilization of the client's equipment. Eventually we may move our entire business over to the new model, which would include hardware as a service.

If you are going to take over the customer's network and maybe even own their equipment, aren't you really acting as a kind of outsourced CIO?

Yes, that's it exactly. In our shift to managed services, I'm looking at my company becoming the acting CIO of my customers' companies. Now one thing CIOs do is to look at best practices across their entire organization. If you have a site that is spending lots of money to perform certain IT functions compared to other sites, you want to ask why that site is different and why it costs more. As the CIO, you will try to identify best practices elsewhere in your organization, identify sites that spend less money to perform the same IT function, and then apply those best practices across the board in order to drive out costs. Each of our managed services clients will be paying a fixed fee to us for their site. But we will manage costs across all of the customer sites in our portfolio. If a certain site has costs that are out of line, as their outsourced CIO I will go to them and ask them either to align on the best practices that we have identified or else agree to pay a higher fee to cover their higher costs.

What advice would you give to a VAR considering managed services?

Moving from break-fix to managed services in the full sense isn't something you can do overnight. We have been preparing for it for three years, and we're just moving out of beta now. It is a major strategic effort that will require a major cultural change in your organization.

As a managed services provider, are you afraid of competition from the big national IT players such as Dell or Best Buy or others?

Yes and no. Our industry is changing and we need to change with it. Our clients are moving into a world where their business depends on their data. If we don't deliver the high level of IT availability they require, someone else will. But that doesn't mean the competitor will be a big national chain or IT vendor. In practical terms, the big guys can't touch the SMB (small and medium business) client on the local level. They just don't have enough people on the street.

Where do you think your business will be in five or ten years?

That's a very interesting question. Managed services are the way things are going to be done in the future. But the big national IT providers won't be able to build out this model by themselves. It's going to be done mostly by local VARs like us. Down the road there may be an opportunity for the VARs who are building out their new models now, ahead of their competitors, to eventually go out and acquire the competitors in their region who didn't move quickly enough, or at least acquire their client bases. There could be a movement toward consolidation on a regional basis. Maybe ten years from now we will have built up and acquired a managed services client base of several thousand customers across two or three states. This movement might ultimately provide a way for the national players to get into the game, by acquiring the regional consolidators who emerge.

back to expert insights