We recently sat down with Craig Flint, founder of Computer ER and a pioneer user of Ingram Micro's Seismic hosted managed services platform.

What percentage of your customers do you expect to move to managed services?

We have a huge list of people we think could benefit from it. It should work for 85% to 90% of our customers. There are a few that it won't work for based on their network or something unusual that they're doing. For those customers we will just continue on the break-fix model of billable hours. For other customers, in some cases we may have to draw a line in the sand and tell them we can't help them unless they're on managed services. But basically we still want to help them, if we bill them at an hourly rate that can still be quite lucrative. We also have a drop-off business where people bring in computers for repair, and that may continue, though it might decline as a share of our total business.

Can you briefly describe your business?

We've been in business for nearly nine years. We help SMBs and individuals to manage their technology needs, everything from basic computer service to complete network management. We are a Microsoft Small Business Specialist and offer mostly HP solutions. We also support Macintosh clients and help Mac users integrate into Windows' networks. Until we started with Level Platforms, we offered a mostly reactive, break-fix service. Now, after testing for 18 months, we can offer our clients truly proactive managed services.

How did you first get involved with managed services?

We first started working with LPI's managed services software in 2005, and acquired licenses directly from LPI for 17 customers. More recently we have transitioned to Ingram Micro's Seismic platform as a hosting solution for our LPI-based services.

Why did you decide to move from running LPI software yourself to a hosted solution with Seismic?

When we first started working with LPI's software, we found it was difficult to ramp up our managed services offering while hosting it ourselves. We started off running the LPI management server (known as Service Center) on a dual-processor HP server with 3 Gigabytes of memory and a DSL Internet connection, which is the only type of broadband connection readily available in our area. But when we started adding customers we found we had a capacity problem. At one point we added two new customers with 250 IP devices each, and this just killed our server and our bandwidth. It happened almost immediately. We had already heard that Ingram Micro was planning to launch a hosted service with LPI, so we contacted them and moved on to the Seismic platform.

Has your experience with the Seismic platform gone smoothly?

Yes. I'd say moving to Seismic has been the best decision I've made so far this year. It solved our performance problems immediately. We've had no down time with Seismic, all our alerts come through without any problems.

How did the migration from your in-house LPI to the hosted version at Seismic go?

It went very smoothly. Ingram Micro was running a more recent version of the LPI software, so we had to upgrade the version of the agent software running at our customer sites. But this was very easy and didn't cause any interruption in service to our customers. All the LPI device management templates we were using before work exactly the same. We also found it was very easy to upload the historical data about each client's site from our local copy of LPI to the copy hosted by Seismic. So the overall transition was very easy, and we lost nothing.

Is there any difference in the way your employees work with the hosted version of LPI at Seismic compared to your previous in-house version?

No. It's exactly the same. We get most alerts from Seismic by e-mail. If they are critical they go out to the Treo cell phones that our technicians carry in the field. Then if they're at another customer's site and an alert comes through, they can just log onto Seismic from a browser, see what they need to see and take whatever actions are called for.

When you made your initial choice of managed services software, why did you pick LPI?

We actually started looking at managed services several years ago. We tested all the major software vendors and found that while they all had pros and cons they were basically pretty similar. We ended up picking LPI because they seemed to have the best reputation in the industry, they had good customer support, and they had a pricing model that was attractive and very easy to understand. We also liked the people. When Ingram Micro announced they were going with LPI for Seismic that was a really important validation of our decision.

How costly is it for you to provide managed services?

The most important cost is in our people. In terms of what we pay to use the software, the cost of providing managed services is actually very reasonable. We pay a small monthly fee to Ingram Micro for hosting, and then we pay a small additional fee to them on top of the monthly LPI license fee per customer site. This low cost structure makes it possible for us to move into the managed services business model without a lot of financial risk. If for some reason I ever decided I didn't want to continue with managed services, I wouldn't be stuck with some huge cost that would be a threat to my ability to stay in business.

How are your customers reacting to your shift into managed services?

For the most part they are reacting well, though some are hesitant at first. Under our old break-fix model we would typically contract with each customer for a certain number of hours per month. Then once a week or so we would stop by and do whatever needed to be done on their site. We are transferring most of these customers over to managed services as their existing break-fix contracts come up for renewal. For some of them the new model is a challenge. They're leery because they think it's going to be something completely different from what they're used to. They think they're not going to see us any more. We have to educate them.

What does the installed base look like at your typical customer?

Our customers mostly range from 5 to 250 PCs. Mostly they are running Microsoft Small Business Server on their servers. About 90% of the client machines are Windows-based, the rest are Macs. We are an Apple reseller and we do a fair amount of cross-platform integration, so we like to make sure that everything we install is at least Mac compatible. But we find we are able to manage Mac networks perfectly well with the LPI software, we just install an XP machine on the network as the agent and it works fine.

How do you price your managed services offerings?

We have a starter plan at $99 per month that scans just the server, firewall and backup. From there customers have a choice of paying for additional services on an hourly rate, or moving up to a higher priced managed services contract, ultimately extending to cover all of their IP devices. That is where we think most of our customers should end up, but we do have to work to educate them about the benefits. Some customers learn the hard way. We had one customer where our remote monitoring had detected a problem on their accounting server. We could see it was about to die, but they didn't want to do anything about it. A few weeks later it did die, and they learned their lesson about the benefits of managed services.

What do you include in your basic managed services offering?

Once a customer moves beyond the $99 per month starter plan to a higher level plan, we offer them a complete package that includes remote monitoring, problem resolution, patching and security scanning. We could charge extra for the patching and security scanning, but we don't, because providing these services doesn't take much extra time, and we have reduced the number of hours of onsite support we provide to them.

Will your business mix between hardware sales and services change as you move further into managed services?

Yes. The hardware part of our business will probably go down, but it won't disappear altogether. We were already 60% services 40% hardware before we started managed services. This was something we did deliberately over the past few years. It's a pain to sell hardware. If a customer comes to us and says "this is what I want", then we will sell it to them. But if they say "can you sell me this for less than the other guy", we tell them they should buy it from the other guy. Of course, if we stopped selling hardware and moved all our business to managed services, then maybe I could sit on the beach in Hawaii and run the business from there. But probably that won't happen right away.

Do you worry that big national providers like Dell or Best Buy will compete with you to offer managed services?

No, I don't. They can enter the market if they want to and no doubt some people will sign up. But I don't think they will be able to deliver service that really satisfies the customer. I worry about the competitor that is down the street from me, not about the big guys.

What advice would you offer a VAR who is thinking about moving into managed services?

You should expect that it might take longer than you think. When we started we thought it would only take 6 months, but in the end it's taken us 18 months to really get a handle on it. In the early days some of the vendors like N-able were even talking about "managed services in a box". But it doesn't work that way. It takes time to learn the software, how to get it up and running, what the alerts mean, and so forth. It also takes time to educate your employees and your customers. A few of them might not be able to make the transition. But with education and patience most of them will.

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