Now Is The Time To Make The IT Services Sales Shift

By The Business Solutions Network

This solutions provider averted disaster by shifting its hardware sales to selling managed services and cloud services.

Finding complementary business partners that targeted similar markets was key to uncovering new managed services sales opportunities, says Thomas Clancy Jr., president, Valiant Technology.

Photo By E.D. Sewell

Manhattan-based managed services and IT solution provider Valiant Technology has faced its share of adversity over the past two years. The first blow came via a letter from hardware vendor partner, Apple, announcing it was terminating Valiant (and other smaller resellers) from its channel program at the end of 2013. The fact that the majority of Valiant’s customers are in advertising, fashion, and media — all big Apple product users — made this a much bigger deal than it would have been for other solutions providers. Up until the end of 2013, about 50 percent of Valiant’s revenue came from hardware sales, and Apple sales comprised about 10 percent of its overall revenue.

Additionally, in 2013 Valiant wanted to expand its operation into Long Island and reach customers in new markets with managed IT services. After delving more deeply into the opportunity, however, Thomas Clancy Jr., president of Valiant Technology, along with his two business partners, concluded that the lack of creative firms in Long Island made the move too risky. “We saw a lot of potential with cloud services, which were applicable to nearly every company, but at the same time, we had built a name for ourselves in the creative industry and didn’t want to dilute our brand,” says Clancy. So, the MSP made a bold move to stick with its core markets and find new solutions and services to sell.

Build Your Own Networking Group
Most VARs and MSPs belong to their local Chamber of Commerce groups, and they may even attend meetings regularly in the hope of networking with other companies. However, these kinds of meetings were not cutting it for Valiant. “People simply don’t talk about their IT failures in these settings,” quips Clancy. “And besides, we rarely find prospects in the niche markets we serve at these meetings — let alone complementary businesses we could partner with to better reach our audience.” On most occasions, the MSP would meet business owners from transaction-based companies, such as chiropractors and residential realtors. “These kinds of businesses cater to everyone regardless of the size of customer or vertical market, so there were few synergies between us and them,” he says.

To find the right kinds of business partners, Valiant turned to its clients for help. “We asked them, ‘Who do you use for insurance, business coaching, application development, financial planning services, legal counsel, and printing services?’ and they were happy to provide us with this information,” says Clancy. “We followed up with and vetted each contact to confirm there was truly a complementary fit. From there, we drew a Venn diagram placing each candidate on its own circle and mapping out all the areas we had in common and could potentially work together. And finally, we reached out to the top companies to gauge their interest in joining our business network, which we now call Creative Masterminds.”

Valiant’s plan worked better than it could have ever predicted, and it saw its leads spike shortly after formalizing its new business network, which includes 6 core members and features 20 to 30 guests (who are all prospects for Valiant) at its meetings. “Everyone in the group sells to the same kinds of companies we do, and we all have the same incentive to help other members of our group,” says Clancy. It is like doubling your sales force without having to hire and train more salespeople. “For instance, when a financial planner in our business network meets with a prospect, it doesn’t only focus on the company’s 401k plans; it takes a broader, consultative approach that even broaches the prospect’s IT planning. And, if our partner discovers, for example, that the prospect is wrestling with a $70,000 hardware refresh, it brings in Valiant for a second opinion [free of charge] to determine whether the expense is justified before making a purchase. Often the conversation results in a warm lead that becomes ours to lose. In the end, we usually are able to save them money, and the client can invest part of those savings with the financial planner. We all walk away winners.”

Replace Hardware Sales With Managed, Cloud Services
While reaching more prospects via its business network was part of the equation, Valiant also needed to find new solutions and services to sell. Rather than seeking new hardware vendors, the solutions provider heeded the advice of business coaches like Gary Pica of TruMethods, who helped Valiant home in on previously overlooked managed services opportunities. “We learned to identify and track potential managed services clients and learned how to advance those leads through the sales funnel,” says Clancy. Defining the specific types of customers it wanted to work with (e.g. a creative services agency with 30 users and at least $10 million in annual revenue) was a key to keeping its sales funnel filled, he says. “Learning how to control the sales process was another key to growing our managed services sales,” says Clancy. “For example, we never present anything until we’ve spent time fully understanding the prospect’s need to make sure we can help at a price they can afford. Then, we talk about the benefits of working with our company — not the features of our antivirus, unlimited calling minutes, or our neato tools.” Additionally, the Creative Masterminds group played a key role in bringing in managed services sales opportunities. “We started setting monthly goals for new managed services business, and before long we were averaging $5,000 in new business each month. In 2014, we saw our managed services revenue climb from $100,000 a month at the beginning of the year to $150,000 a month by the end of November,” says Clancy. “In fact, our services revenue grew so much our service department begged us to take December off so they could catch up.”

During this same period, Valiant saw an increase in private cloud sales, which it offers through Cohere’s Tarrytown, New York colocation data center. “We have twin 160 TB Silicon Mechanics arrays (i.e. N+1 redundancy) in this facility that we use to provide clients with off-site data archiving and backup and disaster recovery services,” says Clancy. As more clients became open to the cloud, the MSP realized that it needed to start selling public cloud services as well. “There are just some cloud services that make more sense to sell through a cloud provider rather than building it yourself,” says Clancy. “Our research led to a partnership with Amazon Web Services [AWS], which Gartner puts at the upper right of its Magic Quadrant for cloud providers.” Through AWS, Valiant is able to offer competitively priced IaaS (Infrastructure- as-a-Service) and PaaS (Platform-as-a-Service) offerings such as compute (e.g. virtual servers and load balancing), storage (e.g. Amazon’s Glacier archiving service), databases (e.g. relational, NoSQL), networking (virtual private cloud), and administration and security (e.g. identity management, access control, plus usage and resource auditing) services. “Even though we could have partnered with Microsoft and put all our resources with one vendor, it felt better having diversity,” says Clancy. “Besides, we don’t ever want to be in the position again where one vendor can send us a letter and ruin our financial forecast.”

Although Valiant’s revenue has remained flat over the past two years and its hardware sales shifted from 50 percent to only 20 percent of overall revenue, its services revenue increased from 50 percent to 80 percent. Most importantly, the MSP’s profit margins grew significantly during this period (and, it is projecting $500,000 in increased revenue this year). “The net profit on hardware is between 2 and 5 percent, whereas with managed and cloud services, it’s between 10 and 20 percent,” says Clancy. “Plus, services revenue is a steady monthly income compared with the unpredictable nature of hardware and traditional software sales.”

In December 2014, Valiant took its cloud services to the next level by spinning off a separate company, Valiant Cloud, which focuses exclusively on selling public and private cloud services. “What’s nice about making it a separate company is that it enables us to expand our reach to new industries without diluting the Valiant Technology brand,” says Clancy.

Don’t Let Telecom Service Providers Steal Your Customers
Looking ahead, Valiant is working on two initiatives to enable new growth. The first initiative is to combat a growing threat from telecom service providers. “We’ve seen a growing trend of telecom companies expanding into IT support services, and we discovered that handing off telecom opportunities was hurting us more than helping,” says Clancy. “Even though it’s been a struggle, we’ve identified new vendor partners, and we’re investing in telecom training to mitigate this threat. We’re going to beat these competitors at their own game. Over the past year, Valiant started working with unified communications and collaboration services [UCC] providers, Stage 2 Networks, and DSCI. Additionally, we work with Intelisys to provide our customers with bandwidth and alternative dial tone services. We act as an agent only when it comes to bandwidth and dial tone, but at least we’re no longer referring our customers to our competitors in disguise.”

The second big initiative Valiant is working on, which it expects to come to fruition next year, is the opening of a second office. Before you conclude that history is about to repeat itself, it’s important to note the difference — it’s not expanding into new industries. “We identified Los Angeles as an area with a lot of similar businesses we’re currently working with that would be a perfect fit,” says Clancy. “The fact that it’s 4,000 miles from our New York office will be a challenge. But, if we have one more winter like we’ve had the past couple of years, I think I may be able to convince my family to make the west coast our permanent home.”