Michael George
If it’s not obvious to office technology dealers that IT services represent a huge opportunity and an opportunity that will enable them to remain relevant to their customers and potential customers far into the future, then maybe they ought to start packing it in right now.
Okay, that’s an over exaggeration, but anyone paying attention to what’s happening within the office technology dealer channel is well aware that there’s a lot of talk and a fair amount of hype around IT services. Some cynics may consider it the service de jour rightfully or wrongfully so, but no matter one’s views, it’s still important to be aware of the various opportunities available to assist office technology dealers interested in trying something different to move into that space.
One IT services organization intent on growing its presence in the office technology channel is Continuum Managed IT Services. The Boston-based company provides a SaaS-based Managed Services platform for Managed Services Provider (MSP) partners, including office technology dealers, to use for backup, monitoring, troubleshooting, and maintaining desktops, servers and other endpoints in SMBs.
CEO Michael George has been with the company since 2011 when it was acquired by Summit Partners, a private equity firm, and has been instrumental in transitioning what was once a remote monitoring and management company into a leading provider of IT Services to MSPs.
The year is winding down, how’s the past 12 months been for Continuum?
George: From a calendar perspective it’s winding down, but from a business perspective it’s just continuing to spin up. It’s been a terrific year overall and arguably a spectacular year in the office equipment category in particular. The dealer channel just totally gets it and is lining up and getting their businesses aligned around the way we’ve engineered ourselves to go to market with them. It’s been an off-the-rails year for us and our partners.
It sounds like you’re happy with the inroads you’ve made so far with the office technology dealer segment?
George: Like anybody running a business I live in a world of discontent. We always know we can do more and do better and I certainly feel that way about our own business. By and large we’re very happy. The only thing that people need to do is to overcome their fears and their past experiences.
The thing we do uniquely is help the office equipment dealers overcome their biggest obstacle right out of the gate. We bring a fully integrated services delivery model that’s not just software that would force them to go out and figure out how to sell it, how to support it, and how to build an IT staff. We come with all of that ready made.
Clearly you bring a lot to the table, especially for an office technology dealer starting from Ground Zero?
George: We have a large NOC operation in Mumbai, India. We have a large and growing Help Desk operation in Pittsburgh, PA, and we [can help overcome] the greatest barrier for office equipment dealers who have entered this market before, which is how to begin and how to identify an IT skills CIO who can bring this to market. They don’t know how to hire one internally or externally and build it out that way.
They’ve got to overcome their fears and not think about Continuum in the way they might have tried to approach this market opportunity in the past. It’s a completely new and revolutionary way in which we’ve married our go to market and our service delivery mapped to the way the office equipment dealer already knows how to do business.
When you first speak to a dealer about partnering with you, what are some of the questions you tend to hear over and over again?
George: This is where they bring the legacy of their prior experiences forward. They’re asking a lot of questions around how do I identify these kinds of people, how do I go out and hire them, how do I train them, and how do I mix the cultures of a traditional office equipment dealer with the new IT services orientation? They ask that because they’ve either tried it themselves and experienced some level of failure or they’ve never tried it because they’ve heard time and time again how challenging it is to enter this market.
Those are the kinds of things that have formed people’s opinions of the market in the past and we’re answering a lot of those questions by saying you don’t need to do that anymore. We help you. We’ll go out, we have a spec, and we’ll help you identify what we call a virtual CIO. We have a lot of them in our own network. We bring them to you.
You’ve also come up with a formula that allows dealers to use existing sales people to sell IT services, tell me about that?
George: In terms of sales, a lot of people say, “I have a guy who has been one of my top producers, he’s been with the company for 22 years, he’s a leading office equipment sales rep and I’m having a hard time reconfiguring him into a sales rep for IT services.”
Our response is you shouldn’t do that. There’s no purpose retraining these people. We have a list of six qualifying questions we give to our partners, and what they need to do is teach that rep who knows how to sell office equipment to go out to their own customer base and ask these six fundamental questions.
People are intimidated by IT and think it’s a very technical category and that they need to know detailed things about MS Office 365, or Windows Version 13, or whatever. The fact is it’s not technical at all. It’s very business oriented. We provide sales training for our office equipment partners to help them understand that they’re not out there to talk technical and they’re not out there to sell. What they’re out there to do is identify opportunities in their existing customer base. Once they do that, we have an engagement model that involves their virtual CIO and our support staff in going through the process of selling that account on their behalf.
It’s very different. They’re not retraining people, they’re not repurposing them, they’re just getting them to ask a simple set of questions that enable them to be effective right away.
For someone who hasn’t partnered with Continuum yet and then decides to contact you after reading this interview, what are some of the questions that they should be prepared to answer?
George: For us it’s simple and centered around people’s commitment to not only wanting to be in this space, but to be a leader in this category. [They must be there] mentally and made a decision and commitment to be in a position to have a new revenue stream or be in a position where they have something to arm themselves to go and steal customers from competitors. They have to be motivated by one of those things or to defend their territory.
Why do office technology dealers choose you?
George: We have some office equipment dealers who come to us because some of their traditional, longstanding customers are getting picked away by competitors who have Managed IT Services in their portfolio.
They need to be defending the territory although we don’t want people who just want to defend their territory, we want people to go dominate their territory and category, and have a meaningful amount of revenue coming from this category.
Dealers who have partnered with Continuum have enjoyed some serious success already haven’t they?
George: We started with people that are in the more than $100 million office equipment space that are now equal in size in IT services. If you look at some of the largest players out there, $60-million, $70-million office equipment dealers, they are now doing $60- and $70-million worth of IT services. That’s phenomenal growth. They’re building real businesses and getting a growth engine in place and they’re committing to it.
Now they’ve gotten through the first year, gotten through the proof points, and are excited about the category they’re starting to put their shoulder into it and say these are great gross margins, this is a great growth driver for me, I’m stealing customers from my competitors, I’m expanding my geography, whatever it is on their ambition road map is now being fulfilled, and they’re getting excited about it and putting more into it. That’s the experience we’ve had with the ones that engage with us.
Is there a sweet spot revenue wise for the types of dealers that are the best fit for working with you?
George: They are typically dealers that are at least $10 million and above. We’ve got plenty that are smaller than that and we’ve been successful with them too.
Once you’re in the $8-$10 to $12 million mark, you’ve got a large enough customer base that if you can go out and capture five or ten percent of it with IT services [you’ll add] 50 percent more revenue to your top line.
What’s your take on growing one’s MS business via acquisition?
George: A lot of this industry and companies grew by acquiring another dealer or another geography, or acquiring a slightly different product line, so there is a good acquisition DNA in this industry to begin with. It’s not foreign to this market at all and we’ve had some phenomenal successes where an office equipment dealer, it could be $20-$25 million, even a $10-million dealer [ that has acquired an MSP]. The cost of an MSP is actually relatively low.
An MSP can be acquired easily and it gives the dealer sort of instant “just add water” capacity, capability, knowledge, everything. What they do is redeploy those skills towards being these internal virtual CIOs. Acquisitions have jumpstarted a number of companies in the office equipment space, enabling them to be instantly credible, having instant capacity, instant everything at a low cost on a relative basis. By the way, those MSPs are bringing a book of business with them already. They wouldn’t be where they are already without a sustainable line of business on the IT side.
We have equipment dealers that come to us and say “I want to buy somebody” and we have plenty of MSPs who say “If the right acquirer came along I’d definitely jump in and stay with the business and run it under somebody else’s banner and build it out.”
[Acquired MSPs] know that the office equipment dealer is bringing to them a big, more easily attainable market because there are already customers of theirs so the selling side of the equation becomes a lot easier when you’re selling IT services to an existing customer. While you had a transactional relationship with them at least you had that relationship.
I can’t give guidance as to whether you should or shouldn’t do it unless I know about your certain set of circumstances. That’s been our experience in the market so far and it’s been phenomenal so far for the office equipment dealers jumping in. It’s instant capacity and credibility and it’s been great for Managed Service providers that have stayed with them through the continued growth.
What can we expect from Continuum in 2016?
George: A lot more around sales enablement and marketing enablement. We’re really helping our partners go to market. We’re putting more and better resources and energy into the sales and training side and everything they need to be completely self sufficient and fully enabled as they continue to build out their businesses
We have Continuum University for online training. And for our office equipment dealers specifically, we’ll provide in-person sales training sessions and guide teams with six key qualifying questions that identify whether or not they are ready to be in this space. We’ve partnered with Mitch Morgan and Chris Ryne at Growth Achievement Partners (GAP), as well as Ed McLaughlin, former CEO of Sharp, who is a key advisor for training and industry guidance. Together with GAP, we produced the first of its kind, revolutionary business model, “Managed IT Services Business Model Report,” that demonstrates how dealers are able to achieve over 60 percent pre-labor gross margins with managed IT services. We also provide a wide array of white labeled tools. Our office equipment dealers look like they own this whole thing lock, stock and barrel. There’s a pride of ownership and a proprietary nature associated with the relationship to IT services.
