With the second half of 2020 coming into focus, it’s important to think about your managed services provider (MSP) business model. The original Payroll Protection Program funds that many MSPs received in the second quarter of 2020 are starting to run out and it’s time to start planning what’s next for your tech firm.
One area that deserves consideration is a well-established revenue generating opportunity known as third-party maintenance (TPM). TPM is ongoing hardware support for technology equipment that acts as both an alternative and enhancement to original equipment manufacturer (OEM) support.
Here is a simple example: A data center may have a portfolio of aging data center equipment (server, storage and networking) that was sold with a three-year warranty and support agreement. At the end of year three, the support expires. Enter TPM service providers who will extend support for the equipment for a fee. Service level agreements (SLA) spell out important support functions such as response times (i.e., same day or next day) and specify minimum certification levels for the support engineers, etc.
TPMs are relevant because they allow the customer to avoid a hardware refresh, but still enjoy the same level of operational quality. The TPM approach is also a tactic to manage or delay OEM-forced upgrades.
Why MSPs Should Consider TPM
With the economic challenges in mid-2020 and for the foreseeable future, the tendency is to try to extend the useful life of hardware assets (and again, avoid the cost of a hardware refresh). This is analogous to repairing your older model car instead of purchasing a new car right now. By creating your own TPM practice or teaming with a TPM organization (such as a reputable distributor), MSPs can also create a new income stream.
Portfolio Protection Program for MSPs
Moreover, it’s critical for MSPs to innovate in the “new normal” and TPM is low hanging fruit. This is your opportunity to diversify your service offering in an additive way with an in-demand service offering, i.e., protecting your portfolio. Customers and IT managers are thinking of ways to cut costs, i.e., protecting the customer’s portfolio. TPM is one tactic and it’s a proven winner for all parties. Frankly, a lot of MSPs haven’t pushed the TPM model and this counter-cyclical offering is a way to protect your business from recession-driven revenue reductions.
The TPM market is evolving as continued consolidation and increased private equity investment in large providers has fueled mergers and acquisitions. Solution providers and enterprise leaders looking to implement hybrid maintenance coverage using a blend of OEM and TPM support must evaluate the risks and benefits of TPM, according to Rob Schafer, senior director analyst Gartner.
Occasionally, software and hardware vendors will enforce end-of-life and end-of-support deadlines for their products, in essence ensuring that customers upgrade to newer versions and generate a more consistent revenue stream. That’s where TPMs can serve as a way to bridge these “deadlines” and extend the useful life of IT assets. It’s a simple solution to present to your customer.
In Part 2, we’ll explore the threats and risks of the TPM marketplace and provide the context needed to confidently offer this solution and protect your business portfolio with new income streams.
Harry Brelsford is the founder of SMB Nation, a publishing and events company focused on the SMB technology channel community.