Is franchising the way to reach SMBs in managed services? 14 January, 2007 By Paul Weinberg

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The Utility Company aims to alter the way IT is delivered and consumed across North America with its Connected Office technology-as-a-service suite, which is targeted at small organizations with five to 100 users.

Connected Office covers five major business processes including sales, customer service, marketing, human resources and purchasing/budgeting.

"Nobody has figured out how to service that market properly," stated Scott Jackson, director of services at The Utility Company.

The company has a two-pronged approach  the development of the Beyond Managed Services program for its network of franchisees, as well as alliances with large retailers and vendors to add managed/utility IT services to their current product line, but minus the pain of building and supporting it.

The Utility Company figures it has a formula to win back "disillusioned" smaller corporate customers and generate new revenue for the IT industry at the same time.

"The consumer is becoming a lot more savvy, and aware of the way that technology is important for them but they want to spend less and have a better value in services," Jackson explained.

"So, if you look at any industry that exists where the easy money is all gone and it is becoming a complex business to make money, the franchise model starts to have prevalence."

Jackson suggested that IT service and support remains locked "in a 1970s delivery model."

He pointed to overspending on IT by SMB customers to the tune of $360 a month. But they are not receiving a sufficient return on their investment, he stated.

"We are at a state today where 15 per cent of the technology [installed] is actually used."

Jackson offered the example of a $50,000 deployment of Microsoft Exchange in a 50 person company where it might cost $1000 to $2,000 to service that customer. "If it was hosted for them at $12 per user, per month, [the franchise could provide] three or four times the service."

The Utility Company is seeking to stay on top of a major shift towards a more service centric business model in IT, which includes the remote management of a client's IT infrastructure.

"I do not really feel that the complexity of managed services can be addressed through the traditional channel model, and again, I come out of that market. Nobody has more battle scars in the industry then me, trying to put together a program that helps the typical solution provider," stated Jackson.

He conceded that only a small proportion of resellers might agree to surrender their independence to a franchise arrangement. "I would say it is probably one in ten people who would be interested in exploring stuff like this."

Meanwhile, Denise Sangster, president of Global Touch observed that variations of managed services are popping up throughout the IT industry as commercial customers become more frustrated by the cost of computing, including the upgrades and maintenance.

"I know many companies are outsourcing different pieces of their IT infrastructure and I think it is about time that this comes into small and medium business. We are going to see more and more valued added resellers with a core competency in services try many different variations of what managed services really are. I think it is a broad area."

Sangster added that "when we get to the end of 2007 we are going to look back and say this was the year of managed services."