Service contracts can lessen impact of economy on business 6 May, 2009 By Chris Talbot

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When it comes to service and maintenance contracts, it's money being left on the table. While that's bad enough in good economic times, in a poor economy, changing the focus of the business to capture more service contract dollars is something that can minimize the impact the economy is having. The channel is selling less product these days, and customers are looking to extend the use of already purchased products by another couple of years, explained Scott Herron, CEO of MaintenanceNet.

Topline revenue is dropping, and while selling services won't necessarily reverse the trend entirely, it can lessen the impact the economy is having on a partner's business, he said.

"It's easier to sell something into an existing customer, which we all know, but they're able to reach out to that customer with something that they're truly going to need at this time that's high margin and a highly sought after service," Herron said.

Warranties on equipment they have already purchased is an opportunity for channel partners, and it's a sale that's higher margin than the equipment they sell to customers, he said. End-customers need equipment to last longer because of the economy, and selling them service contracts will enable that to happen at the same time that it brings in additional revenue, he said.

One of the first things channel partners should be doing is going through their customer lists to see who has expiring or expired contracts and then try to sell them maintenance contracts, Herron said. This is something MaintenanceNet has been talking about for quite some time now, and little has changed. Many partners leave up to 50 per cent of their potential service contract business on the table, he said.

"I think it's still early in the focus for a lot of our partners. I think it's still early in the adoption, understanding that it's a business that should be focused on and should have expertise within the organization," he said.

According to Herron, selling service contracts is something every reseller should be focused on. It's an annuity-driven business with high margins, he added.

"I think it's just more topical. I don't really think it's something you need to beat the VARs over the head [about]," he said.