Some Simple Math

It's been a while since my last post. During this time, I've been busy working with a lot of different companies helping them use ScanSource Virtual Technician to create proactive POS help desks. We've seen reductions in call volume, reduction in times of calls and an overall improvement in customer service. But I think one of the more exciting things I've seen is the emergence of a model for building proactive monitoring into the support offering that adds immediately to the bottom line even if support costs are reduced or even if sales don't increase. And the best part? The math is really simple. Here's what I've seen a few companies do.

1. Let's start out with a set of assumptions. Obviously, you need to replace our assumptions with the realities from your customer base.

New customer locations per year: 20

Average sites under support per year : 100

Average terminals per location : 3

Currently using PC Anywhere for remote control, but need to move away from PC Anywhere due to PCI issues. PC Anywhere currently costs $72/site.

2. Additions to the end-user support contract offering

Every support contract includes remote monitoring of the retail solution

End user is provided real-time alerts of certain issues such as recommended reboots of systems

Support team will respond proactively to a defined set of issues when notified.

End user will be sent a weekly or monthly e-mail listing the high and medium priority alerts that detected.

Remote control will be provided through SSVT's secure remote control solution

3. Support contract is increased $2.50/month/terminal

Since 100 sites are under support each year and each site averages three terminals, the total increase across the customer base is $9,000 ($2.50 * 12 months * 3 terminals * 100 locations).

4. The SSVT cost

SSVT is typically installed one one backoffice system at the customer site. Using 100 sites, the remote monitoring and remote control cost $3 each/month/site. So the total cost of both monitoring and remote control at all customers is $7,200 ($6/month * 12 months * 100 customers).

However, because SSVT includes a secure method of remote control, PC Anywhere does not have to be purchased for the 20 new customers signed up this year. So an additional $1,440 is cost is eliminated from new system sale ($72 for PC Anywhere * 20 new locations).

5. The Math

Additional revenue from support contracts: +$9,000

Cost of SSVT solution for 100 sites: -$7,200

Elimination of PC Anywhere for new sites, +$1,440

Total bottom line impact: $3,240

The cost increase of $2.50/month/terminal to support contract in return for the improved level of service and security has been easily accepted by customers. So, without any other benefits, this small change to the support contracts is immediately adding to the bottom line at a margin of 45% ($3,240 from an investment of $7,200 in SSVT). Very powerful.

6. Replacing PC Anywhere

Let's look at one more important factor. For eighty of the customers under support, PC Anywhere had to be replaced with a PCI compliant solution. This cost is already included in the calculations above. However, if not using SSVT, more would have to be invested in a new remote control solution.

If this new solution cost $3/month/location (low end of commercial hosted remote control solutions), the recurring additonal cost for those eighty sites would be $2,880 which no longer has to be spent.

So by also eliminating the need to invest in another remote control tool, the margin suddenly jumps to 85% ($6,120 on $7,200 invested).

Not a bad days work.

Reducing Costs with Proactive Support

Let's dive deeper into how adding proactive support, using a tool like ScanSource Virtual Technician (SSVT), can and should reduce your costs. Everything we talk about can be linked to one phrase:

Better Information Yields Better Support

Here's how.

Fix problems when they're small

Many problems are easy to fix...IF they're tackled in a timely manner. The real time and costs hit if the problem is ignored until it eventually flairs up into a large problem. Let's look at two examples:

Many POS systems include end-of-day routines that need to run successfully every night. For some, part of this process includes "incrementing the business date". This is common in the hospitality space where locations will stay open past midnight. All transactions through the close of business need to be recorded on the same business date. Once closed and during the end-of-day routines, the business date will be incremented and new transactions will go against the new business date.

So what happens if this process fails? Well, the business date doesn't change and any new transactions are recorded against "yesterday".

No harm, no foul if this is detected and fixed before any new transactions are entered. So the proactive support organization, using SSVT, can know about this situation first thing in the morning and can get the problem resolved before the new day opens. But the reactive organization is faced with a different choice. Once new transaction are entered against the wrong date, there are two options and neither is good. They can invest the time to change the dates of the incorrect transactions OR they can tell their customer that the data will be wrong. It's a lose-lose dilemma.

Another example is backups that are failing. As long as the system is up and running, a failed backup doesn't cause a problem. The failing process is a small problem. But Murphy says that the sites that will fail will be the ones that don't have backups. And if a customer system dies and there is no backup, you again have no good options. It is going to take a lot of time to get the customer back up and running, and, even if you can bill for that time, it is what one SSVT user referred to as "blood money". In the end, no one is happy. Again, it's lose-lose.

But if you know about the failing backup process and fix it before there is a system failure, you are never faced with the situation. You will have a happier customer and the support time required in the case of a failure is dramatically reduced.

Avoid problems through advanced warnings

Some problems can be avoided completely by responding to a warning that a problem is looming. Instead of fixing problems, the support team performs preventative measures. Again, let's look at two examples.

When a system runs out of disk space, all sorts of strange things can happen. From the perspective of the remote support person, the symptoms usually don't make any sense. Customers don't call up and say, "Our backoffice system is out of disk space". Instead, they call reporting odd errors. Eventually, the support person will stumble on the fact that the system is out of disk space.

All this can be avoided by getting (and responding to) an advanced warning that a system is running low on disk space. A thirty minute support call and a down customer turns into a five minute fix and no downtime.

Another example is that, by simply rebooting systems on a regular basis, some problems can be avoided entirely. I've heard this referred to as "System Rejuvenation". Tools such as SSVT can give you warning when a system has been running without a reboot for a lengthy period of time, giving you a chance to "rejuvenate" the system during off-hours before any problems ever occur. Again, five minutes of effort can significantly reduce troubleshooting time and downtime.

Lower the peak volume of calls

If your support offering is completely in response to customer calls, then you'll typically get hit with a bunch of calls when the customer first arrives to open and finds an issue. If most of your customers don't open until 10:00 or 11:00, you'll get hit with your peak calls about 30 minutes later. The fact that there is a peak won't change if you add proactive support, but the peak can drop. Why? Because you know about the common calls you WOULD get during the peak and you can take care of them first thing in the morning before your customers even get to work.

Automate fixes

Tools such as SSVT allow you to automate the common reactions to certain problems. My recommendation is that you automate anything that is a common, level-one response to a problem. If it fixes the issue then, great, you've just avoid a call and potential downtime. If it does not fix the issue, the simple fix has already been tried and the support personnel can move onto step two.

An example of a level-one response would be restarting a service or process in response to an alert. Remember, you are still delivering the support to the end user, you're just doing it with a tool instead of with time.

Know what is and has happened

Finally, and perhaps most importantly, a tool such as SSVT can give you critical information about what is and has happened on systems you are supporting. One of the most common challenges faced by support people is figuring out why something that worked fine yesterday doesn't work today. They need to know "what changed".

Again, let's look at two common examples.

One day credit card authorization quits working. Why? It turns out that the night manager installed e-mail software on the backoffice machine so they could get e-mail. Without a monitoring tool, you need to discover that this happened before you can fix it. But with SSVT, you see in the history log that, at 10:30 last night, e-mail software was installed. This is the clue that turns a 60 minute troubleshooting puzzle into a five minute fix.

Likewise, your customer has internet issues and calls the Cable or DSL company to come fix the problem. They do but, in the process, they change the backoffice box from a static IP address to DHCP. Great. The internet is up and working and they leave. But guess what. Nothing else is working. You get a support call. Again, without SSVT, you need to discover that this change was made. But sitting in the SSVT logs is the fact that, at 2:45 this afternoon, the LAN IP address of the backoffice box was changed. Five minutes later, your off the phone and closing the support ticket.

Conclusion

So, as you can see, using SSVT will reduce the costs of delivering support. The key word is USING. Simply having the information but not using it adds no value and just means business as usual. I've said it before and I'll say it again. SSVT doesn't make you proactive. It gives you the information you need to be proactive. It's up to you to integrate the tool into your processes and to use the information.

Proactive Support - Where's the ROI?

In business, except for compliance issues, if something doesn't positively impact the bottom line, you probably shouldn't be doing it. Adding proactive support (using a tool such as ScanSource Virtual Technician) is no different. If SSVT doesn't increase revenue and/or decrease costs, you shouldn't be using it.

So how should you expect to see proactive support impact the bottom line? I believe there are four main ways in which this can be accomplished:

Reducing cost:

Proactive support can reduce the operating costs of delivering support. Your support team should be capable of more efficiently supporting your customers, allowing the same number of people to support more customers.

Increasing Sales:

Perhaps it will surprise you when I say that transforming yourself into a proactive support organization has an even greater impact by increased top-line revenue than reducing costs. But I think I can back it up.

First off all, in a world where there are is a lot of competitive pressure and, when comparing features and benefits of a POS system, you need a competitive edge. Delivering proactive support provides your sales team with that key differentiator.

Secondly, proactive support strengthens your relationship with the customer. Many times, once the sale is made and the system installed, the only contact with the customer starts with the customer calling with a problem. Proactive support can change this.

Finally, and possibly most importantly, is the fact that proactive support, when an integrated part of your support contract, changes the contract from being perceived as break-fix tool to a constant insurance policy. The result? Increased renewals of support contracts.

As you can see, proactive monitoring can both add revenue and reduce costs, making it, on the surface, a simple decision. But as with anything, commitment is required. If you pay for the tool (such as subscribing to SSVT) and don't fully integrate it into your business, all you will have done is add costs without the upside. So along with the decision to integrate proactive support must come the commitment to do it, and to do it right.

Lead or Lag

As we discussed previously, providing a Managed Service has been done for years within the POS industry through annual support contracts. But there is a new move underway to transform the services from reactive to proactive. Each POS Solution Provider will be faced with the decision of when, or if, they are going to embrace a more proactive method of delivering support. Let's look at this decision in a little more depth.

Technology adoption follows a predictable curve. Of course, not all technology is adopted. There is a pathway behind us littered with good and bad ideas that never caught on. So the first question the POS Solution Provider needs to ask themselves is whether they believe proactive services is simply a fad that will go away or whether it is a lasting change in the way support will be delivered. We don't believe it is a fad, but as a business owner, if you do, you would be wise not to invest in something you believe will be going away in the near future.

The reason we believe proactive monitoring is here to stay is that there are many converging forces that add significant value to the concept.

First of all, we are already seeing proactive monitoring penetrate the tier one and tier two markets within POS. Manufacturers such as IBM and NCR have systems management tools for their Enterprise accounts. We believe it is only a matter of time before this is expected by SMB customers.

Add to that the rising importance of support contracts in the POS Solution Provider's business. Hardware margins are falling, to the point where several business owners have stated to me that they sell hardware to get the support contracts. For the average POS Solution Provider, support contract revenue generates 20% of the gross sales and yet 50% of the net profit. Support Contracts are rapidly becoming, if they aren't already, the critical lifeblood (read cash flow) of the company.

Therefore, anything that can increase support contract revenue or decrease support contract costs adds significant value. And if both can be done simultaneously, even better.

Another factor is the ever present risk of a customer deciding they no longer need support because they can manage the system themselves. Have you ever heard "We don't think we'll renew this year since we only called you once last year"? These customers no longer see enough value in the contract to renew. Adding proactive monitoring is one way to increase the perceived value. Issues will always occur on systems and simply putting these issues in front of the customer on a weekly or monthly basis can show value. Even better, there is power in calling a customer to tell them you fixed something before they even knew the problem existed. I like to use this analogy:

An automotive mechanic calls you first thing in the morning to tell you that, while you were sleeping, he noticed that your car wouldn't start. But no worries, he fixed it while you where in the shower and you're good to go. Would you ever use another mechanic?

In addition, proactive monitoring can help reduce the costs of delivering support. The same number of people can support more customers. Or possible, existing resources could be freed up for revenue generating work such as staging or installations.

And finally, proactive monitoring is gaining acceptance in mainstream IT Managed Services every day. This success will carry into the POS.

For all of these reasons and more, I confidently say that I believe proactive monitoring is not a fad, but an emerging technology within the POS world. And if that is the case, the question isn't if you adopt, but when.

As stated earlier, with every technology there is a predictable curve. There are early adopters, leaders and laggards. Proactive monitoring has moved beyond the early adopter stage, where the technology is adopted because it was cool and had fuzzy potential value. Instead, we are just at the beginning of leader adoption, where the cool technology is coupled with real business value. This is a great place to be. Those who adopt now have first mover advantage. They can offering a solution and bring additional value to their customers, a value that their competitors most likely don't have.

But this advantage never lasts forever. Eventually, the laggards decide they must jump on board or die. They don't adopt because they want to offering something innovative. They adopt because the market expects it. They don't win by having it, they lose by not having it.

We are at an important point in time for POS Managed Services. The early adopters forged the trail and experienced the pain. We are at the beginning of leader adoption. But that mean the POS Solution Providers are faced with a crucial decision....lead or lag.

For POS, Managed Services Is Nothing New

Managed Services are a hot topic. If you read the press, you'd think being a Managed Services Provider (MSP) is new. In fact, if you look at mainstream IT Managed Services, it is a relatively new concept. The idea of outsourcing the management of your IT Infrastructure is not something that was done frequently as little as 10 years ago.

But in the Point-of-Sale (POS) world, this concept has existed forever, at least for the companies delivering solutions to the mid-to-small end users. It hasn't been (and isn't) traditionally called Managed Services. Instead, they have typically been called Support Contracts. But, effectively, they are the same thing.

According to Wikipedia, "Managed services (as defined by Dr. Gerard Macioce) is the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations. The person or organization who owns or has direct oversight of the organization or system being managed is referred to as the offerer, client, or customer. The person or organization that accepts and provides the managed service is regarded as the service provider.

Typically, the offerer remains accountable for the functionality and performance of managed service and does not relinquish the overall management responsibility of the organization or system."

Well, what is a support contract in the POS world? It is an agreement that, should anything go wrong with a POS system, the end user calls the POS Solution Provider who then fixes it. Effectively, instead of managing their own POS systems, the store or restaurant has decided they can obtain more "effective and efficient operations" by paying the POS Solution Provider to take care of the systems. They are paying for Managed Services.

However, there are a few key ways in which this traditional POS support contract offering differs from today's vision of Managed Services.

• Under the support contract model, the delivery of service starts when the end user detects a problem AND CALLS. It is a reactive situation where the end user has to experience pain and let the POS Solution Provider know about it. Today, MSPs are expected to be more proactive. While not every problem can be detected ahead of time, the expectation is that most (and, frankly, all of the common issues) are addressed proactively, before their is any end user impact.
• Unlike mainstream MSPs, POS Solution Providers don't just care if the infrastructure is up and the application is running. They care about the processing of the application as well. As the complete solution provider, not just the company responsible for ensure that it is up, they are responsible, or at a minimum care, that the application functions properly when running.
• POS end users, especially the smaller enterprises, are traditionally cost-averse. They would shutter at paying a thousand dollars per month per site for IT services.

Well, there is some exciting news for the POS world. ScanSource Virtual Technician (SSVT), powered by the Vigilix remote monitoring technology, is a hosted remote monitoring and management solution built specifically for the POS Solution Provider. As a hosted solution, you can get started quickly and with very little initial investment.

In addition, the SSVT team has already built monitoring templates (predefined lists of what should be monitored) for many of the key POS Applications on the market (MICROS, Digital Dining, Aloha, Retail Pro to name a few). The benefit? You can start monitoring you customers immediately without having to figure out what to monitor. That work has already been done for you.

Finally, SSVT is priced around the realities of being a POS Solution Provider. SSVT is priced at a point that allows you to simply include it in every support contract, transforming your support contracts from being reactive to proactive without adding significant costs.

Of course, you don't just sign up for SSVT and become proactive. SSVT is simply a tool and, as with any tool, if left unused it adds no value. More importantly, if used incorrectly (like using a hammer to put in screws), it can do more harm than good. But having the tool available is an important first step.