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.