How Integrators Are Adapting to Selling Managed Services

5 Oct, 2024, 2:05 PM

Geoff Kohl

 

In the 2024 Security Industry Association (SIA) Security Megatrends report, we identified “SaaS Reshapes Integration Business Model” as one of the top 10 trends of the year. Given the number of solutions that are now offered via the cloud or “as a service” or as a “managed service,” it’s not surprising that this qualified as a Security Megatrend. But the trend isn’t that solutions are moving to the cloud; that’s old news. The trend is the impact it makes upon how security integrators will run their businesses, and this trend was further emphasized by SIA’s March 2024 report The Adaptation of the Security Integrator, which leveraged research from Novaira Insights on the pressures that integrators were facing.

 

As we summarized in the 2024 Megatrends report, there are a few key areas where the change to the integrator’s business is likely to occur:

 

The first is the question of who will own the recurring revenue as security moves to SaaS models? And more to the point: Does the integrator get a share of the recurring revenue?

 

Second in our discussion of this megatrend was the changing nature of integrator-to-customer relationships. Support of security systems was always owned by the integrator, but with SaaS deployments, the customer’s support channel is now more likely to be directly with the software provider or manufacturer, rather than the integrator. While it may be a relief to think, “Phew, we’re not going to have to provide support anymore,” the real risk is losing that customer touch experience and your relationship to that customer.

 

Lastly, this move to SaaS/managed services is likely to force integrators to become very closely aligned with some of the biggest SaaS providers, and that means integrators will have to choose very wisely who they will partner with and ask whether that software firm or manufacturer is truly committed to the long-term success of their integrator channel partners.

 

This megatrend was also a key topic at PSA Security Network’s recent PSA TEC event in Dallas, Texas, where PSA’s managed services committee held a poignant discussion on how integrators are adapting to this change. The speakers included Markus Leogrande, director of managed services and technology for M3T Corporation, Tim McHugh, business development director for Integrated Protection Services, and Jarett Cavell, director of the security division for Life Safety Engineered Systems, and was moderated by PSA Security Network’s James Gallagher.

 

There were a lot of gems in the session, but I want to share three of the real-world pain points and takeaways I heard that day from these forward-thinking integrators.

 

#1: The Level of Sales Adaptation Required

 

There’s no question that integrators that become adept at managed services become more valuable to their clients and more valuable as companies. But it’s not easy to make the change, and McHugh in particular addressed this pain point, recounting how Vector Firm’s Chris Peterson had once said that an integrator had 10 sales people accustomed to selling classic project-based security, only two of those sales people who be able to smoothly adapt to selling managed services, and the other eight would need coaching and plenty of carrots and sticks.

 

McHugh said that proved true in his experience, noting how they had to socialize this sales change from the C-level down. He said they accomplished it with regular meetings to coach sales team members on this shift, and their own marketing team even scheduled monthly learning sessions with their SaaS vendors for all the company’s employees. The point from McHugh was direct: It required real, recurring, consistent effort from a sales leadership standpoint to make this kind of transition, and he said it shouldn’t be considered a trivial change to reinvent your sales approach.

 

#2: The Level of Internal Business Process Adaptation Required

 

Some of the most successful companies in managed services planned their recurring revenue strategies from the beginning, but for companies that have been built around project-based security system sales, there will be internal process changes that you should expect, and these changes may be tedious. Even moving to recurring invoicing is a big shift in accounting, let alone how a company may pay out on commissions.

 

And once a company accomplishes the significant task of configuring recurring invoicing for clients, company leaders have to think about how those charges are future-proofed in an age of inflation. Leaders and CFOs need to ask questions like: “How do we build in price increases into future invoices?” And don’t forget aspects like ensuring the company has a document retention system so that they are able to preserve that original contract and their terms and conditions from when it was signed. The panel emphasized the point: The fundamental business changes related to this megatrend are not inconsequential.

 

#3: The Challenge of Picking the Right Technology Partner

 

In a managed services or software as a service model, the business goal is to pick a great solution, match it perfectly with your customer’s needs and then be rewarded by consistent income. Sounds easy, right? As you might expect, it’s not that simple, and the integrator is forced to perform an extensive evaluation process when picking solutions to take to their customers, since their future recurring revenue will be riding on how well they picked their vendor partners.

 

Again, McHugh weighed in on this: “Don’t be afraid to fail,” he said. “We experiment with a lot of technology. I think the more we experiment, the more we’re good at spotting pitfalls. Ask the vendor: ‘Where will I break this? What’s the early warning light that will come up on my dashboard that I need to be aware of?’ Before you adopt the technology, you better try to figure these things out.”

 

Leogrande echoed McHugh’s sentiment, stressing the importance in evaluating vendors and ensuring all the training is in place so that not only can the integrator’s sales team sell it, but their technicians can install it and their team can program it.

 

“You want to make sure that you look at the solutions from every angle,” said Leogrande. “What are the IT implications? For the most part, the manufacturers are pretty good about their systems being secure by design regarding their outbound connections to the cloud, but there are some solutions that aren’t. You want to take all of that into consideration when you are picking the solution.”

 

While the change to a SaaS model is a lot more complex than these summary points from the SIA Security Megatrends report and from PSA’s session on managed services, there’s one more takeaway to be seen here, and that is that integrators which truly commit to making this business model change can and will be successful. They won’t find the change easy, but the reward of taking on a difficult change means they are able to future-proof their business.