Progress Update: Converting to a Managed Services Model Thinkstock

Progress Update: Converting to a Managed Services Model

There’s ample incentive for resellers to make the change; some 73 percent of the managed services providers surveyed by CompTIA late last year reported that their services were profitable. But it takes no small amount of effort to move a legacy business to a new operations model.

In 2002, Barry Shevlin started Network Liquidators in Tampa, Fla. Eventually, the company found its groove selling refurbished IT equipment to brokers and resellers. Shelvin’s business prospered. But by the end of the decade, the technology world was changing.

Growing numbers of organizations began looking to take advantage of cloud-based computing to transform their operations. Many didn’t have the in-house expertise to pull it off and needed assistance from IT services providers who could manage the migration of applications and workloads, or provide related networking, security and storage services.

This represented a big opportunity for Network Liquidators—bigger than being known as “the used Cisco guys.” After some evaluation, Shevlin recognized that he could leave behind a lower-margin business for a far better one with the prospect of recurring revenues. That’s a very brief recap of the 2010 decision to rebrand the company—now called Vology, the Latin word for the study of speed—as a supplier of IT infrastructure, products, services and solutions.

In truth, the shift from sales of increasingly commoditized hardware and software to more profitable, recurring revenue streams has encountered a few bumps since then. But the change has paid off for Shevlin. Vology has grown through a combination of acquisitions and organic growth to the point where it accounted for $200 million in revenue last year. The company also ranked No. 21 on the latest MSPmentor’s annual list of the nation’s top 501 Managed Service Providers.

Nowadays, Vology provides IT managed services to clients ranging in size from 200 to 5,000 employees. It maintains more than 100,000 devices at more than 20,000 customer locations.

New Approach, New Company
The transformation at Vology speaks to a familiar narrative: the channel’s decades-long battle against falling margins on hardware and software. Indeed, the struggle to offset the forces of commoditization has challenged resellers since the days when computer retailers sold IBM’s PCs and floppy disks.

There’s ample incentive for resellers to make the change; some 73 percent of the managed services providers surveyed by CompTIA late last year reported that their services were profitable. But it takes no small amount of effort to move a legacy business to a new operations model.

In many respects, Vology is an entirely different company from the one that Shevlin founded. Within the space of five years, he bought four companies with the goal of building up Vology’s services business from roughly 1 percent of revenue before the company began its acquisition spree.

Each deal was designed to add a different competency. In 2012, Vology bought Bayshore Technologies, a Tampa Bay virtualization firm. A couple of years later, it acquired a division of government technology VAR Govplace, which also had a managed services contract for Orange County, Calif. In 2015 Vology bought managed services firm Offsite Technology Solutions, and later that year made its largest acquisition when it bought VITAL Network Services, an international provider of network services.

The deals brought obvious benefits as Vology built up its expertise as a solutions provider offering services for installation, configuration and management of various cloud-based and infrastructure technologies. At the same time, however, the magnitude of the organizational changes took time to work through. Integrating new people into another company with a different corporate culture sometimes required extra effort. For instance, one of the acquisitions involved a family-owned company where the corporate culture was a lot different than the more high-octane atmosphere that prevailed at Vology. 

These weren’t the only challenges. When they received their new marching orders, many of the veteran salespeople employed at the company found it hard to leave their old ways behind. Shevlin noted the difficulty for “someone who has been selling products and has a transactional approach to transition to a selling approach that’s based on business outcomes.”

“It requires a shift in thought processes and we found that only a small percentage of our legacy sales reps were able to make that transition,” he says.

These lingering organizational challenges are just part of the inevitable evolution that Shevlin estimates may take a while to smooth over. “It’s nowhere near the end,” he says. “This is a change that has got to be measured in many years.”

Shevlin also underestimated the initial size of the investment required to carry out the transition.

“People said this will be more expensive than I realize and harder than I thought,” he says. “I should have listened more. It was definitely more expensive and more difficult than I expected. And we’re still going through it.”

“At some point any growing company is going to get [ahead of] their ski tips,” he adds. “We had some of that in the early days when we tried to build our services practice around the wrong toolset for our customers. It resulted in the wrong processes for our customers and in some cases, hiring the wrong people.”

After some adjustments, however, the transition has taken shape the way Shevlin envisioned. By the end of the decade, services are expected to contribute half of Vology’s projected $500 million in sales.

Shelvin’s advice to other resellers who have been in his position: take stock of your situations and make difficult changes. Either that, or be prepared to face irrelevancy.

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