Should your MSP be selling Telecoms services?

I was involved in an interesting round-table at my local User Group, AMITPRO, last month. The subject was Telecommunications and the question was – should I as an MSP be selling Telecoms services to my clients?

There are three types of Telecoms services that will be familiar to most IT Solution Providers and MSP’s.

• POTS – Plain old Telephone systems
• VoIP – Voice-over-IP
• Mobile – Mobile Telephony, such as Mobile Phones and Mobile Broadband

The market for POTS is virtually non-existent. Nowadays, almost all multi-line business telephone systems (or PABX) run VoIP, at least internally, and analogue and ISDN lines are typically only used for external calls. There’s still an opportunity for MSP’s to provide these lines, but typically the margins are slim and best the MSP will end up with a small referral fee or tiny cut of on-going revenue. You could re-sell CLS (Carrier Line Select) services, where you help your client reduce their Telephone call bill by routing all externals calls via a cheap call provider, and I’ve seen some MSP’s make good margins out of this, but typically the POTS market is one you’re best off making referrals to trusted 3rd Parties who can better handle the work.

VoIP is the reason POTS is dying a death. It’s a solution that sits on top of existing LAN and Broadband Internet infrastructures, and it typically has a low cost of entry. VoIP is also typically associated with “free calls” by clients. That’s true to a certain degree – think Skype – but it sets a dangerous level of expectation that you need to be aware of. VoIP as a business telecoms solution certainly isn’t free.

Finally there is Mobile Telephony. Everyone has a mobile phone, and mobile Broadband such as USB Dongles are now very popular. There are some great deals out there from the likes of O2 and Three – and IT Distributors such as Ingram Micro and Computer 2000 offer a mobile re-seller service for MSP’s which allows you to sell clients a handset along with an eighteen-month, two or three year deal, and receive a commission as a result – so why shouldn’t you, as an MSP, get a slice of those deals?

Well, the reason you shouldn’t re-sell mobile services, in my experience, is that it’s a major headache for very little return.

For mobile Broadband, the margins are too slim. With deals on the high street selling USB dongles with a 1GB allowance for £5/a month, where are you going to make your money?

For mobile phones, the advent of the consumerisation of IT and “Bring Your Own Device” (or BYOD) means that nowadays most people see a mobile phone, even for use in business, as a personal statement and want to choose from a myriad of available devices accordingly. This makes it very difficult for you as a an MSP to offer a small selection of handsets that you’re familiar with and more importantly, can be competitive on price with. The amount of time you’ll spend with your client deciding on the handset they want, and then trying to find the right price – only for them them to come back and say they can get a better deal on the high street – wipes out any profit you make. You could delegate this client work to an admin assistant to deal with, rather than an engineer, but the results will likely still be the same. By all means try it yourself, but don’t say I didn’t warn you!

So eliminating POTS and Mobile Telecoms, leaves us with VoIP.

Next, we’ll take a look at VoIP to see the pro’s and con’s of selling it as a solution to your clients.

*** Updated – 3rd February, 2012.

I’ve had some interesting feedback on my post, most notably from some of the larger SMB focused MSP’s who say they *are* making good margins out of POTS and Mobile Telecoms.

One such MSP said they’d done the following deals (quoted with their permission):-

“· A 20 handset mobile deal could make us £4-6k profit if it’s out of contract (they aren’t always unfortunately).

· A recent 100 handset VOIP deal gave us £20k commission (we don’t win a lot of these but the margins are nice for little work).

· Typically we’re seeing 10% of a customers spend on their landline bills and saving them money (this is a relatively east win, but it as a competitive market).

We end up providing support for the VOIP systems and the mobiles, especially BES Blackberry devices etc… so we thought we may as well make some cash from them and also improve the customer “stickiness”. We knew we didn’t have the skills in-house so we created this new business as a joint venture between ourselves and a local mobile reseller, it really is one of the best things we’ve done in the last two years.

I just wanted to give you another side to it.”

Really interesting feedback which I’m grateful to receive, and I’ve included it here as I believe it confirms that for a small MSP to make a profit in the Telecoms space, you need to be working with either larger clients or larger volumes, and to partner with somebody who can deliver the services cost effectively where you are unable to.

I think that for the majority of smaller MSP’s who typically work with smaller clients who don’t have corporate mobile contracts, the margins aren’t worth the effort required and they’d be better off focusing on their core competencies.

The point about ending up supporting VOIP systems and mobiles is a really important one though, and the focus on my next blog post! See you then!