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Does your MSP suffer headaches providing hardware to clients?

Piggy Bank looking at LaptopOne of the challenges that many IT Solution Providers and Managed Service Providers (MSP’s) often experience with some clients is around the fulfilment of hardware.

All clients regularly need hardware – be it new workstations, replacement servers, additional printers or any other office equipment – and so they naturally turn to their IT partner to advise them on the specification, make and model of equipment to buy. The IT partner happily provides this info, often as a quotation – and it’s at  this point where the challenge lies for many IT companies.

Typical Client Statements

Do any of these client statements ring true?

  • “Thanks for the quote, but I can get this cheaper on-line”.
  • “We bought this PC cheaper than the one you suggested, but it’s now saying Windows 7 Home Edition won’t connect to our domain?”
  • “How do we network this (cheap) printer we bought from eBay?”

Clients often think they’re being savvy by cutting you out of the equation and buying their own equipment – but it rarely ends well for them.

Educating the client

You can educate clients that they’d get better value from buying their hardware through you.

  • Charging Consultancy time for specifying hardware to the client.
  • Charging installation fees for new equipment.
  • Charging for your time spent dealing with Warranty work on any equipment not purchased directly from you.

This all helps the client to understand buying cheap hardware off their own back is a false economy.

By implementing these types of techniques, I’ve helped many MSP’s to turn the provision of loss making hardware sales into a profitable source of income.

Should you offer Credit Terms?

But then there’s the challenge that most clients seem to expect credit terms for hardware purchases. You’re taking a risk of non-payment by buying hardware on behalf of your client, but many MSP’s feel uncomfortable *not* offering Credit Terms.

(For more on this, read “Should my MSP offer Credit Terms on Hardware and Software?”).

This can be a difficult conversation for MSP’s to have with their clients.

Therefore in the face of all these challenges, and the low margins that is often available on hardware, it’s easy to see why many MSP’s consider Hardware purchases for clients a real headache.

Looking at an alternative

So it was with interest that I chatted with Brian Trevaskiss of IT Hardware distributor MoreFrom Group about their latest initative, MoreFrom.me

In a nutshell, MoreFrom.me allows IT companies to offer their own branded web-site courtesy of MoreFrom, offering selected products to their clients. The client uses the MoreFrom.me web-site directly, pays for the hardware themselves, alleviating the credit risk from the IT company, and MoreFrom also undertake the entire order processing and fulfilment of the hardware. MoreFrom then pay the IT company a referral fee of up to 13% for any purchases – meaning the IT company has reduced their headaches, but still made some profit.

I recently caught up with Brian to record a brief video chat with him about MoreFrom.me.

Can MoreFrom.me Help MSP’s?

For those MSP’s who have decided Hardware is nothing but a headache, I can see MoreFrom.Me providing a nice way to recommend products to clients, receive some income, yet mitigate the overheads and risk.

The Hardware Vendor market is a very tough one, with little margin to be made, so I applaud MoreFrom for offering an alternative solution to hard pressed IT companies.

I’ll be watching with interest to see how MoreFrom.me fares!

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Richard Tubb

I help IT companies grow their businesses in a scalable and sustainable way. My clients are business owners of small to medium sized IT firms. at Tubblog
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Comments

  1. 1) Nice design on the iPad – just saw it now

    2) morefrom sounds like a no brainer! A few years back I worked for an integrator, which also sold hardware. Trouble was often that some large clients would put the company’s cash-flow under such a strain that it would be impossible to source more hardware.
    The little money you end up making on hardware is just not worth the reputation risk. Focus on the services and outsource non-core activities – like delivering hardware and software – makes total sense!!

    • Jakob – thanks for the kind words on the new blog layout!

      I agree with you 100% on your comment “focus on the core services and out-source non-core activities” – not just for Hardware sales, but for any aspect of your business.

  2. I think it is a very difficult one and you layout the options really well Richard. In terms of me, then I always provide the hardware to the client at ‘cost’ and add a % fee for ordering, delivery and setup. This seems to go down well with the and it offers clients comfort in knowing you are not making a huge margin on the hardware.

    The key, as you point out, is to show your value in what you do with the kit, not just the supply of the kit. Buying a PC and getting it out of a box is easy…………… making that new PC do the things you need is where your MSP skills come into effect and are the skills you need paying for; they should not be overlooked.

    More importantly, you will have to offer the client some assistance in terms of what PC to buy, what processors to use (http://buff.ly/OPSDVh) and so on……………. you need to ensure the client see’s that investment of your time as ‘of value’ and thus ‘worth paying for’.

    A final thought, in terms of the importance of reliable IT hardware. If a standard HP PC costs £500 and is designed to last a min of 3 years, then that means the PC will cost the business £13 per month in its lifetime. Can you think of anything more important to a member of staff than a reliable, efficient and dependable PC ? And to think that the cost for it is so low.

    It staggers me when business owners quibble over the price of a PC when in fact that piece of hardware costs so little, yet is so important to generating revenue day-2-day in their buiness

    • Craig – good comment, and I think you’ve taken a great approach. Transparency towards your mark-up on hardware sales is often the best way, although some clients simply don’t appreciate this model and so alternative routes need to be found.

      You and I both know that the real cost of Hardware is not in the sale price, but the ongoing maintenance and support of the hardware. It pays to buy business class to reduce these ongoing costs. It’s our job to educate clients to that truth.

  3. Julian Wilkinson says:

    Perhaps I’ve learned through error, but in the last two years I have always required clients pay up front for harware above £350. That basically always covers for a PC.

    But I can only think of the one client that doesn’t buy their hardware through me, because they can get credit from Dell, but I cannot.
    So they understand and I charge them “speccing” time.
    Perhaps I am just lucky with clients.

    For existing clients, it isn’t a problem, for new clients I basically say “Use me or not”. I am in the position where I could turn away profitless business… (Perhaps it would be different if I were larger).
    Also when it comes to hardware, it’s Vostro, Latitude or Optiplex. No exceptions. 3 years next business day warranty. No exceptions* (*reinforced by using Lenovo twice recently, and getting bitten hard both times).

    But I find that if you have faith in the product, know the product and the brand, you shouldn’t have much issue in hardware return… But I am a voracious reader of reviews which helps as well…

    Anyway, back to speccing a desktop which I anticipate to make 10% on to cover my time for speccing it, and Louise’s time for billing…

    Regards

    Jules

    • Julian – a word of warning. A 10% mark-up on a Desktop may seem adequate, but in my experience – once you take into account the actual time you’ve spent speccing up a machine, dealing with administration, chasing overdue invoices, etc – you might well be making a loss on the sale.

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