IT and Business Insights for SMB Solution Providers

The Hardware Hook

IT Support LA offers low-cost, no-contract hardware as a service as part of a strategy to retain customers for the long haul and to manage everything for them. By Yuri Aberfeld

HARDWARE AS A SERVICE (HaaS) is the “carrot” IT Support LA uses with prospective customers, who are often initially skeptical, and later pleased, to find there is no “stick.” Not only has HaaS differentiated us, but it set the stage for a transition from break-fix to managed services to technology concierge.

When I joined the company in 2015, IT Support LA was a one-person break-fix shop. We leveraged my background in hardware sales and launched the HaaS offering while moving to a managed services model. Unlike many of our competitors, we provide HaaS with no contract and a 90-day money back guarantee, so there is no risk to the customer.

Why take on that risk ourselves? Because we treat hardware as just another tool. When we bring on a customer who does not have the supporting infrastructure for the deliverables they want from us, we bring in the necessary equipment. For example, a customer may want ransomware mitigation but the current network doesn’t support that. We install the hardware tools we need to do the job. We have partnerships with Cisco, Dell, Microsoft, Ubiquiti, Veeam, and Xerox.

To determine appropriate pricing we built a HaaS calculator that enables us to plug in each customer’s variables, based on extensive discovery and client meetings, and come up with a monthly price.

Our master service agreement lays out termination protections. Customers have 30 days to either purchase the equipment at fair market price or relinquish it. If a customer needs more time to buy and deploy new equipment and is in good standing, we will extend the term to ensure a proper transition. The only reason that contract-free HaaS works is because we do it properly. If we mishandle just one customer this whole idea would fall apart.

Once we had our HaaS offering in place, it made sense to transition to a technology concierge model. We now take care of everything for our clients, from IT managed services to hardware and software licensing to vendor management, which includes printers, phones, and applications. We deal with any and all issues. In addition, we don’t outsource anything.

Because we know their environment inside and out and document everything, we also serve as virtual CIO and provide input on business vision. We are involved in all IT projects from discussion through design and implementation.

Hardware the Hard Way

We are three years into HaaS, and the ROI continues to improve with customer retention. The first six months of this venture were admittedly rough, though. We took a risk and hired a marketing person even though we didn’t have the money, and also bought the Robin Robins Technology Marketing Toolkit, which we followed to the letter. It started getting us meetings, and prospects liked our approach.

However, what helped us keep our HaaS pricing low is revenue from hardware sales to other IT providers and non-managed services customers. The first few months of a new HaaS engagement are not profitable because we’re investing in hardware and software licensing, and typically redoing the customer’s network. We are also handling a flood of help desk tickets as people get used to the changes.

The profitability of our model is in the long-term customer relationships. After six to eight months tickets diminish, and we have established processes and documentation for efficiency. We know their business intimately. Once the hardware is paid off, margins continue to increase over time.  

When I joined the company in 2015 it had about $100,000 in revenue, and by year-end we hit close to $600,000, mainly due to hardware. In 2017, we grossed approximately $1.5 million. But the important point to note is that the percentage of revenue we derive from services continues to go up, from just 10 percent in 2015 to 50 percent in 2017. Our goal is to get to $3 million in services in the next three years.

HaaS is the long game and a key part of our relationship-building approach. Once customers take the carrot, we hope to have them for the next 20 years.

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