IT and Business Insights for SMB Solution Providers

The Case for On-Demand Pricing

With cloud on the rise, GCS Technologies is fueling growth with an hourly pricing model that better aligns the interests of the client and the provider By Joe Gleinser

GCS Technologies is leading the charge to the next evolution of the IT business model. On-demand pricing embraces our hourly services roots and aligns with the cloud trend in which SMBs do not have to make long-term commitments. The managed services fixed-fee support model is a relic of a different (albeit not so long ago) time. I love competing against that model. We have a long list of clients moving away from managed service providers to GCS.

There are good reasons for on-demand pricing. The complexity of on-premises gear made support costs for businesses variable, so the MSP model made sense. But with cloud that variability diminishes to the point where there is no need to fix the price. It requires a lot less support to manage cloud systems than on-premises systems. Existing fixed-fee, long-term contracts need to be right-sized by 30 to 50 percent when cloud services are deployed. When total price is reduced by that much our hourly service model better meets their needs.

At one point GCS did dabble in fixed-fee managed services, because we were convinced we could produce higher margins and predictability of revenue. But it put us in conflict with our clients on a regular basis. We found ourselves saying we couldn’t do something because it wasn’t in the contract, or that we’d have to raise prices. With the model we have now, the interests of the client and the provider are better aligned.

We also cover more of the market than MSPs. They have to take clients that are willing to purchase the hardware/software standardization they’re advocating. That limits their overall organic growth potential.

We still do many things an MSP does, with the same goal for our clients: to decrease support costs and maintain and upgrade systems. With the MSP model there is a lot of talk about value or predictability of income, but with our volume, our gross margins are as good or better than many MSPs’. Moreover, in a bad economy, businesses are looking for an hourly provider to reduce their spend, and in a good economy you can scale up without having to renegotiate the contract.

Today we have two basic service offerings: support and projects. Projects include storage, virtualization, cloud migration, Office 365 and Amazon Web Services migrations, networking infrastructure and firewalls, and Server 2003 upgrades. With projects there is a fair amount of hardware. Projects represent about 60 percent of our business, and support about 40 percent. Many of our peers in managed services don’t work on advanced, state-of-the-art technologies like VMware Site Recovery Manager or Amazon Web Services. With our two offerings we have great learning experiences.

Also, our Dell relationship has evolved immensely. Dell has become one of, if not the most, channel-friendly company in the country. We can win with Dell’s growing portfolio in the midmarket, one of our fastest-growing client segments. Overwhelmingly, security and compliance is being emphasized in that segment. It’s driving a lot of spending on endpoints, in the data center, and for our cloud business too. All of this produces a lot of professional services and consulting business.

Evolving the Business
Our business has gone through a number of stages. I spent the first nine years making every possible basic business mistake. By 2009, we were barely over $1 million a year. Then we brought in a VP of sales and added some deeper technical competencies. Our project-heavy, flexible model allowed us to grow quickly. In 2014, GCS Technologies was on the Austin Business Journal's Fast 50 list of rapidly growing companies with less than $10 million in annual revenue.

When you’re a small company hustle beats strategy, but with our growth in recent years we had to get a lot more strategic. With the knowledge we’ve gained in the SMB space—how, what, and when they buy—we were able to create a detailed marketing strategy and a multi-practice approach. We joined HTG Peer Groups in 2012 and immediately made rapid advancements. It’s an investment every business should make.

I also recommend that my peers embrace differentiation. There is so much conformity around managed services, but I hope they open their eyes to different perspectives. Many follow a “me too” approach to marketing strategy. The market is changing and new offers are going to beat old models. I see a lot of entrenched vendors that better be ready for us to come in and take their clients from a total cost perspective.

 

Joe Gleinser
President, GCS Technologies Inc.

FOUNDED August 2000

NUMBER OF EMPLOYEES 48

WEBSITE www.gcsaustin.com

COMPANY FOCUS We focus on removing the challenges of using technology from our clients’ businesses.

FAVORITE PART OF MY JOB Working with some of the best people in all parts of the business, from clients to employees to partners.

 LEAST FAVORITE PART It’s a heavy burden to know 50 families depend on me making consistently correct decisions to advance their livelihoods. I take it very seriously.

WHAT PEOPLE WOULD BE SURPRISED TO KNOW ABOUT ME When I started this business I was not particularly technical. I had to sneak outside and call my brother (and co-founder).

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