The world of IT is a fast moving business and one of the most difficult issues facing Technology Support Companies and Managed Service Companies (MSP) is getting clients to upgrade or replace aging IT equipment such as servers, firewalls, desktops and laptops. Very often clients get sticker shock, not only from the equipment and licensing costs, but from the service portion of the project—the cost of the work to migrate data to the new equipment, set it up, test it and trouble shoot inevitable issues. It is not unusual for a midsized upgrade to cost $100k or more all in.
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For many companies the initial response to sticker shock is to do nothing. The equipment hasn’t broke yet and additional costs of supporting aging equipment is incremental. Most owners do not recognize that there ARE hidden costs of supporting legacy equipment.
Few IT companies have a traditional sales team and the engineering team is poorly equipped to handle client push back over costs. The objection becomes nearly insurmountable. What normally happens is the account engineer shrugs, “they said no,” and continues to work on the old gear
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There is an easier and arguably “better way,” of handling the objection. It is a tactic used successfully in other industries for decades but for some reason has never caught hold in the IT world. The secret to overcoming the price objection begins in the presentation.
Focus on the current additional costs associated with supporting the equipment. For example the additional cost of supporting an old server that is having trouble may require 4-5 hours a month extra to support—At $150 an hour that is $600-$750 a month. On the high end that is an additional $9,000 a year!
Next is to calculate the soft cost of productivity disruptions. If a company with 60 employees has an average employee cost of $50,000 per employee and assuming each employee has approximately 1,880 working hours in a year, they are losing more than $2,000/hour during company wide outages! Just one hour a month in lost company productivity is an additional $24,000 in sunk costs. The total additional hard and soft costs of supporting legacy equipment is more than $33,000 a year.
Now after you have reviewed the number with them and they realize they are already paying $33,000 MORE than they should on old equipment and will still need to make the investment in new hardware, you make things interesting for them and start to take the pain out of it.
Before you came to the meeting you prepared a leasing estimate that includes only the monthly costs and does not show the full cost of the project. Yes, you will disclose the total cost, but just not at first. You want them to understand that the monthly number includes the cost of the equipment, the full project and normally the 1st year of support and warranties. You remind them that if they don’t do it now they will still need to pay the $33,000 and this number will remain the same or may be even higher a year down the road—if the equipment doesn’t break down before then and cost even more during an emergency replacement. Emergency replacements can increase costs by as much as 50-100%. The small monthly number will seem like an overwhelmingly good deal.
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For IT providers, a good leasing partner that understands how to structure computer equipment leasing the right way is invaluable. If you find the right partner they can help you present financing for individual projects, hardware projects, Infrastructure as a Service (IaaS), Software as a Service (Saa), and Hardware as a Service (HaaS).
By Anthony Butler