Hardware sales vs. Services?

[Product Team]

In the last year it seems my clients spend more on getting IT services then buying hardware. I’ve noticed my profits come mostly from services now. Has anyone else experience this shift in profits? (received from a RangerMSP user)

Post your comments..

[smelvin]

Re: Hardware sales vs. Services?

Absolutely! The margins in hardware are a disgrace and there is pressure from everywhere to reduce further.

Whilst hardware is great for the turnover, its not great for the profit and I am sure many others feel the same way.

We supply hardware because we are the trusted source for many of our customers. They buy from us probably knowing that they will be paying more, but confident of the right product and it being setup correctly. Also the knowledge that if it goes wrong they have a proper human being to talk to or can mediate on their behalf with the vendor.

My 2p worth.

Scott

[jtfinley]

Re: Hardware sales vs. Services?

I agree. Hardware and for that matter software sales are cut-throat unless you deal in quantity. Hard to compete against Dell/HP when the customer can surf to it. Service is about 65% of our business. You can make up for lack of hardware/software by diversifying such as offering OFFSITE Backups, Hosted Exchange Mail, Hosted Web Sites. Even offering Refurbished PC's coming off lease (www.joysystems.com). Reselling Business Grade refurbished PC's that are a couple years old can be profitable.

[natrat]

Re: Hardware sales vs. Services?

EVen though the margins are rubbish in hardware generally, you can't deny its an easy and quick way to make additional money. I would much rather a new client ring me up to supply an office fit out with half a dozen PCs, server, printers etc than ask me to install it. They do both of course, and I do both, but the profit on the hardware I make in about 15 minutes whereas the labour I have to spend a day to earn the same amount. Its a scale thing though - its a waste of time selling equipment under $200 (peripherals etc) as the margins are nothing for the time involed in the sale. But selling a couple of PCs a week is a nice earner without doing much at all.

[paulNZ]

Re: Hardware sales vs. Services?

Agree ... hardware sales are EXTREMELY competitive but again our volume has not dropped hugely as we have converted hardware sales into a 'solution' ... e.g customer has a 4 year PC and the hard drive fails, rather than even talking about a hard drive replacement/OS install, etc we present a 'solution' to bring them back up and operational by packaging our MSP solution, new PC, even upgraded or new software [MS Office is the common one], funded via an arrangement we have with our bankers for a monthly fixed fee ... commonly referred to as HaaS [Hardware as a Service] ... our 'hit' rate is 57%, the fall back is a break/fix model.

[digitalminds]

Re: Hardware sales vs. Services?

We use our computer hardware account Pricing/Volume to offer client's servers/workstations at our cost but invoice for the consulting time to configure/work with the Dell. Clients like the discounted pricing. We get to setup/configure/manage the new servers/workstations when they arrive.

[Interprom]

Re: Hardware sales vs. Services?

I subscribe to the theory that today, SERVICE drives hardware sales. There's nothing wrong with selling hardware/software today, however this should be as a "convenience" to your current customers, and new prospects/customers.

Both you and they need to understand that you are NOT a retail store, but rather a SERVICE PROVIDER, who, as part of the total service can also provide hardware and software. This does NOT mean you shouldn't or can't charge for installation, configuration etc. Even if they purchased hardware from another, you'd still be charging for this service.

Selling hardware can add a fair amount of profit when you add it up at the end of the year, so there's no reason not to sell. I've even found that I can add more margin than a typical retail or online source, and my clients don't mind. They appreciate the value of US taking care of the entire process under one invoice.

Gavin Steiner,
Interprom Inc.
www.interprom.com

[natrat]

Re: Hardware sales vs. Services?

Absolutely true Interprom. ALL my hardware sales are driven from me being a service provider first and foremost. If I wasn't, I wouldnt have any calls to sell hardware. So service has to be the main focus.