One of the basic questions that a computer business owners has to struggle to decide how to handle in their sales and marketing process is how long their managed services contracts should be for. For many different reasons many techs have decided that the ideal length that a agreement should be for is around 3 years. One of the factors driving that decision is that many consultants are offering hardware-as-a-services and they feel that since they are including new hardware that this requires a long term agreement. The big question that still remains though is what is the ideal length of a contract that you should be trying to sell? If you’re doing aggressive IT marketing then this might affect your decision since you need to get a ROI from your investment!
This question about how long the managed services agreement should be for is as old as the industry is and goes back over 10 years. Many technology providers feel passionately that the need to have long term agreements for their clients for many different reasons. One of the better reasons I have heard lately is that because they are offering hardware-as-a-service that they need to have the customer locked into the agreement for at least 3 years. However, I heard one MSP explain to me that they don’t need to tie their customers hands with long term contracts because if they decide to cancel then they have to give up all their hardware! In other words the clients will want to stay to avoid giving back all their equipment rather than needing to be ‘forced’ to stay your client. It’s usually better to entice your clients to want to remain your customer rather than having to resort to the blunt instrument known as force.
Now the other issue is the idea that you need to have a long term contract to increase your client retention. However, the one thing that most of the IT guys have told me over the years is that they all have an amazing client retention rate. Without going into great detail as to why this is the case let’s just say that since most business are afraid to change and would rather stay with the Devil they know than go with the Devil they don’t know that as long as you offer basic support you should be able to have amazing client retention without long term contracts.
The final and most important reason that you shouldn’t have long term contracts is that they are a barrier to new sales. Most business don’t like the idea of being tied in to long term agreements and many reject managed services proposals that reflect this. Therefore if you have an investment in IT lead generation and are paying for your IT sales leads, then you simply can’t afford to have self imposed barriers that prevent prospects form signing up. The easier you make it to do business with you then more companies will decide to make that switch from your marketing efforts.
John Black is the Marketing Director at MSP Telemarketing and has over 10 years experience marketing for IT providers and VAR marketing to help them get more IT leads that turn into IT sales.