Is the break-fix market broken?

With margins on the wane and high-end engineering skills seemingly being sidelined, we ask if the maintenance space is becoming a race to the bottom

If you've ever spent 45 minutes on hold, waiting to tell someone about your temperamental wireless router (or perhaps worse still - been on the other end of the line), you probably need little convincing that fixing broken-down technology is a godforsaken way for a company to make its money.

For the channel, providing break-fix services has long been a core offering. But a number of companies have distanced themselves from it in recent years, and there are frequent complaints that margins are coming under increasingly severe pressure. With some big players having shed scores, if not hundreds, of engineers, and the increasing prevalence of the technical courier model of fulfilment, times have also been tough for the technical professionals working in the market.

Glyn Dodd, chief executive of maintenance specialist Centrex Services, says margins have been under strain for the past decade.

"That price point is reaching a melting point," he says. "We insulate ourselves from that with economies of scale. We have developed a commoditised, productised offering. We have taken the technical courier, educated him and upped his salary by ￡2,500. As product gets simpler, we are taking out some of the engineering resource and driving down the price to where you [are charged] ￡100 for delivery and service. We are more supply chain and logistics-focused with a technical overlay, rather than the other way around."

The Centrex boss indicates that with "technology getting sturdier, [the] need for high-end engineering skills has become less and less". This has forced charges ever lower, and the ￡300-a-call-out price of the late 1990s has typically come down to about ￡160, says Dodd.

Nic Morgan, sales manager at third-party services specialist Networks First, asserts that break-fix "is still a core service for us, and it is still profitable business". But he admits that margins are being hurt, as both vendors and customers put pressure on services players.

"It is a commodity market, so we are driven on price," he says. "We are coming under pressure on price being driven down by the customer, and also as vendors want a piece of the action as margins come down on tin."

Ben Davies, managing director of white-label services provider Comms-care, also claims that break-fix is still a money maker in its own right.

"We have come from the break-fix side of things, and it is certainly still core to what we do strategically," he adds. "But we are launching out into other areas, because if you do not do that then your business is going to suffer. But we still see break-fix as a profitable market."

The price is right?
Davies explains that while the market may have attracted its share of rogue operators over the years, a reputable company offering a reliable service could still charge a price with which both the provider and the customer are happy.

"Maybe some people in the channel have not done it the way they should. But we can still charge a reasonable price for the right level of service," he says.

"Margins have certainly been reduced but it has not been dramatic and it has been gradual."

Davies claims that "three years ago the margin [on break-fix services] may have been double digit - probably even more". Although this may have come some way south since then, he claims that it has been more than offset by the increased ability to attach higher-margin services, something the Comms-care chief believes would not be possible without the firm foundation of the maintenance business upon which to build.

"There is a lot of scope for us to grow, but [the break-fix services business] gives us critical mass," he says. "It might be an opportunity to start doing business with a partner, which we can then use as a platform, and enhance that break-fix with management and monitoring."

Morgan from Networks First agrees that third-party services players must maintain their clout and expertise in the core break-fix area, as it is the beachhead from which to launch into more margin-rich areas.

"It is an absolutely strategic part of our business; network support services and network restore services are what we do very well," he says. "We offer SLAs with a hardware fix, but we will work to network restoration outside that. My sales guys are driven to attach managed services and other value-add. That makes us sticky to that end customer. But break-fix is the building block we will grow our business on."

Horses for courses
The provision of break-fix services may still be somewhat profitable for the companies involved, but the outlook for the individuals they employ could be somewhat less lucrative. In recent years the use of so-called technical couriers appears to have increased at the expense of higher-end engineers.
Morgan from Networks First explains that although his company does not use technical couriers, it has an array of engineers at different levels to service different customer needs.

"SLAs at the edge of the network might be lower than they are at the core," he explains. "There are different levels [of engineer] for different complexities - it is horses for courses. We are also quite proud of our remote fix rate."

Comms-care boss Davies adds: "We do not use technical couriers; all our engineers are employed by Comms-care and have the relevant accreditations for the work they do. We have a range of engineers; a level-one engineer might be a [Cisco] CCNA, right up to a level six which would be a CCIE. It is not cost-effective for us to send a level six to swap out a router."

Dodd from Centrex explains that "desktops and laptops represent about 45 to 50 per cent of user incidents and activity", meaning that his firm often does not need to dispatch a highly skilled engineer.

"Our model is [using] a polished technical courier with a supply chain around them," he says. "They won't pull apart a server, but they will be able to replace the power unit, take out the hard drive, and secure the data."

He predicts the careers landscape will become increasingly challenged in the coming years for high-end technical professionals. "Product is becoming more reliable, and there is not enough work for all the engineers," he says. "The economics dictate that you cannot have a 40-grand engineer fixing a ￡200 MFD. There are simply too many of them; between 1.9 and 2.8 for every job."

Engineering evolution
Terry Erdle, executive vice president, certification and education, at industry body CompTIA, seems more confident that the industry's technical employees have proven themselves able to evolve and ensure they remain relevant. He claims that break-fix-focused employees have seen their traditional role turn into posts typically bearing titles such as technical support analyst, helpdesk technician, support centre technician, and field technician.

"The role of what was once a break-fix IT technician has evolved quite significantly over the past several years. It's no longer a reactive job where one waits for the phone to ring or an email ticket to arrive summoning you to fix a broken PC," he explains.

"The role of an IT technician involves maintenance of and support for increasingly complex systems. These systems will still include motherboards on traditional computers, but will also include mobile and virtualised technologies.

The support technician who is worth hiring is more than a break-fix technician. This person is someone with experience and relevant insight into cloud computing, security, and emerging technologies."

Erdle admits that in light of the "serious economic setbacks over the past several years... sometimes the most highly qualified individuals are made redundant".

"Yet individuals with relevant skill sets in technical support, security, virtualisation, and networking enjoy a consistently high demand," he adds.
"The landscape for technical workers is quite stable. We will see consolidation and significant changes in companies that provide technologies... but as far as workers are concerned, there is significant demand for individuals who want to grow with the industry. The best advice is to focus on skills that are relevant to both your company and to the industry as a whole.

"Technical support individuals who obtain new skills in, say, virtualisation and cloud technologies, will do well. Programmers who focus on learning secure programming practices and mobile platforms will do very well. The same individuals who simply focus on supporting a company's outdated infrastructure and nothing else run the risk of finding themselves defined by that infrastructure."