Matchmaker Takes Advantage of IT Services Outsourcing Trend

Every business manager can remember some hellish, hair-pulling scene resulting in missed deadlines and dead-in-the-water deals all in the name of IT gone wrong: Printers wouldn’t talk to computers; a virus choked up network traffic for days; servers crashed; or a traveling rep didn’t have the right tools to access office data that could have turned a prospect around. One can compose a very long list of IT crises that involve hardware, software applications — and all the cards and wires in between.

So who are companies turning to for protection, repairs, and rollouts? More and more, the answers are coming from outside, as businesses forgo in-house IT staff and get IT answers from outside firms.

ComputerRepair.com, founded in 2003 and processing its first orders in 2004, has not taken long to rise high on the IT service outsourcing wave. This year, the company has cause to celebrate having scored US$15 million from private equity firm General Catalyst Partners.

IT service-on-demand is its strong suit, and the fledgling company has a business model that gives it a unique edge. Don’t confuse them with just another Geek Squad or similar repair outfits. ComputerRepair.com’s CEO, Jeffrey Leventhal, will be the first to set you straight.

“We are not a service company,” said Leventhal. “We are a Web platform that enables IT service processes, and we have taken to the next level, as a full-fledge IT resource.” Basically, ComputerRepair.com has become a not-so-average Internet-based uber-matchmaker. The Boca Raton, Florida-based company links IT service professionals with clients seeking services.

Perfect Match

In linking people who need such services with service providers in need of clients, ComputerRepair.com takes “matchmaker” profit cuts from both sides. Clients and service providers pay their respective fees to the company.

At the time of this writing, ComputerRepair.com had 11,449 service providers and 3,787 customers; the business covers 50 states. How it works: Service seekers go up on the company’s site to see which kinds of providers to match their needs are within their geographic area. They can also see how much the providers charge. There is a feedback mechanism that can ease customers’ fears about entrusting their computers to strangers.

ComputerRepair.com acts to weed out providers who don’t have the credentials they claim to have through a “verified credentials program.” The company says it checks out each provider’s credentials each time a newcomer wants to climb on board its network.

Also, customers get to evaluate the quality of service they are given via a “Provider Rating System.”

The customer gets an e-mail providing a link to a form to rate the technician’s performance. The form becomes visible to all who view the technician’s ratings. The service provider has an opportunity too for response.

The Right Time

Aside from having a well-oiled business model for IT services, the fact remains that ComputerRepair.com is simply in the right place at an advantageous time, according to analysts who are reporting favorable tradewinds for IT outsourcing.

A Forrester Research report on SMB IT spending released this June, “MSP Model Will Find a Home in the SMB Market,” found that more SMBs are becoming increasingly comfortable with outsourcing.

Tracking SMB interests, Forrester found that both IT spending and the propensity to outsource services are growing among SMBs.

As Bob O’Donnell, research vice president at market research firm IDC, put it, “The fact that outsourcing in general is on the rise is nothing new. This has been a trend for a while, including computer functions and repairs.”

On the consumer side, O’Donnell points to the Geek Squad’s presence at BestBuy stores as indicative of the fact that customers are willing to pay for computer services. He said that it is also a sign that retail operators are waking up to the fact that, when it comes to technology, it’s not just about moving boxes off the shelves. “Service is an enhancement for them.”

On business and consumer fronts, O’Donnell said he saw a future for the Geek Squads and other IT service firms “depending on execution.”

Rob Enderle, principal analyst of the Enderle Group, agreed that in general the outsourcing trend is nothing new. What is new, though, he said, “is the use of these smaller service aggregators; they can be both less expensive and more responsive than the larger firms if managed correctly, and IT is watching costs like never before.”

Harsh Realities

As for any debate on what makes more sense in the long run, in-house staffing or outsourcing, Enderle described some hard realities about IT:

“The problem with in-house teams is that there is no real career path for them, and hiring and firing to contain costs becomes painful.” Enderle also noted that although one can find good technicians available for employment, “certifications and references can be easily faked these days, and the market is awash with people who are not qualified for the jobs they are applying for.”

As for enterprise trends, Mimi Ho, senior research analyst at the Robert Frances Group, pointed out reasons why one cannot expect to see an abandonment of in-house IT staffing. She said there are some scenarios where in-house IT staffing continues to make very good sense. “In 2005, there has been a steady balance of outsourced and internal support offerings.”

She described instances where companies with significant amounts of proprietary applications to support may not at all see outsourcing as ideal. “Transitioning that knowledge to outsourced staff can be very difficult and costly. The agent ramp-up time and skill levels may not equate to what was offered internally.”

According to Ho, some companies choose a “hybrid” approach to IT support. For them it’s not question of either in-house or outsourced; it’s both. “Some companies keep high-skilled staff on proprietary apps and projects, and they also outsource services that they not have the competency in, or for support tasks that are low-level.”

Turning Point

Nonetheless, Ho readily acknowledged the other reality: Those that do not have the IT competencies in-house have turned to outsourcing. In turn, she added, “ComputerRepair.com has an interesting offering for businesses that do not have expert staff in-house.”

Meanwhile, Leventhal’s company is aggressively moving forward. He says 2005 was a turning-point year for his business in many ways. “CompUSA committed to our platform; we received funding; and we’ve crossed the 10,000 mark in service technicians.”

Leventhal continues to rope in a range of customers, too, from home users to Fortune 100 companies. “They are all looking for the same thing,” said Leventhal. “They need IT services — period.”

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