Landlords as service providers

Should landlords be in the business of providing retail managed services and competing with their tenants? According to one panel at last week's IMN event in New York, the answer is an unequivocal yes. "It's time to cannibalize," advised Ivan Kotcher, President of Orishatech LLC, a Washington DC-based consulting firm. "Take that business directly from your customer and move up. Don't be afraid to take that margin." That's easier said than done.

Yet other panelists concurred with Kotcher. "There's a reason colo providers are making that shift (to managed services), and you should as well," advised Moz Aslam, the colocation manager at Interaqt Corp. One panelist went so far as to opine that since landlords already employ janitors and building managers, it's not a huge leap to add IT staffers.

Here's where I get off this train. I've been skeptical of the giddy enthusiasm for managed services for some time. It's a trend, and it's coming, just not as quickly as its advocates would have you think. The "xSP" business is already overcrowded, with large numbers of companies chasing a limited amount of demand. If all your tenants were rolling in dough from selling managed services, you wouldn't be spending so much time tracking chapter 11 cases.

Landlords need to be mindful of this. During this downturn, some landlords have indeed been able to wring additional revenue from their buildings by converting empty shell space into finished colo facilities. This is best accomplished in premium buildings in strong markets. But it's not without risk. The landlord absorbs the cost of finishing the space and funding the service offerings. Besides, do you "cannibalize" your relationships with an existing, rent-paying customer to spend hundreds of dollars a square foot to chase potential future business?

Then there's that "core competency" matter. If your expertise is real estate, hiring a janitor to clean the building is a lot different than hiring an IT worker to oversee managed firewalls for corporate clients. Even now, when out-of-work technology pros are easier to find, it's no simple matter to move up the food chain.

Are you a landlord or a managed service provider? Let's hear from you on this topic.