This year, there are five big change agents that managed services providers (MSPs) should see coming head on. These changes, which I’ve noted below, are not only game-changing, but can make or break an MSP’s business model.
Hindsight is always 20/20, but this year, there are five big change agents that managed services providers (MSPs) should see coming head on. These changes, which I’ve noted below, are not only game-changing, but can make or break an MSP’s business model.
1. New Competitors and Convergence
Managed services is an incredibly lucrative, high-margin business characterized by “sticky” customer relationships. Not surprisingly, because of the recurring revenue, any company with an installed client base, a digital product line or any type of IT service model is eying managed services as a logical extension of its core business. Case in point: the sheer number of MSP market acquisitions over the past couple of years. And, the volume of new competitors from non-traditional areas such as telco, copier dealers and more.
Like you, these companies are attracted by the opportunity to generate recurring revenue and at great margins. They’re all hungrily eyeing your SMB and mid-market customers. The big question is, are you ready to battle for the business? If you’ve got the right service model and trusted advisor relationship in place, competitive takeovers should be one of the last things you need to worry about.
2. Rapid Commoditization
The IT industry is the worst when it comes to early commoditization. Managed services is reaching that stage now – driven in large part by the entry of aggressive new companies that are productizing their services and diminishing value. Once IT companies start productizing, they commoditize. That means you’ll see competitors who will stop selling on value and start selling on price. How are you going to justify a fixed fee, managed desktop service at $60 when a bigger, aggressive competitor offers to provide the same service for $50 per desktop?
This is the new reality: managed services will commoditize, and it will happen faster than you think. For many, it already has. We have seen desktops fall from $60 to $30 Euros per month in some European marketplaces.
What this means: if you are going to thrive against a new breed of competitor – and the inevitable commoditization of managed services – you will need a plan for achieving new levels of operational efficiency and that plan needs to be in place right now.
3. Mobility and Mobile Computing Matter More Now
Reports indicate global mobile traffic will increase 13-fold by 2017, with more than 10 billion mobile connected devices. That growth has created a rare greenfield opportunity for managed services. More and more, smart phones and tablets are included as part of an overall managed services agreement. If these devices, often loaded with sensitive corporate data, are not properly managed and secured, they pose significant risks to the SMB.
MSPS are now in position to help, whether it’s in support of a COPE strategy – Corporate Owned, Personally Enabled – or BYOD – Bring Your Own Device approach. Either way, explosive growth in mobile means you need to have a competitive and efficient mobile device management strategy. Managed services contracts must extend to include whatever devices people are using to compute on – a laptop, tablet, smart phone, whatever. We’ve reached a point where the MSP has to stop thinking about “managing the device.” Instead, they’re managing the ability for the end user to compute on any device of their choice – with all the different points of potential failure in between.
4. IT Anywhere is a Reality
It all started with BYOD and the movement has been turbo-charged by the adoption of one device in particular: tablets, which have entered the workplace with record-breaking speed. In so doing, they have helped accelerate “IT anywhere” -- effectively transforming the managed services business. Executives and employees alike expect to move seamlessly from one device to the next – from PC to laptop to smartphone to tablet. MSPs are now confronted with greater device complexity, more applications, AND an increasingly empowered workforce that expects – or demands – choice: the option to work on any device, where and when they want. The new reality is “IT anywhere.” This means managed services contracts need to be more flexible and include more devices and applications than ever before – while delivering 24/7 help desk support to ensure their customer’s end users have the professional assistance they need, when they need it.
5. Cloud is Here to Stay
Gone are the days that the internal IT department or service providers can dictate product choice. Executives and employees expect – or demand – choice. The new reality we face as MSPs is this: cloud-based solutions are already being aggressively marketed to end customers. And, every single end user – 100 percent of your customer base – is probably already comfortable with the cloud. They’ve embraced the cloud on a personal level with applications like iCloud, Dropbox, Ubuntu, IDrive, SugarSync, Amazon CloudDrive, ZipCloud – to name a few.
With personal adoption so prevalent – and big companies like Microsoft, Google and Amazon trumpeting the efficiencies of cloud-based solutions, MSPs need to quickly follow suit and join the chorus.
MSP Strategies for Change
These five drivers of change are creating a perfect storm of disruption for MSPs. If you are thinking it’s going to be “business as usual” in 2014, you are likely in for a big surprise. There are many implications for MSPs including the following:
- MSPs must adapt AND adopt to stay relevant with these changes
- MSPs need a cloud and mobile practice to meet new technologies and platforms
- MSPs will need to automate to establish leverage – and scale their business to meet the challenge of commoditization
- MSPs will need leverage these efficiencies to combat their new competitors
If you keep an eye on the above in the year ahead, change will be good for your MSP practice. By staying ahead of the key drivers shaping the market, your business may even have a breakout year.
Mike Cullen is senior vice president of sales for N-able by SolarWinds and brings over 20 years of corporate sales experience to his MSP customers. He has assembled an equally experienced sales force. Prior to joining N-able, Mike was vice president of sales (Ottawa Branch) and interim president of the Québec region for IKON Office Solutions. He grew the Ottawa business to $24 million in five years, resulting in the Ottawa office's recognition as the branch office of the year in 2000. Mike joined IKON in 1995 as a result of an acquisition of Fulline Office Products, an office equipment company Mike co-founded in 1988.