Create Opportunity With Managed Services
The outlook is positive for managed services providers, but donâ€™t forget your due diligence if you decide to expand your business into this space.
Business Solutions, December 2008
"There's been great debate about how the U.S. economy will impact IT spending and the channel, yet very little discussion about the opportunities these times bring to established MSPs and solutions providers," says Garbutt. "Technology will play an ever more critical role in the livelihood of SMBs and small-to-medium enterprises (SMEs) and present opportunities for MSPs to deliver higher-value services for less cost while still achieving profitability. This is a win-win scenario."
Take Advantage Of MSP Market Growth Now
According to Jim Hamilton, executive director of MSP Partners, estimates show that fewer than 5% of SMBs in North America are taking advantage of a managed services offering. That leaves the market ripe for solutions providers. "It is a real, growing, and significant force in the channel," says Hamilton. "If you are not in managed services, you are not only missing a large business opportunity, but also missing out on a better business model that produces higher revenues, lower costs, and bigger margins."
While the managed services market remains open, don't expect to just add a line to your business card saying you offer those services. Peter Sandiford, CEO of Level Platforms, reminds VARs that selling managed services does not mean abandoning traditional products and services offerings. "Managed services can help grow VARs' existing business by providing them with the ability to reduce operational costs, acquire new customers, add recurring revenue, and increase product and project sales," says Sandiford. He cautions VARs to think realistically about their business' ability to tackle the engineering and support needs required for a successful MSP practice. Hamilton agrees. "Managed services cannot be sold like a hardware or software product. Instead, you must understand the business drivers of your customer by engaging in a conversation about the nature of their business," he says.
Once you have a match with your services and your customer's business needs, you can move forward. Hamilton also stresses that VARs considering a move into managed services must address the sales cycle to migrate customers from a break-fix model to a managed services model and then be prepared for the travails of 24/7 support. "Smart processes and running a smooth operation are foundational to a good managed services business," says Hamilton. "After all, your business is all about ensuring predictable, stable, low-cost IT services."
Start By Evaluating Popular Technology Fits
If you aren't sure about your business' fit with managed services, consider the most popular technologies addressed by MSPs. Keith Alston, director of North America channel sales for BitDefender, says he sees no end to the need for MSPs in the network management, storage backup and recovery, and security management spaces. Gaining popularity are remote monitoring and management automation tools, software as a service (SaaS), managed backup and other security services, virtualization, and print management technologies. More technology options are quite likely to evolve soon. "Innovation is a constant in the managed services arena because it's an emerging field. It will continue to grow throughout the years," says Garbutt. Additionally, Sandiford says he expects more collaboration as new technologies enter the market and new competitors follow to serve those technologies.
Guard Against Common Mistakes
Insufficiently managing the quality of service is Alston's blunt answer to why MSP endeavors fail. "VARs should think big, but start small," adds Hamilton. "A simple way to do this is to implement a monitoring service, then grow into a full-blown managed services business once you've demonstrated value to your customer." Another mistake VARs make as they move into managed services is offering a cost-plus approach, says Hamilton. "This is particularly tempting in managed services, where economies of scale and process efficiencies drive down costs," he says. "By offering a cost-plus pricing model, you end up with lower margins and commoditization of your services. People see you as a cost to be managed rather than a strategic partner. VARs should be selling their service contracts based on value around their customers' business drivers." Sandiford agrees. "As a managed services provider, you're wise to clearly articulate your value proposition based on what you can offer your customers specific to their individual needs. Prove your worth by consistently delivering exceptional technical support and successfully managing your client's risk," he says.
To position yourself as a true managed services provider and succeed, Garbutt suggests a critical look at your existing operations. "Do your due diligence now and take inventory of your company to ensure you're running at optimal performance and have the right technology, tools, processes, and people in place to deliver exceptional service to your customers and still make a profit," says Garbutt.
Another step is identifying specialties your company has and marketing those to other partners to help fuel growth. Maybe you're an expert in virtualization or have a knack for developing business continuity plans. Capitalize on your expertise, and market your strengths not only to customers, but also to prospects and partners. Keep your eyes open, and be opportunistic.
Jump Into Growing MSP Market
With Gartner estimating a revenue growth of $30 billion over the next five years in the managed services market, Alston feels confident the market is wide open for solutions providers that do their due diligence and grow their managed services practice wisely. Garbutt agrees. "In these uncertain times, MSPs can not only build and improve business by driving efficiency, but just as important, do the same for their customers while maintaining a desired level of profitability," he says. "The more businesses come to rely on technology, the more value they will place on ensuring it will function without interruption, which means more opportunity for MSPs and services providers."