By Bob Vogel, Chief Marketing Officer, Autotask Corporation
During the past three years we have seen a steady proliferation of managed services in this market, and the pace of adoption is accelerating. The growth has been driven by an increase in the number of solution providers getting into the game for the first, as well as from established players increasing the percentage of MSP offerings in their IT services portfolio.
With 20,000 solution providers using our software, we have a bird’s eye view of this trend – measurable both by the percentage of customers who ask us to turn on our MSP extensions that link Autotask with the managed services vendors – including Kaseya, Level Platforms, N-able, Zenith and others – and also through direct polls we take through the Autotask CommunITy built-into our software. The last poll we ran just a few weeks ago revealed that fully 95% of our customers now say that at least 10% of their revenue is coming from a recurring managed IT service… And more than 1/3 of them say they derive more than half of their revenue through Managed Services.
We’re also seeing a new wave of Master MSPs who are making it even easier to get into the game, by offering up turn-key managed services that solution providers can simply resell to their customers. Zenith Infotech jumped into the game early, offering up a virtual NOC, and then Ingram Micro added momentum with its Seismic Offering. Then, Amy Luby’s MSPSN, Do IT Smarter, the Utility Company and a dozen other smaller players began to aggregate basic services, including virtual help desk, patch management, and monitoring – becoming the secret “back-end” delivery mechanism for hundreds of smaller VARs wanting to get into the MSP game without the big investment. Now the likes of NetEnrich and Dell are getting into the game.
What’s wrong with this picture? To put it simply, managed services delivery is entering the mainstream of our business, and the impact is going to be a steady increase in competition and a commoditization of many of the services in your portfolio.
Not only are most solution providers now offering the same suite of services to small and medium sized businesses – many of them are buying and reselling those services from the exact same sources and/or using the exact same managed services platforms to deliver them.
That’s why VARs and MSPs that want to continue being paid at a premium for the services they provide, must find ways to differentiate their business and collaborate with partners who can enhance their offerings and help deliver superior customer service.
We faced the exact same dilemma 15 years ago with the commoditization of computer hardware and software. Resellers had traditionally made most of their money on the healthy margins they realized on the equipment they purchased for their customers. Then, the basic computer networking technology became so pervasive, with so many vendors, that prices dropped, margins evaporated, and Resellers turned to services to make their money – becoming not just computer resellers, but VALUE-ADDED resellers.
That was then. But now that the services you are delivering are becoming commoditized, what is your “value-add” going to be? Are you going to be able to win new customers – and make a profit from your current customers – when everyone is out there offering up network management at $X/month per PC, and $Y/month per server – and each provider throwing something else into the mix, or lowering the price by another $1 a month, just to beat the next guy’s plan?
Now, I’m not suggesting that we’ve gotten to the point where you can’t make money in Managed Services today. But it’s going to get increasingly difficult to make a profit at it, as prices continue to drop, more services get bundled in, and your labor costs continue to rise.
The solution providers who are going to come out on top, in my view, are the ones who develop a clearly identified specialty – either in a proprietary business solution, or in one or more narrow vertical niches that they can establish themselves as “the technology gurus” within their areas of specialty.
The successful solution providers of tomorrow will use Managed Services delivery as a MEANS to their ends, not the end itself — whether delivered by their own staff or through outsourcing to others. The successful MSPs will be the ones who are rigorous about they way they collect and manage the information about their clients’ businesses – not just in terms of the data being generated through their monitoring systems, but data related to the quality of their service delivery.
They will use this data both to regularly justify the value of the services they have already delivered, and to identify new opportunities for selling higher-margin technology services and solutions to their clients.
