The Next Turn of the Crank

The MSP business model has been growing for the last 15 years. It started with the advent of two critical tool sets: Remote Monitoring and Management (RMM) and Professional Services Automation (PSA).

  1. RMM tools allowed the MSP to manage end points (workstations, printers, servers networking and storage) remotely. Normal soft maintenance and problem trouble-shooting could be performed remotely, in the offices of the MSP. This capability enabled the client relationship to be ongoing, not event-based. RMM also allowed the MSP to predict and prevent failures, making their IT service much more reliable and available.
  2. PSA tools provided the billing and labor tracking engine which, in a cost-plus world, were not needed. PSA tools also enabled the “aaS” world to surface. It was the basis for a recurring revenue model that resonated with end users so much. The clients were much happier with a “pay on consumption” business proposal, compared with a pay up-front proposition.

This MSP business model also enabled the Cloud to be so well received. Having moved to the “pay on consumption” business proposition, the client could more easily evaluate the cost benefits of virtualization, off-premises data centers, to Cloud hosted, to cloud-based functional applications. In CompTIA’s “IT Industry Outlook 2018,” published in January 2018, the MSP business outlook was very positive. The overall IT Industry was projected to grow at 5% approaching $5 trillion globally. In the U.S. SMB segment served by MSPs, 38% of the respondents stated that their IT spend was too low. It was also noted that those SMBs who were most satisfied with their IT services tended to be users of technology partners. All are good signs at the macro level.

While MSP revenue growth in 2019 will come to new client acquisition, more opportunity for MSPs will surface from selling more to existing clients. Two forces are acting to create a larger impact potential for MSPs. The “aaS” delivery model, as established for IT Infrastructure is now the preferred model for all business services. AV, IoT, Security,

HR, Logistics, Analytics and verticalized LOB applications will all need to conform to the “aaS” model. PSA providers are already preparing the way to accommodate these aligned services. These changes position the MSP to be the business services aggregator and integrator for their SMB clients. The key word is “position.”

To capitalize on the client-based growth opportunity the MSP will need to develop four competencies:

    1. Client business knowledge. The MSP RMM/PSA business model brought stability and reliability to SMB client IT Services. It also laid the groundwork for incorporation of off-premise and cloud-based applications, such as Office 365. For IT Services to assist in the digital transformation, the
      MSP, acting as the Virtual CIO, will need far greater knowledge of the client’s business. What are today’s pain points? Where is Top-line growth coming from? What are the risks to mitigate? What competitive actions will impact the business? Where are new opportunities surfacing? Conversations with client owners will be about these topics, not about downtime trending.
    2. Partnering for mutual benefit. According to Tiffany Bova (Growth IQ. Penguin Random House, New York, NY, 2018. Page 218), “Partnerships should be proactive and have well-though-out arrangements between the companies, with clear expectations and measurable results.” The difference between partnering today and ten years ago is the MSP is in the driver’s seat. It is more important to understand the need and usage of the technology-based business service than the underlying technology. As a consequence, the MSP needs to be the partnering leader, the orchestra conductor, assembling the partner suppliers needed to transform the business.
    3. Outsourcing beyond IT Infrastructure Services. An interesting byproduct of the MSP RMM/PSA business model is that MSPs have developed excellent onboarding skills and processes. These skills and processes are generic and can be applied to more than IT Services. They can be applied to any other business functions an end client desires to outsource. Due to the MSP’s focus on detail and their intimate knowledge of the end client’s operational environment, the MSP will manage the outsourced function onboarding better than the functional service supplier. The MSP can monetize this service, even better.
    4. Positioning for Business Integration Services. If we agree that the opportunity for MSPs is beyond IT and is centered on delivering digital value to the SMB client, it isobvioustoseethatthere is tremendous value in the integration of all sorts of services for the client: cloud line-of-business applications, other aligned technologies from specialized providers andfunctional out sourced services. According to an IDCstudy published in September 2016, “By 2020, for every dollar Salesforce makes, the company’s ecosystem will gain $4.14. Organizations supplement their Salesforce subscriptions with additional services from consulting partners and additional apps to extend core functionality, built by ISVs on the Salesforce platform.” The SMB client wants data to flow from all these sources for seamless decision-making. Think of a business intelligence dashboard architected by the MSP to meet these and future needs.

CompTIA 2017 IT Industry Outlook reports that end users are looking beyond the tactical functionality of IT to drive business goals such as customer satisfaction, operational efficiency or offering innovation. Digital Transformation is the opportunity of the future for MSPs. It’s time to turn the crank again.

Bob O’Malley