N-Able CEO: Small MSPs Can Beat Direct Deals

As Dell was announcing the expansion of its direct managed services offering to the New York metro market, Gavin Garbutt was holding steady to his core business philosophy: “He who monitors the customers owns the business.”

The Dell news was not unexpected, says the chief executive and president of managed services tools vendor N-Able Technologies, given that it owns the assets through its acquisitions of Silverback Technologies and Everdream to deliver remote monitoring and management of customer infrastructures. After a successful pilot in Dallas, Garbutt said it was only logical that Dell would continue and build out the program.

Despite conflict protections enacted by Dell to guard against channel conflict, solution providers can expect a clash. With a direct managed services offering, Dell will compete directly against its partners for new customers by offering lower prices. And that’s where Garbutt believes the small managed services provider will continue to thrive.

“There’s still a role for solution providers competing in the direct-delivery world,” said Garbutt. “They need to build out their individual value proposition by being the value-add solution provider and the local general contractor.”

Dell isn’t the first monster to charge into the managed services market with direct offerings. All of the major telecommunications companies–AT&T, Verizon, MCI and British Telecom–offer some form of network and security monitoring and management. CDW, the giant direct market reseller, recently signed a deal with managed storage provider Asigra to resell off-site storage. Major hardware and software vendors from IBM to Microsoft are offering direct managed services and software as a service.

In spite of the breadth of direct managed services offerings, the small VAR-turned-managed service provider has continued to thrive. Garbutt believes it’s their traditional role of trusted adviser and provider of value-added services that gives them an advantage on the local level. Since they both know the customer and monitor their business, they’re able to provide superior customer service.

“The big vendors will offer a lot of services where price is everything, and they’ll do very well. The small and midsized customers will want the local support and local provider, and that’s where the small managed services provider has an advantage,” Garbutt said.

Backing Garbutt’s position is evidence from a recent Channel Insider study of the managed services marketplace, which found sales of hardware, software, software as a service and other professional services skyrocket as a result of a solution provider offering managed services to its customers. Garbutt believes that phenomenon will continue as the managed services market matures, with some solution providers who own relationships with their customers taking on the role of a general contractor that aggregates the offerings of other service providers.

“There will almost be a resurgence of the VAR community, but it will all be real technical providers coming in under a managed service monitor acting as a general contractor,” he said.

Monitoring customers’ IT consumption and infrastructure performance, as well as predicting IT needs, will ensure the success of a managed service provider. Since the managed service provider can see all the network utilization, security events, storage capacity and data generation levels, and hardware performance, it can demonstrate value to the customer by proactively planning for new equipment and helping to control software licensing costs. Being local and able to talk directly with decision-makers only enhances a managed service provider's value and probability of success.

Dell plans to avoid conflict with its partners by declaring existing managed services business going through a partner off limits to the direct sales team. While Dell is giving itself license to target any new customer with direct managed services, Garbutt believes this is an opportunity for managed service providers to re-engage with customers and keep them out of Dell’s and other direct vendors’ hands.

Most solution providers claim anywhere from 50 to 250 customers, but only one-quarter of them are active and revenue producing. Garbutt suggests approaching inactive customers with offers for low-cost or free monitoring services. This will establish a beachhead in the customer that keeps Dell out and gives the service provider an opportunity to expand business over time.

“First, mine your customers for new business. It’s the easiest way. It was hardest in the past because you were trying to sell into them for the first time. If you show them the value of monitoring and the reports on where IT can help their business, it becomes a very easy conversion,” he says.

One area where big vendors have an advantage over small solution and managed service providers is in branding and marketing. Everyone knows Dell, IBM, Microsoft and Google, but few know the small local VARs. Garbutt is one of a growing chorus in the channel who believes solution providers and managed service providers need to do a better job establishing their own brand identity and market their value propositions better.