Wanted: A Few Good MSPsBy Sharon Linsenbach | Print
MasterIT touts IT-as-utility model as "recession proof" and hopes to expand into other geographies through partnerships.MasterIT is looking for a few good MSPs to deliver technology using an IT-as-utility business model, which the firm has claimed is "almost recession proof."
The Bartlett, Tenn.-based company began selling IT-as-utility in 2006 and is now looking to expand its reach by recruiting business partners that will act as MSPs that sell IT-as-utility under the masterIT brand.
J. Michael Drake, chairman and CEO, said masterIT is looking to increase geographic coverage through partnerships. "We'll be looking for other service providers in other geographic markets who want to assume the masterIT brand," Drake said.
Future masterIT-branded service providers would be able to assume financing from the masterIT credit facility, he said. Traditionally, masterIT aimed for customers in the under-500 seat range, Drake said. But he said he believes the model is scalable up to large enterprises.
Drake spent 17 years as a hardware financier and, based on his connections with a consortium of banks, set up $200 million worth of non-recourse credit and financing. The banks fund a loan to masterIT, which purchases a customer's entire infrastructure. MasterIT strengthened an existing partnership with Ottawa, Ontario-based N-able Technologies for remote monitoring and management software which runs the IT functions of the customer's business. The customer pays masterIT a fixed fee per seat, per year, turning IT into a budgetable, predictable expense. Drake believes his model standardizes the total cost of use of technology, allowing customers to focus on delivering business value to their customers, not on the price of a new PC.
The best part, Drake said, is that the business model is mostly recession-proof. "This not only saves the customer money as their business grows, but the fixed fee model means that their cost also shrinks as the headcount shrinks," Drake said.
Drake said the market is wide open for IT-as-utility. He likens the opportunity to a "land-grab," and said he thinks it's a great place for an MSP to be.
Mike Ellison, director of Partner Development at N-able, said that while most N-able customers are still working from a traditional managed services model providing one or two select services, there are already half a dozen partners benefiting from IT-as-utility, and thinks the idea will gather steam quickly. MasterIT, for example, has added 18 customers with more than 1,000 seats in its first year using the IT-as-utility model. "If a solution provider decides to go this route it is still going to be a pioneer in front of customers, but in the next six months, we see the number tripling or quadrupling," Ellison said.
Drake said his model removes much of the risk involved, both for masterIT and for customers. Before purchasing a customer's infrastructure, masterIT performs an extensive total cost of ownership analysis based on Gartner research and industry best practices. The TCO analysis includes both a technical and physical network assessment, which, in conjunction with the TCO, shows clients exactly where and how they are spending their money, Drake said. The TCO encompasses every area of the business and the cost is then presented to the client as a fixed fee per seat, per year.
Infrastructure is then purchased at book value, not market value, which is often lower, he said. This type of granular analysis gives Drake an intimate portrait of the potential client and allows masterIT to make a more sound business decision, he said.
"Right up front we have to understand their financials, their cash flow, their ability and willingness to repay," Drake said. "We're forced to be more discerning in who we recruit and sign as customers," he said.
And for the customer, what risk is left is assumed by masterIT. MasterIT immediately refreshes all hardware when the purchase is made and sticks to a rigid replacement schedule to make sure that customers are working with warrantied, up-to-date equipment that is standardized across the company. Laptops are replaced every three years, desktops every four and servers every five, Drake said. Remote monitoring and management capabilities allow masterIT to identify and in most cases resolve security and downtime issues before they affect the business.