MSPs Are Turning Software Into New Services – As We Predicted

Right in the midst of ramping up our Toolsmith series, our friends at AvePoint have rolled out the results of a survey of 1,000 MSPs, which, among other things, confirms our view turning independent software vendor (ISV) products into services is the best growth path for managed service providers.

The AvePoint survey found that when adding new vendors to their repertoire, 54% of MSPs prioritize the projected revenue growth from additional services generated from new products.

And partners are not becoming aligned exclusively with one given solution, as illustrated by the point that nearly half (49%) of all MSPs work with upwards of 20 ISVs to solve myriad end customer needs.

Unless those ISVs have found an extraordinary way to preserve the profit opportunity for partners, it is very likely that partners are wrapping their own services around products from all of them. On the other hand, the survey revealed that 60% of all MSPs want to consolidate the number of vendors they work with. Possibly they want to eliminate those vendors whose products don’t lend themselves toward supporting new services.

For AvePoint, this translates into the economic services opportunity that Microsoft often talks about, that for every dollar of Microsoft licensing sold, partners realize $9 in services revenue. AvePoint has calculated similar results for their partners.

Also read: AvePoint Launches New Partner Program Aimed At Microsoft Teams, 365

Security & Governance

Not surprisingly, the survey found that 69% of MSPs indicate both security and governance as two of the top three IT needs for their customers. In a survey conducted by AvePoint earlier this year in the UK, it was found that fully three-quarters of businesses have deployed Microsoft Teams without any security or governance in place. Clearly, this presents partners with tremendous opportunities to incorporate relevant products into services directed at resolving vulnerabilities like these.

Another security stat that provides no surprise is that over half (52%) of MSPs or their customers have been attacked by ransomware in the past year.  With more channel chatter about AI-based behavioral analytics software coming to market, it is hoped that partners will be able to put those new solutions to work in conquering this difficult challenge.

Also read: Best Backup Solutions for MSPs to Protect Against Ransomware

The Reign of Hybrid Networks Continues

More than 15 years ago, a Microsoft executive warned partners that their failure to embrace cloud computing would result in their becoming irrelevant within four years. Here we are, four times that projection later, and still over 60% of MSPs are only now planning to add cloud migration services to their managed services portfolio to support on-premises to cloud transition. This should reflect a large proportion of the business community that has yet to move past hybrid on-prem and public cloud, if that.  Despite Microsoft’s prediction, cloud ubiquity is still far, far away.

Also read: Top Cloud Migration Services Providers 2021

Again With MRR

MRR. MRR. The Holy Grail. Focus on MRR. Oy.

Regular readers know how deeply this sticks in my personal craw. So many self-appointed analysts and “experts” expound upon the importance of focusing on monthly recurring revenue (MRR) to the exclusion of all else. Reportedly, some channel partners have stopped accepting project-based business, refusing to take any work that was not a monthly recurring service agreement.

It is no surprise to me, though it may be to the “experts” among us that AvePoint’s survey revealed that 63% of MSPs make less than half of their revenue from recurring services today. That’s right, two-thirds make less than half from MRR. Oh, the humanity…

Don’t get me wrong. MRR is great. Every MSP should have MRR in their portfolio. But dropping project services to focus on driving MRR is like dropping the engine out of the car just before the start of the race. If you’re doing it right, every project you perform should result in a managed services agreement that provides MRR. Reading the reports from that MRR-generating monitoring and management program should surface the next project opportunity as an improvement to the original one. New project, new managed services. New project revenue, new monthly recurring revenue. Rinse, repeat.

Teams Sprawl – Is it Really That Bad?

Another stat raised by the AvePoint team is an announcement by Microsoft that they added 100 million new daily users on Teams during the pandemic. Their observation is that the creation of Teams channels has drawn many MSPs into this service arena. One big focus has been resolving “Teams sprawl,” the result of many companies allowing their employees to create channels at will, which has also led to multiple copies of many files wasting tremendous amounts of storage. An AvePoint partner in the Chicago area, working with a large consulting firm, reported that, globally, their Help Desk internal help desk was getting 10,000 requests a day for Teams creation. By using AvePoint tools to automate those processes, a tremendous burden could be relieved from that Help Desk.

Time will tell if this winds up being a bad thing, but it is already generating new service opportunities for MSPs.

Implications

It’s no surprise to us that so many partners are focused on new services revenue generation from new products provided by new vendors. Not only does this provide a strategy for leveraging products to produce service revenue, it also means ISVs must continue to support partners with sales assistance and marketing development funds. Also, it encourages vendors to continue sharing their roadmaps and plans with partners who continue to drive projects around their products.

The channel may have changed, but the biggest values it brings have been preserved and perpetuated in a services format.

Further reading: If We’re Not a Channel Anymore, What ARE We?

Howard M. Cohen
Howard M. Cohen is a 35+ year executive veteran of the Information Technology industry who writes for and about the IT channel. He’s a frequent speaker at IT industry events, including Microsoft Inspire, Citrix Synergy/Summit, ConnectWise IT Nation, ChannelPro Forums, Cloud Partners Summit, MicroCorp One-On-One, and CompTIA ChannelCon, and he frequently hosts and presents webinars for many vendors and publications.

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