Taking Your Managed Services Business to the Next Level

By Frank Ohlhorst

The MSP market is booming, and new players arrive every day.  Some do very well, others struggle, but all share one element in common – the desire to achieve growth that leads to increased revenue.  However, growth is complicated and can be somewhat risky, often following a torturous path that ultimately ends in uncertainty. That is just the nature of the IT services industry today.

Nevertheless, many have overcome the odds and have made the transition from a boutique MSP to an enterprise-class MSP.  Growth comes at a price, however, namely significant investments in personnel, software and hardware, as well as increased bandwidth costs and maintenance contracts. It’s a situation that has scared many away from the MSP market and caused others to hang up their hats and abandon MSP-related opportunities in favor of sticking with more traditional IT services. That creates a question – has the opportunity to become a high-end MSP now passed?
The High-End MSP Opportunity

The short answer is no. Opportunities abound for solution providers looking to build successful MSP practices, and better yet, the path to the high end is no longer blocked by a requirement for hefty investments. Solution providers can thank the cloud for that, where economies of scale have made high-end services affordable, easier to get and most importantly, rebrand-able.  The cloud can deliver elasticity that allows data centers and services to grow and shrink as needed.

That elimination of waste and the ability to almost instantly reconfigure to change scale brings an affordability to the channel that can be translated into high-end services, which can be bundled and resold by even the smallest of solution providers.

A solution provider looking to dive into the MSP market can turn to large providers such as Rackspace, Amazon elastic cloud and several other large hosts to build out a virtual infrastructure leveraging cloud-based services to start. However, that is not where the magic truly lies simply because most any solution provider can do the same thing.

The magic comes down to what services you are looking to provide as a MSP and how you combine and formulate those services. Traditionally, MSPs were defined as little more than remote support agents, who offered desktop and server maintenance via remote management.  In effect, that was the managed service. However, with the plethora of cloud-based solutions ranging from Infrastructure as a Service (IaaS) to Desktops as a Service (DaaS) to Software as a Service (SaaS), the definition of the MSP has expanded. All IT, whether physical or cloud-based still needs management.

That expanding definition is driving the opportunity for growth. To seize that opportunity, solution providers must redefine themselves, and that is the tricky part. Moving upstream requires planning, forethought and of course, the appropriate, channel-friendly cloud services vendors.

Building alliances with cloud services vendors will become the foundation for any high-end MSP. The trick is to leverage those alliances to create a suite of integrated services that are unique for your particular market target (think vertical markets), yet adaptable enough to support a la carte offerings. Perhaps the biggest challenge is finding a way to manage it all – the "all" being the services, the vendors, the customers and the revenue picture.

Professional Services Automation Tools

That is exactly where PSA (professional services automation) tools fit into the picture. The bad news is that PSA is yet another layer that must be added to the foundation of an offering. The good news is that PSA is now available as a cloud service from vendors such as ConnectWise, Autotask and others. PSA in the cloud simplifies management and reduces the need for a significant upfront investment. What’s more, many cloud services vendors have formed alliances with PSA vendors, baking in the integration with PSA platforms and offering channel programs that support rebranding. An MSP want-to-be can build a relationship with a PSA vendor as the first step to building a customized managed services offering, and that offering will have the advantage of simplified billing, profit analytics, and high efficiency that benefits from an economy of scale, all at a palatable price point that a solution provider can markup and for an ongoing revenue stream.

While competition in the MSP market is on the rise, driven by cloud services and the low barrier to entry, there are still opportunities for solution providers to differentiate themselves. Look at technologies that are still new to cloud services such as disaster recovery, unified communications, desktops in the cloud, infrastructure as a service, security as a service and even hardware as a service. Each of those offerings has the potential to replace traditional solutions, but that potential relies highly on the solution provider and not the vendor.

It’s Still About the Relationship

Whatever the offering, solution providers need to sell themselves before selling the technology. Of course, platforms and technologies are important, but with managed services a relationship built on trust is the single most important element for success. Nevertheless, there are still important considerations that a solution provider must address.

Solution providers must build relationships with their cloud vendors and carefully vet which vendors fit well for the solution provider’s MSP business model. Solution providers can leverage vendor channel programs to do just that.

Solution providers must carefully examine the channel programs of potential cloud services vendor partners. Simple questions to consider include how to rebrand a service, what are the upfront costs, what are the billing cycles, what training is required and available and so on. More complex questions will focus on customer ownership, the price of scaling, cost escalation, support responsibilities and service level agreements. Vetting cloud services vendors is not that different from vetting traditional vendors, yet many solution providers seem to overlook the obvious and take a leap of faith when it comes to partnering with cloud vendors.

The key term here is due diligence. Carefully check the viability of a cloud vendor, validate exit strategies in case the relationship fails, and of course, protect your customers. The technology to become a high-end MSP is already out there, it all comes down to how you roll it and sell it – and that may be the biggest secret for success.


This article was originally published on 2011-07-18