When I first started my MSP back in the early 2000’s the “guys” that were really progressive were renting data-center space, installing servers, managing the back-end and providing hosted solutions to their customers – all before the marketing term “cloud” even picked up traction. Back then, not many businesses were willing to go down this road on their own because it was a massive investment of time and capital. Moreover, ongoing labor was needed to make that happen, and many were still concentrated on on-prem solutions.
Fast forward to 2016 and the market is completely different. The cloud wars are going on between Amazon, Microsoft, Google, etc. and there is this divide in the market. As an MSP, how can you make sense of it all? Here’s a breakdown of the different types of services providers and their impact on the market.
The “Old Guys”
These are the businesses who started their IT/MSP shop back when I did in the 2000’s, still clinging to owning, managing and depreciating things on their own. Some of these people are stuck in the past – unwilling to see the changes that are happening and just going along blindly. Others feel as though it’s extremely hard to see a return on investment (ROI) now that less expensive and more robust solutions are out there. They know they can’t compete with these solutions on their own, which leaves them migrating out of the old model as fast as they possibly can.
The “In-Between Guys”
These are the guys that started their MSP business in the mid-to-late 2000’s. Most of these people have had experience in local data centers, thrown some servers up and said it’s not that hard and that they should keep on scaling this way. However, these types of MSPs are still running from the old playbook and don’t seem to see the market shift. At a smaller level, things may be working, but at scale, the time, expertise and money needed to grow and do more is not in their view. They understand the cloud is out there, but they’re afraid that not being able to touch it means they can’t make it work.
The “Bleeding Edge Guys”
Lastly, you have the guys who have started their MSP business within the last five-or-so years. These MSPs have looked at the current market and understand that they need to keep moving along with it to stay competitive. These are the people that understand that change is inevitable, and they’re familiar with all the options and use them to their advantage. In doing so, they can keep their margins, become more aggressive and be constantly viewed as people who are on top of what’s going on and the go-to people to work with. It is not uncommon to see new players from this group called “born in the cloud MSPs.”
What’s the Point?
So what does this all mean? Well, the whole point of being in business is to make money, right? Nobody is here to work for free. Technology is going to continue to change, and the “race to the bottom” – or as some call it, “The Commoditization of IT” – will never stop. The only way to look at this and stay sane is understand the market for what it is and use the tools, vendors and platforms around you to be better.
When Microsoft started offering what ultimately became Office365 and providing Exchange Online for $4.00 per mailbox per month, many MSPs said to themselves, “how can I make money doing this? There is no way I can compete with an on-prem Exchange server at that price!” Exactly, be smart and simply bundle Email-as-a-Service into your offering, and get rid of those on-prem email servers that are a total time waster. Don’t go and put exchange servers in a data center and then try and be Microsoft. It makes no sense, because the amount of scale needed to make the numbers work will never be there.
The same can be said for Unified Communications or Voice. It makes no sense to take a customer who you installed an on-prem solution for, put a box in a data center and think you can compete at scale with all of the Cloud PBX offerings out there. Again, the numbers will never work at scale. Scale is always something that people struggle to understand, plan for and deal with once it hits them. We hear it all the time at BVoIP, from all over the world. "Why should we work with you when we can do it on our own?" On average, 8 out of 10 of the guys who tell us that come back within 10-12 months and want to talk again. Was it worth it? Did it make sense to learn the hard way?
Moral of the Story
It does not make sense to build it, manage it, depreciate it and keep it working all on your own. Be smart about where your time is best spent. Don’t get sucked into the idea that just because you can’t touch it means that it doesn’t work. Use the market to your advantage and spend your time finding the best mix of technology, vendors, platforms and offerings that you can consolidate and bundle for your clients. Be the strategic manager who can guide your customers through the options, rather than be so consumed with the system that you miss the boat all together.
By Paula Griffin
By Lily Teplow