As more SMBs migrate to cloud-based technologies, what value do MSPs provide to their clients? This is the question every service provider should be asking themselves.
Several years ago, I attended an industry conference at which leaders from Google, Microsoft, Rackspace and Avnet participated on a panel. Panelists from each company told the crowd of about 500 MSPs the following:
- You will need to abandon the managed services model in favor of selling cloud services. In other words, leave it to the big cloud companies like us to invoice your clients.
- You will need to transition your business model into a “consultancy.” Your role will be to advise your clients on which cloud services they should use.
- Your revenue will come from data migrations and recurring “residuals” (they would pay MSPs 5-20% per month for bringing them cloud services).
The Response from the Room
You can imagine how the MSPs reacted to this information.
Approximately, 25% of the room walked out before the panel was finished. After sitting through the entire earth shattering panel, the remaining 75% walked out of the room shaking our heads, saying “these companies are CRAZY. Our small business clients will never go for this, and neither will we!”
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Too Quick to Dismiss?
Today, Office 365 (“BPOSS” back in the day) is enjoying massive adoption in the "less than 50" employee category, which represents 90% of its Office 365 customer base. And then there is Google Apps, which some say is doing better than Office 365 in the sub-50 employee demographic. Making matters worse for MSPs is the proliferation of SaaS applications, and solutions like Dropbox, which displaces the need for a file server.
I have to admit there was some real foresight in their message. I’ve come to realize those panelists were foreshadowing a concept I now call “channel eclipse.” So, what does the channel eclipse mean for MSPs? MSPs must change the economics of their business. As they transition their business to the cloud, they will lose their dependency on highly-priced, highly-certified network/infrastructure engineers. MSPs will need to outsource back office functions to create efficiency and increase margin. They will need to maximize their value to their clients in a world of declining margins. MSPs will need to reinvent themselves, but not as drastically as predicted by the big companies at the conference referenced above.
How to Become an MSP of the Future
Step 1: Select a Desktop as a Service (DaaS) platform you can private label. Desktop as a Service is a misnomer, because it implies you’re just providing a “desktop,” but, in fact, the right platform allows the MSP to provide clients with all of their servers, access to data and access to third party apps.
Step 2: Focus your client acquisition efforts on companies that require third party applications to run their business (Office 365 doesn’t count). There are thousands of business line applications small businesses use every day to run their business. Focus on those.
Step 3: Host those third party apps for the client with your private labeled DaaS platform. When you control access to the applications, you control the client relationship.
Step 4: Bundle your managed services with the DaaS solution to create a package that includes hosted servers, access to applications, back-up and disaster recovery, hosted exchange and unlimited end-user support for a fixed monthly fee per user/month.
Step 5: Mine data from the DaaS platform and present your clients with business analytics that are meaningful to them.
Upon implementation of these five steps, MSPs can deliver a comprehensive portfolio that provides SMB clients with the IT functionality they want and need, and allow the MSP to deliver more value to their clients in the form of meaningful business analytics. As MSPs make traction with this model they will be able to reduce their support costs, while increasing recurring revenue and becoming “stickier” in the process. The MSP of the future isn’t an MSP at all. It’s a TSP: a Total Service Provider, a provider that not only delivers functionality, but also provides valuable information to enable better business decisions.
Total Service Providers (TSPs) will be made up of three primary positions:
- Tier 1 technicians
- Business/technology consultants
- Sales people
To learn more about these job descriptions and the evolution from MSP to TSP, join Jim in our upcoming webinar!
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