This could be the year many resellers move from a break-fix business to one that receives recurring revenue from managed services. The vendor community is expecting the shift, and research from numerous quarters, including MicroScope, indicates it is happening now.
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Deciding to grow a managed services business is all well and good, in theory, but just what steps should the channel be taking in practice and what sort of moves should they make this year to improve their credentials in the services space? The best way to get answers is to ask the great and the good in the channel to get some advice about how to become a managed services provider (MSP).
To start with, there are some calming words from Alex Ball, regional manager UK and Ireland at Veeam Software, who points out that it is not “an impossible leap” to make the move from break-fix to managed services and a lot of the skills required will already exist, they just need to be delivered to customers in a different way.
“Becoming an MSP isn’t as hard as it used to be. as long as resellers keep doing what they do best: understand their customer’s needs and offer the right levels of service to help them on their journey,” he says.
Ball says many vendors are now doing everything they can to make becoming an MSP easier, “by providing more flexible cloud licensing and products that are designed to work as a service”.
Why move to MSP?
There will be rewards for MSPs, with research coming from all directions, indicating that the demand for that type of relationship between customers and resellers is growing.
Ed Macnair, managing director of EMEA at Intermedia, quotes some of that research, which indicates the UK market for cloud services has grown year-on-year since 2009. “TechMarketView predicts it will reach revenues of £6.1bn in 2014,” he says. “A recent Cloud Industry Forum survey found 69% of UK businesses polled have already adopted at least one cloud service and are planning to extend their use of cloud services in the next year. Most businesses understand the benefits of cloud – what they are looking for is innovation.”
Having established that the market is growing and vendors are being supportive, the next question is around what the first steps should be. Some of the vendors who specialise in selling the MSP tools to the channel have valuable advice about what should be done.
Jacques van der Merwe, director mid-market and inside sales EMEA at Kaseya, says the key to moving from a traditional break-fix set-up to a true, value-adding MSP, is to start by understanding the full responsibilities of an MSP, and then working to put the right pieces in place to meet these requirements.
“Once these responsibilities and priorities are understood, it’s essential to establish a business model that can easily scale with success. One thing to note when constructing this scalable model is that a new MSP must be careful not to over-commit themselves; doing so may put them at risk of losing money very quickly,” he says.
“A good first step is to develop a monitoring service for existing clients and then to define the service level agreement (SLA) that can be met. One mistake that aspiring MSPs often make, however, is to define remote monitoring as managed services. While having the ability to remotely monitor customers’ IT systems is a critical step, it’s only the first toward becoming a true MSP. If new MSPs are able to be proactive and automate some of the routine IT support responses, they can offer far more value to their customers,” he adds.
His answer is to encourage resellers to invest in an IT service management solution, which means they can support existing customers but have room to grow and add more clients to the system. A decent management system will also help MSPs be proactive and provide indicators that can be replayed to the customer to solve potential problems before they develop.
“By using an ITSM solution to supervise and support all elements of customers’ networks at anytime, from anywhere, MSPs can tailor their offerings to meet the exact needs of users, making them an invaluable extension to an in-house IT team,” Merwe says.
Research the customer base
Even before a management system is introduced to help deal with customers, the reseller can start to do the homework on its existing customer base to find out just what sort of support those users will be looking for.
“Managed services providers need to provide a solution for every workload with the right SLA, right price point and right location options for enterprises. Here is my advice to resellers who want to become managed service providers in 2014.
“First, resellers should analyse their existing customer activity and ask the following questions: How old is their server estate? What sort of applications are they using? Are they reducing the amount of kit in use – which would suggest they’re already using cloud services – and how can I retain my customers,” says Ian Finlay, vice-president of products at Abiquo.
We meet Clark Computers, a provider that has already made the transition with help from partner AVG.
“Second, resellers should assess their strengths. Do they have systems in place for usage-based billing, or just for static billing? How can they leverage their existing technical? By doing so, and working to their strengths, resellers can more easily become a managed services provider, adding value where the likes of commodity infrastructure service providers such as Amazon cannot,” he adds.
He says it is also important for resellers to grasp the opportunities their customer base inspires when it comes to making the move to becoming an MSP.
“Depending on their customer base, they may look to be a trusted partner offering hosted email, Office 365, hosted backup – all services they can easily resell without having to build them,” he says. “Or, if their customers have more complex needs, maybe they should look to become a cloud distributor, selling partitions on their own cloud platform that can be built on demand to control the pace and risk of investment. For resellers wanting to become a managed service provider, the key is to deliver more than just infrastructure. By leveraging managed hosting and services skills, operating system knowledge and the ability to integrate seamlessly, resellers who want to become MSPs stand a chance of penetrating the market that’s emerging after the hype of enterprise private cloud.”
It is also important to remember the customer during the process and place what they want at the heart of the strategy. Mark Banfield, vice‑president of Autotask, stresses that an MSP needs to think beyond the applications they deliver. “Customers want the complete package,” he says. “Innovative solutions, affordable pricing structures, 24/7 help desk support, all underpinned with excellent customer service. Providing great customer service, however, is not as easy to apply and manage as you might think.
“In many cases it can be a company’s undoing, because in their commitment to help and service the customer, they can sometimes give too much, especially when you are moving from being a reseller to a managed service provider. When a company over-services its clients there is likely to be one victim: the service company itself. It is easily done, unless you find a way to keep your efforts in check.”
More haste, less speed
Market opportunities, management systems, SLAs and customer relationships all take time to identify and work on, and when it comes to that commodity there is a warning that leaving it much longer is a bad idea. The march towards becoming an MSP is well under way and resellers need to be aware that the clock is ticking.
David House, sales director at Avnet Technology Solutions UK, says he would advise any traditional reseller looking to become a managed service provider in 2014 not to delay.
“Over the next 36 months there will be a shift towards this method of IT delivery as customers look for an alternative to the buy, build, own and operate a model for savings and reliability. Resellers need to decide whether they are in or out when it comes to managed services,” he says.
“The best way to make this decision is to start by talking to customers in two areas,” he says. “First, find out what investment customers have already made in cloud. What cloud services are they using and what else they have planned. Second, get a full inventory of a customer’s existing IT assets. Getting access to this will equip resellers with the information they need to continue a conversation about what managed services would be of interest to the customer in the future. Avnet sees opportunities for resellers in particular around collaboration, security, storage and mobile managed services.”
Resellers are not just being pressured to grasp emerging opportunities. There is a real threat that existing break-fix business is shrinking and facing grim long-term prospects.
“The decision to become a managed service provider from a traditional break-fix supplier is not just a business option, it’s a must,” says Glyn Dodd, managing director of Centrex Services. “Since the margin bubble burst on the IT product in the late nineties, the cost and complexity of hardware maintenance has resulted in a fragmented and confused industry with little or no accountability. Providing a break-fix service alone is no longer commercially viable,” he says.
“Not only do VARs and distributors no longer exist in the traditional form; the role of field service engineers is also set to change rapidly. With 60% of CIOs saying that cloud computing is their top priority, onsite triage is no longer required; much more can be resolved remotely, removing the need for a physical visit while adding true value to the service.
“I believe a lean approach provides the key to long-term successful supply chain management. It enables organisations to eliminate waste, improve service and change the mentality applied in the typical supply chain, allowing them to put the customer at the heart of the service, adding value to their service supply chains and enabling them to rise above competition.”
With the warnings from Avnet’s House and Centrex Services’ Dodd stressing the importance of getting onwith making the decision to become an MSP, the year ahead is clearly set to be one that witnesses the birth of more MSPs. The good news for most resellers is that they have most of the skills required and should get support from their vendors and distributors. The challenge is one of timing; delaying the decision until 2015 will not be a wise move. This year is the moment to embark on the MSP journey.