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With predictions of an 80% increase in SMB IT spend over the next four years, the role of managed service providers (MSPs) is becoming increasingly important as smaller businesses look to adopt more managed services. But what can MSPs do to ensure they make the most of the SMB opportunity and how prepared are they to support SMBs as they shift spending to managed services?
Back in June, Datto CEO and founder, Austin McChord, was arguing at DattoCon that small businesses would “need to turn to managed service providers” as they scrambled to rethink their IT infrastructure. He urged MSPs to “differentiate themselves – just figure out what they are best at and sell that”. Speaking at the same event, David Pence, founder and CEO at AcumenIT, told MSPs to “work in a fishbowl, not an ocean”.
Many people agree that when it comes to the SMB market, the first priority is not to fall into the trap of viewing small companies as a homogenous mass of businesses that can be sold the same product or service. “A “one-size” approach is a detrimental mistake common in the managed services arena,” argues Jim Ritchings, Trustwave, senior vice president, Worldwide Channels. “A shift in philosophy to focus more on people and support in addition to technologies provided is essential for becoming a trusted partner.”
' James Pittick, Canon UK director of B2B Indirect Sales, echoes those sentiments. “By being flexible, collaborative and versatile you can help to support SMBs,” he states. “There is no ‘one size fits all’ approach . All business are unique and in order to fully support them that needs to be recognised.”
The need to specialise
Apay Obang-Oyway, Ingram Micro UK & Ireland, director of Cloud & Software, adds that MSPs “need to pick the industries they want to specialise in, as a horizontal approach will not work for all SMBs”. Once they have their chosen industries, they need to “build their credibility in that sector and become experts by developing a deeper understanding of the critical issues that affect them, including regulatory and compliance requirements”.
It’s very important that MSPs don’t spread themselves too thinly, warns Gary Marsden, senior director of Data Protection Services at Gemalto. Instead, they should choose “a specific vertical, geographical or technology oriented market where they can become the go-to-partner for SMBs”.
Dave Sobel, MSP evangelist at SolarWinds MSP, said something similar to MicroScope in May this year, when he noted that some MSPs were specialising in a vertical, technical speciality or demographic. “They’re finding their own particular way to engage with the market, and not be ‘all things to all men’, which is a lot harder than it’s ever been,” he remarked.
But the experience of MSP DynaCom IT Support is slightly different. Director Simon Beckett told MicroScope that while MSPs needed to be strategic, the company did not “specialise in one particular vertical, but that doesn’t mean we don’t think carefully about who our potential customers are and their specific needs”. He cited the difference in requirements between a small business working out of an office and an industrial laboratory. “So while breadth is important to us, we also need to make sure we can meet specialist needs before we support them.”
John Coulston, Rackspace EMEA director of Partners and Alliances, agrees, arguing “there is more work to do” for MSPs. “The size and diversity of the SMB sector means broader knowledge is needed into how these organisations work. One size doesn’t fit all, so making sure MSPs are able to tailor their solutions for each customer is critical.”
Andrew Wilson, director of channel sales at Node4, is another of those who believes there is no such thing as “one size fits all” when it comes to SMBs. “Understanding SMB customers is vital to designing services that fit their needs. MSPs who operate a ‘one size fits all’ approach to service provision are going to find the opportunity much more challenging,” he warns. “Customer size, industry, tech priorities, investment levels and their experience in working with outsourced service providers are all important pieces of the jigsaw.” MSPs need to be able to anticipate these priorities, requirements and boundaries to advise on the best blend of technologies”.
The customisation challenge
But there’s a problem. If there’s too much deviation from the “one size fits all” approach, it’s very hard for MSPs to provide a more tailored service to smaller businesses without losing money. So how can MSPs deliver solutions for each customer at scale? Figuring that out is, Coulston warns, “critical”. He suggests that MSPs look to sharing best practice “and creating groups of likeminded SMBs that can be addressed in a similar way” as potential ways to “adopt a specialist approach and help build their relevance to these critical customers”.
Marsden at Gemalto suggests the best approach is somewhere in between. “MSPs should know there is no need to reinvent the wheel when it comes to providing security services,” he remarks. “There are some excellent security-as-a-service offerings available that can be white-labelled. It’s really all about getting the balance of build versus buy right.”
One reason why managed services are increasingly attractive to SMBs is because many smaller businesses don’t have the IT skills or the money to recruit the skills they require.
Russ Madley, head of SMB at Kaspersky Lab UK and Ireland, notes the vendor has seen a lot of MSPs “entering the industry, many have been traditional IT software and hardware resellers, and it shows no signs of slowing down”. SMBs are outsourcing services to MSPs to get around their skills shortages and ensure essential services are being carried out where they don’t have the capacity to perform them in-house.
It’s also an attractive option to be able to outsource a certain project or query to an MSP and have an expert help them. “This makes the opportunity to work with MSPs extremely attractive, especially when considering the value for money this will represent,” Madley claims. Employing MSPs is often cheaper because they can be contracted as, and when, necessary for an agreed price.
The other difficulty for small businesses is that it’s becoming much harder for internal staff to cover a wide range of jobs. The finance director can’t realistically be expected to perform the IT manager’s role anymore.
As Dr. Jamie Graves, CEO & founder at ZoneFox, puts it, there’s a real problem with resources at an SMB level. With many smaller businesses, founders and employees “are often expected to wear many different hats as well as their main role. From heading up HR and becoming the corporate travel manager through to dealing with GDPR and cybersecurity, often employees will need to focus on business areas way outside their usual remit”.
This presents a real opportunity to vendors and MSPs to engage with the SMB community, “but only if they fully commit to a different way of engaging with them”. Graves says it’s still all too common for MSPs to view smaller deals as a commodity sell where they sell software or a service to a small business, help set the services up and then are on hand to troubleshoot any issues that may arise. “Instead of this, MSPs and the channel more widely need to see themselves as an extension of their clients’ business, providing the skills and resources that are missing in order to be as helpful as possible,” he claims.
There is also the issue of being able to provide “oversight for the solutions that businesses have bought; solutions that, if the businesses are left to themselves, they may not quite understand how to derive full value from”.
Graves reveals that more and more organisations “are taking on this business-extension role, but there is plenty of work to be done. “MSPs have to realise the level of expertise they have themselves and use it to provide peace of mind to the SMB community that comes to them for help.”
Regulatory pressures are also having an effect. Marsden at Gemalto cites GDPR as something that has “made security essential for all business and IT plans. Yet for SMBs, the playing field hasn’t been leveled. The IT and security skills shortage is making it difficult for them to compete with large enterprises when recruiting experts with the knowledge to ensure compliance and mitigate security risks”. Not to mention the cost.
MSPs can make a real difference by offering long term services, rather than just short term product delivery, he adds. Karl Roe, Nuvias VP services and cloud solutions, concurs. “MSPs today need to recognise their profits won’t come from margin in selling products or services, but from delivering and managing a solution or service on behalf of their clients,” he comments. They need to look at adding value “around the on-boarding of a service (in the cloud) or in the long term management of that service in the cloud. The value isn’t in the product or service itself, which is minimal”.
He points to solutions like Microsoft Azure or Office 365 where “the reseller is really managing that service on behalf of the vendor in order to deliver a good experience to the user”. MSPs need to have “automatic systems and processes in place to provide that support efficiently, with minimal human intervention”. Roe is clear that MSPs shouldn’t “rely on margin on the products or services they provide, but on creating value around support. And they should assume that this will all be on a subscription-based model”.
But how do you create an identity of your own in circumstances where more and more cloud services are being provided on global platforms such as Microsoft Azure or AWS and the SMB is a micro user? It’s a question posed by Joseph Blass, CEO at WorkPlace Live. “How can an MSP provide bespoke service to an important SMB (maybe even 200 users) when the entire underlying service is provided by a third party where the customer is insignificant in the scheme of things?,” he asks.
How indeed. According to Blass, the answer is for the MSP service “to retain control of as many elements of the service as possible, so the nature of the service is holistic rather than being a middleman to a global conglomerate”. Which represents something of an evolution from the traditional channel partner role.
The good news is that MSPs have a stronger connection with customers. “Users are more loyal to MSPs,” claims Kaspersky Lab’s Madley. “Moving from an MSP contract to another has more challenges and it’s easy for a good MSP to demonstrate their value to the user in terms of performance against service level agreements.”
That was something emphasised by Simon Beckett, director of DynaCom IT Support, to MicroScope back in May, when he said: “We ensure that each customer has a service level agreement in place, and that they understand and are happy with it. Only this way can we balance keeping our customers happy and run a profitable business.”
Mo Anesse, investment manager at mid-market private equity firm, Livingbridge (which specialises in investing in technology companies), observes that MSPs “play a crucial role in helping SMBs to scale, globalise, innovate and thrive in today’s connected age” but in a market where they partner with similar cloud providers, “the ability to differentiate on customer service and support is vital. Propositions should be built around the customer, with the MSP positioned as a trusted strategic partner able to build a roadmap of where the customer wants to go, working with them every step of the way through that journey”.
He says that if they want to retain their position as key partners for SMBs, MSPs will need to undergo a process of “constant evolution. This means devising a strategy to operate opposite the hyperscalers, developing a unique set of services and working closely with their customers to help them achieve their business objectives”.