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As more and more companies look to offload tasks they can no longer take care of themselves, the demand for IT managed service providers (MSPs) is set to sky-rocket. But faced with surging market growth, 87% of MSPs surveyed for our recent report Managed services: the winners and losers in 2018 say they fear their organisation is at risk of missing out to more nimble providers should they fail to get their service portfolio right or deliver new services to customers better and faster.
In an industry where change is the norm and competition is fierce, embracing new revenue streams will be key for MSPs looking to capitalise on the significant market opportunities on the horizon.
Yet the sheer pace of change means many MSPs are struggling to sustainably expand their service delivery options. Indeed, over two-fifths (43%) of those surveyed concede their organisation is already having to take short cuts simply to keep up with customer demand.
Little surprise when you consider the scale of the challenge currently confronting MSPs. Almost all the organisations (92%) we spoke with are planning to introduce additional services over the coming year, with security services (52%), cloud services (45%) and/or cloud service monitoring (45%) topping the charts as the most popular solution areas to be launched in response to customer demands.
But that’s not the only hurdle MSPs say they need to overcome in their race to the top.
Challenge #1 - Running to keep up
Over half the MSPs surveyed (57%) admit they’re finding it harder to meet the needs of customers compared to 12 months ago, saying this is having a knock-on effect on customer satisfaction.
With demand on the up and the customer experience increasing in the spotlight, improving the customer experience is easier said than done. With customers demanding more technologies, greater security, speed, reliability and contact, the current pace of growth is already putting a strain on the operations and customer-facing interfaces of many MSPs.
Challenge #2 - Getting the service portfolio right
In a bid to cultivate new customers and respond effectively to the evolving needs of existing customers, MSPs are rushing to scale up their service delivery offerings and, wherever possible, to differentiate themselves from the rest of the herd.
But over a third (35%) of those surveyed say this pressure to deliver constant technical innovation in the face of fierce competition is proving a tough task.
Furthermore, over four-in-ten (42%) admit to lacking the insights required to ensure they offer the right variety of solutions to customers. A finding that indicates these MSPs lack the ability to evaluate their countless customer touchpoints and, as a result, are at risk of executing in an uncoordinated and opportunistic, rather than strategic, manner that enables their recurring revenue models to be realised.
Challenge #3 - Maintaining margin
Today’s customers are pulling the strings, leading MSPs into new solution areas and expecting more bang for their buck when it comes to customer service and responsiveness. As MSPs push forward and evolve services their enterprise customers need, the pressure is growing to do more with less – and do it well.
Little wonder that MSPs say offering services at a competitive price (47%) and/or offering a service that is cost effective for their organisation (45%) is a recurring challenge that’s constantly top of mind.
Clearly, the criticality of making well-informed long-term decisions is set to become even more paramount as MSPs quest to remain competitive and profitable.
Challenge #4 - The cost of doing business
Retaining a strong focus on the bottom line is one thing, but MSPs need to deploy the right blend of tools, processes, technology assets and people to effectively execute the managed services they offer.
As MSPs strive to expand the services currently on offer, they’re encountering roadblocks that hamper their ambitions. The breakneck pace of new technology emergence and adoption was identified as a top issue for over one-third (34%) of MSPs.
Similarly, finding and retaining the right staff with the right skillset represents an enduring challenge for 40% of MSPs.
Challenge #5 - Retaining customer focus
With the pressure on to keep up with technology innovations and launch new services, many MSPs are failing to keep their eye on the ball when it comes to improving customer interfaces and interactions.
Little surprise, when MSPs admit that on average, seven-out-of-ten employees in their organisation work in an IT/technology role, compared to only one-in-ten in sales and one-in-ten in marketing.
Furthermore, half (50%) of those surveyed admit to not measuring the customer experience when evaluating the success of their managed services and a further quarter (25%) don’t measure the customer experience at all. Instead, profitability was viewed as the most important measure of success by 43% of the organisations surveyed.
In the race to capitalise on rapidly expanding market opportunities, many MSPs are rushing to expand their service portfolios without fully understanding what solutions will be most strategic and productive in the long term. But competing on technology terms alone is a one-track approach that risks putting sustainable growth in jeopardy.
Those MSPs that ultimately win out will instead take a more customer-focused approach, initiating the right tools and resources that make it possible for technology teams to deliver consistently positive services for customers and maximise operational capabilities. With everything to play for, MSPs that are able to sustainably evolve will ultimately seize the day.