Like many industries, the managed services landscape has shifted considerably in 2020. As companies around the world have been forced to adopt remote operations with lightning speed while facing a new level of economic uncertainty, they’ve turned in large part to managed service providers for assistance.
These conditions have reinforced the need for MSPs, and the critical IT services they deliver, to help businesses adapt to new challenges. A recent survey, commissioned by BitTitan, revealed insights into how successful MSPs are generating revenue and what sets them apart from their competitors. Read on for a behind-the-scenes look at key drivers of MSP success.
Follow the Money
The survey of nearly 350 senior level decision-makers at MSP partner organizations revealed that the most profitable services include IT services outsourcing, software-as-a-service, and networking. However, the MSP respondents note that their most strategic investments also include cybersecurity and information security as well as business continuity and disaster recovery. Each of these areas have grown in importance with the increased number of employees now working remotely, making them a good bet for future growth.
Security is Top of Mind
Security is always a key concern for customers. As a result, successful MSPs are looking for ways to increase their security offering and weave security into everything they sell. Smaller MSP partners, with fewer than 10 employees, typically focus on selling network security and endpoint security in the form of standard, branded security products. However, those surveyed are looking toward the opportunity to move upstream with more complex, higher-margin products. Larger partners are more likely to view security operations, threat hunting, application security, fraud protection, and other complex, higher-margin services as important to their customers.
Invest in Marketing and Sales
Marketing and sales are a consistent challenge area for most MSPs. Because MSP organizations are often run by people with a technical background, the sales and marketing side of running a business may not come naturally or be an investment priority. As a result, most of the MSPs surveyed struggle to find and nurture leads. For this reason, investing in bolstering your marketing and sales departments is critical to the success of MSPs. Savvy MSPs can also look for sales support from vendors to strengthen their own expertise and investment in this important area.
Adapt to a Cloud-Services Model
MSPs have faced internal challenges when it comes to adapting their business to sell cloud-based services. Effective design and pricing of service offerings is a top challenge for both large and small MSPs, survey data showed, as is developing and executing successful marketing campaigns. Other challenges revolve around adjusting business models and retooling practices. Making this transition is paramount, given that MSPs expect to have more employees dedicated to delivering services via the cloud in two years, shifting away from traditional delivery of on-premises and project-based services. To keep up with this shift, successful MSPs are investing in new skills and processes, such as cloud-delivery platforms, and training and education around cloud business practices.
Vendor Selection is Critical
Vendors play a large role in helping support the success of MSPs. Profitability drivers influence how small and large MSPs make vendor choices. For small MSPs, the survey shows, the focus is on program support. Large MSPs focus more on training and sales support when compared with their smaller counterparts.
But MSPs of all sizes share some specific criteria in their vendor selections. At the top of the list is vendor fit. Shrewd MSPs make sure they choose a set of vendors that complement their core businesses. This allows them to leverage and build on team skills and strengths, achieve operational efficiency in both sales and delivery, and ultimately focus on specific needs of their targeted, vertical market customers. Other important selection criteria include helping the MSP compete for customers, product offerings that enable the MSP to differentiate their business, unique or market-leading technology, and a well-established brand that will help the MSP drive leads.
Vendor pricing and policies are also important. There are significant margin differences for partners who simply resell a vendor-branded service versus those who have integrated to operate, host, and deliver that service. And partner-branded solutions are another way for MSP partners to add value. MSPs that have their own development teams can customize offers around a vendor’s core technology, and often offer higher-margin services. As such, successful MSPs look for vendors that support this strategy.
With the new challenges presented by the current market landscape, the services provided by MSPs are needed by businesses now more than ever. By taking a strategic approach to focus on the critical services that will help businesses continue operations, MSPs can position their business to thrive amid today’s uncertainty by helping their customers thrive as well.
GRADY GAUSMAN is a product marketing and analyst relations manager at BitTitan, where he works closely with sales, marketing and product management teams. He specializes in the areas of SaaS, cloud technologies, product strategy and go-to-market initiatives.