What motivates an MSP or VAR to jump the fence into the vendor community? And what advice do these jumpers have for those considering the same move? Those are questions we put to three entrepreneurs who’ve recently made, or are still making, the switch.
In all cases, the impetus started with the product, typically software that was developed in-house to solve their own problem, because no one else had yet. They arrived at something that so improved their own operation that fellow MSPs told them they’d buy it.
That’s how Chris Day, CEO of IT Glue, based in Vancouver, British Columbia, now finds himself selling a knowledge base/documentation solution that got new hires at his MSP, Fully Managed, up and running much more quickly, and that continues to propel his old business. A software tool his developer brother built and improved over the years, it replaced a mixed collection of SharePoint, spreadsheets, and other tools.
Kirill Bensonoff developed software to help his MSP business, Computersupport.com, get the best bang for the cloud commodity buck. His startup, Unigma Inc., based in Framingham, Mass., now offers “unified cloud management,” a performance monitoring, automation, and cost-analytics service for public clouds.
Bensonoff finds himself in a very different world now. “If you choose to do software development or build a product, you need a lot more money to start [than an MSP does],” he says. He recommends taking a year after product development to learn the intricacies of your target market and “to make small pivots if you find the initial design isn’t what people are looking for, especially in the services space.” Bensonoff raised money through a few investor acquaintances, but bootstrapping is recommended by the others. “Most of the VC world doesn’t understand the MSP space,” Bensonoff explains.
Dan Gordon left his 20-year-old IT consultancy months ago to devote full time to San Francisco-based Wanpath LLC and myworkdrive.com, a service that enables companies to replace sync and share services and “cloudify” their own storage servers for remote access without VPNs or SSL configuration. On the plus side, he finds it exciting to be working with marketing people and tools (he uses Infusionsoft). He’s got checklists he’s never had before: deploying ecommerce software, creating a partner portal and program, doing PR, and speaking at conferences as part of Microsoft’s Enterprise Cloud Alliance. Day, too, says he enjoys the sales and marketing side.
On the down side, the vendor route requires a greater leap of faith. According to Gordon, “There’s no immediate customer feedback” when ramping up. The hardest part? “Being torn in two directions: trying to manage the old firm and be involved in partner meetings and strategic planning, and trying to extricate yourself from day-to-day operations while you’re setting up a new business.” Even after a couple of years preparing and launching his startup, he says, he’s still 10 percent in the old business.
“It’s a bigger responsibility ... for me to switch from infrastructure management and services into working full time with developers—people who have different engineering goals and tasks,” notes Bensonoff, who now has to pull together more metrics on more fronts, including marketing, sales, and development.
It’s also been a switch away from personal customer relationships. “They’re not buying me, they’re buying the product,” says Bensonoff. “If there’s a fit with what buyers are looking for, they’ll give it a try whether they know me or not. In the MSP world, if they’re going to entrust the network to you, they’re buying you. That’s a big difference.”
Bensonoff and Gordon agree that MSP customers are tough nuts to crack, both because they’re typically so busy and because years of exposure to vaporware has built up a thick outer layer of skepticism. They’ve discovered newfound sympathy for the fellow vendors whose marketing messages they once ignored.
Gordon also sees marketing as a completely different experience now. “As an MSP, we may only get a couple of leads a month, but our close rates can be 50 to 70 percent. One lead can result in quite a bit of recurring revenue. As a vendor, you can get a dozen downloads a day, multiple partners signing up, and [you’re not getting] through to any of them. You’re also marketing on a much wider scale, sending emails, doing webinars, making phone calls. As MSPs, that’s all new to us.”