With the second half of 2020 coming into focus, we need to have a talk about your Managed Services Provider (MSP) business model. The original “Payroll Protection Program” funds that many MSPs received in the second quarter of 2020 are starting to run out and it’s time to talk about what’s next.
I’m suggesting we think about a well-established revenue generating opportunity known as Third Party Maintenance (TPM). TPM is on-going hardware support for technology equipment that acts as both an alternative and enhancement to Original Equipment Manufacturer (OEM) support.
Here is a simple example. A data center may have an portfolio of aging data center equipment (server, storage, and networking) that was sold with a three-year warranty and support agreement. At the end of year three, the support expires. Enter TPM service providers who will provide extended support for the equipment for a fee. These agreements spell out the Service Level Agreement (SLA) such as immediate response times (e.g. same day) and certification levels for the support engineers, etc.
TPMs are relevant because it allows the customer to avoid a hardware refresh but still enjoy the same level of operational quality. The TPM approach is also a tactic to manage or delay OEM-forced upgrades.
Why MSPs Should Care?
With the economic challenges in mid-2020 and for the foreseeable future, the tendency is to try to extend the useful life of hardware assets (and again, avoid the cost of a hardware refresh). This is analogous to repairing your older model car instead of purchasing a new car right now. By teaming with TPM organizations (such as reputable distributors), MSPs can also create a new income stream. If there was ever a time to think strategically—that time is now.
Portfolio Protection Program (PPP) for MSPs
Which leads to the next point. MSPs need to innovate more than ever in the “new normal” and TPM is low hanging fruit. This is your opportunity to diversify your service offering in an additive way with an in-demand service offering (that’s protecting your portfolio). Customers and IT managers are thinking of ways to cut costs (that’s protecting the customer’s portfolio). TPM is one tactic and it’s a proven winner for all parties. Frankly, a lot of MSPs haven’t pushed TPM and this counter-cyclical offering is a way to protect your business portfolio from recession revenue reductions.
In the next part of this series, we’ll go deeper into the TPM marketplace structure but suffice it to say the TPM market is evolving. The TMP continues to consolidate as private equity investments in large providers has fueled mergers and acquisitions. solution providers and enterprise leaders looking to implement hybrid maintenance coverage using a blend of OEM and TPM support must evaluate the risks and benefits of TPM. That’s according to Rob Shafer at Gartner.
By analogy, let’s frame up the opportunity with a well-known example in the small and medium business (SMB) MSP community: Microsoft Windows Small Business Server (SBS). In mid-2012 Microsoft announced the end-of-life (EOL) and end-of-support (EOS) for SBS over an 18-month period. That led to forced upgrades and the like. It was in Microsoft’s business interest to create the artificial deadline to drive customers to Office 365. Hardware OEMs often engage in the same tactics. And that’s were TPMs are a way to arbitrage these “deadlines” to extend the useful life of IT assets. It’s a simple argument to present to your customer.
In Part Two – I’ll explore the threats and risks of the TPM marketplace to provide you the context needed to confidentially offer this solution and protect your business portfolio with new income streams.
Harry Brelsford is the founder of SMB Nation from Bainbridge Island, Wash. He is a long-time SMB channel partner who has served customers and mentored other partners (SMB Nation has over 49,000 members who are Managed Services Providers (MSPs) and SMB technology consultants). He oversees the popular SMB Nation workflow including content and events (webinars, workshops and multi-day conferences).