Having the right strategic focus on what matters most is a priority for MSPs faced with pivotal challenges such as identifying the growth drivers and enablers that will shape their future success, and where to find the biggest opportunities. Here, Comms Vision thought leaders help us understand how these market dynamics will unfold across the full spectrum of determining factors – and the implications for MSPs.
With technologies and solutions continuing to innovate, expand and grow in complexity (through the rise of software, AI and cloud for example), ensuring that MSPs set the correct course is critical to their sustainable growth. According to Nathan Marke, COO, Giacom, the channel stands to make considerable gains in three key areas... software, infrastructure and security. "Growth in SMB is coming from software and SaaS in particular," he stated. "We're seeing SaaS growing 12 per cent for the next five years. And when SMBs buy software they need good infrastructure to sit underneath it. A big opportunity for the channel is Infrastructure as a Service, it's one of the biggest markets and growing hugely. Then it's all about security. These are the three big fast growing markets, and alongside them sits the services opportunity."
Future growth will depend on two more interrelated factors, noted Andy Smethurst, Channel Sales Director, Gamma - namely becoming a trusted partner and being smart about strategic alliances. "Advances in technology mean that the ability to offer complex solutions lower down the customer stack, and the scope for end customers to benefit, is much larger," he explained. "Therefore the opportunity for resellers to be the trusted partner for more of their customer base is higher. With this comes an enhanced requirement to reconsider solution stacks and supply chains. To stand the test of time in terms of the pace of the market and technology evolution, resellers need to back the horses with deep pockets that meet the requirement for R&D."
How to accelerate technology adoption in SMB and realise the potential of available solutions remains a big question, and one that needs addressing urgently says Gavin Murphy, Propositions Principal, BT Wholesale. He noted that SMB businesses can be categorised as having up to 200 employees, and he cited a report that states the average number of dedicated IT workers among these organisations is two. "They are too busy just keeping the lights on, therefore the likelihood of these organisations adopting technologies more widely is limited," commented Murphy. "We need to make technology more accessible by simplifying the language and simplifying the use cases so IT leaders can easily understand the RoI. We need to support them because they are stretched, burnt out trying to answer phones and lead the digital transformation."
We're seeing SaaS growing 12 per cent for the next five years with Infrastructure as a Service growing hugely. Then it's all about security. These are the three big fast growing markets, and alongside them sits the services opportunity
Simplifying and changing the conversation is key to breaking away from this status quo, agrees Neil Wilson, Chief Product & Marketing Officer, PXC, who highlighted the pressure on businesses to do more with less faster, and how technology is the enabler for that. "The channel needs to get into business outcome conversations rather than tech led ones," he commented. It's about finding the technology that enables and delivers those outcomes. That's what customers get excited about and generates opportunities for the channel."
For Marke, the poor technology existing within many SMBs stands out as among the the strongest drivers for growth, with productivity improvements being a key upside. "Everyone wants to innovate but there is a far bigger issue that has hit productivity for businesses up and down the country – poor IT," he stated. "They want great technology but don't know where to start. As an MSP you need to sell some of that innovation but the real substance of where you will get your strategic relationship is in being that workhorse that removes IT headaches and does the basics well."
As so many SMBs aren't even seeing the benefits of a basic tech upgrade, when will they be ready to adopt game-changing technology like AI? "We need to think about the reality of AI for SMBs," added Marke. "The hyperscalers are investing massively into the AI grid - £300bn by 2028 (Gartner) - and they need a return in that investment which they won't get until SMBs start to consume it in a licence with a cost. While 80 per cent of large enterprise will adopt significant AI projects next year SMBs will not be ready to adopt. Consider PCs and cloud computing... SMBs lagged enterprises in adoption by three to five years. It's going to be all about preparation for them and the way they will consume AI will be through software applications. They'll consume it accidentally by buying a service that has AI sitting within it."
To recap: Although the impact of AI in the enterprise space is set to be a game-changer, its transformative potential in the SMB market will be minimal, with its presence largely unseen and behind the scenes. For this reason Marke believes that the conversation should be about MSPs building out their platforms with AI to help improve their services. It's an approach PXC has applied to its network. "For years we were talking about CX being reactive and wanting to move to a proactive stance – with AI we can go pre-emptive, that's the next step up," he said. "There's a huge amount of data involved in running a network and you can learn what a switch looks like before it falls over or develops a fault. Weaponising that information into useable intel that allows you to take pre-emptive steps is the next level in CX."
The channel needs to get into business outcome conversations rather than tech led ones. That's what customers get excited about and generates opportunities for the channel
Having assessed the use case impact of AI in enterprise and SMB, and factoring in expected adoption rates, Murphy deduced that there's a risk of companies with large budgets and resource capitalising on AI while SMBs get left behind, and the gap between SMB and enterprise will get bigger. "The adoption lag might be ten years not three," he warned. "We need to figure out how to make that simpler."
Our panelists also recognise that the hyperscalers are an opportunity rather than a threat, with Smethurst saying that the channel would be wise to focus on what hyperscalers ignore a chance to differentiate. "Lean into what they do do, and lean into what they don't do," he stated. "Embrace the fact they have deep pockets to invest and create marketplaces, but they are not building solutions. The value of an MSP is to integrate the solutions that are available to them and attach value added services around the edge. So take advantage of what the hyperscalers are not to prepared to do."
To stand the test of time in terms of the pace of the market and technology evolution, resellers need to back the horses with deep pockets that meet the requirement for R&D
Marke also brought into sharp focus what the hyperscalers mean for the channel community. Giacom works closely with Microsoft which launched the Azure marketplace that enables ISVs to build solutions. "There are thousands of products with great innovation but it doesn't compete in the marketplace that Giacom provides," pointed out Marke. "Our marketplace as a curated offering. Every product we put into it has a team of specialist sales and support people with collateral for trading enablement. A huge amount of effort goes into launching a product into our marketplace and the channel uses our skills and expertise. You don't get any of that in an Azure marketplace. We don't see AWS, Google and Microsoft as threats. They can't deliver that curation and ability to deliver out through the channel with a tactile people-led sale, which is the only way technology gets deployed into customers."
Wilson also observed that there is plenty of viability in bringing solutions together, reflected by the contrast between selling from a book and designing real world solutions that drive value for the customer. "Having a catalogue is easy, but how does a partner on board products, support the customer and add value? That's where the curated marketplace comes in," he added. "The technology world is complex and SMBs don't have the subject matter experts they need, which is the channel's opportunity. Filling the consultancy and skills gap is critical. Engaging and building confidence in the sales team to have a tech and IT conversation and talk about business outcomes was the biggest lever-change we made. That's how you drive adoption and make money."
According to Murphy, the hyperscalers have enabled disruption through the SaaS model and changed the market dynamic in a cohesive way. "Hyperscalers are key to building the bridge between the telco and techco model," he stated. "Our most successful customers are bringing different technologies together and building powerful vertical propositions. Even with AI in the SMB sector."
While AI and disruptive technology won't be playing a starring role in the SMB sector any time soon, knowing when and how to plan for it is critical to an MSP's sustainable growth. And how MSPs pivot towards differentiation will also become more important, noted Smethurst. Although he urged resellers to embrace technology, he also encouraged them to focus on their customer base first as a foundation for creating differentiated strategies. "Understand who your customers are, what they look like and identify areas where you can deliver innovation," he said. "Ideally design something that can be replicated, whether through verticalisation or a particular solution that's applicable to many businesses. Our role as a supplier is to help with the messaging on the technology that's being delivered."
We need to make technology more accessible by simplifying the language and simplifying the use cases so IT leaders can easily understand the RoI
Use cases that can be repurposed to provide the same capability in many environments is key to breaking away from the status quo. MSPs will also see an unassailable upside from a differentiated proposition that Marke says will be sustainable for at least the next decade. "Become the strategic one-stop-shop partner for smaller businesses while bringing in innovation and helping SMBs to keep pace with technology," he stated. "Becoming a one-stop-shop means being broader and deeper than you are today, but the issue we hear from channel partners is how to do this."
Sustainable differentiation for MSPs over the next ten years also involves a GTM proposition with recurring revenues, subscriptions and a price-per-user per-month model for the core stack of services - while focusing on innovating how MSPs deliver that platform, observed Marke. "The MSPs that grow fast focus on how they deliver that platform," he added. "They have teams focused on automation, which could mean lead to cash, making it easy to buy, sell and build etc. Much of this innovation isn't in the OSS, it's in the operational systems where differentiating processes can be created."
Likewise, future success will also be influenced by doing a lot more than simply ordering and provisioning, noted Murphy. "Over the coming two years we should all be doing integration and automation as standard, including the customer," he said. "The next stage is APIs into the network, enabling customers to be fully autonomous. However, while portals, AI and integration are great, if a customer can't pick up a phone and speak to someone during an escalation they'll go elsewhere."
As we have seen, charting the right path forward, and striking the right balance between the themes discussed in this Comms Vision panel debate, means prioritising the curation of not only technologies and services, but also the experiences of channel partners, believes Marke. "Our partners are the innovators and our role is to understand all the innovation points and bring them together," he stated. "As a galvanising force we can share experiences and weave a story to tell all entrepreneurs in the channel, and learn from each other. That's our value."
More consideration points
We're seeing on average across our networks 46 million potential threats every day, and that number is going to grow driven by AI. Every 12 months new technology comes along which generates more threats. Security has to continue to evolve and you need deep pockets to do that.
Gavin Murphy, Propositions Principal, BT Wholesale
SMBs may not even know these technologies exist. Our role is to educate, but getting the message out about new technology is a challenge.
Andy Smethurst, Channel Sales Director, Gamma
We're not seeing any lift from AI specifically as a category, but all the money spent on AI has to be paid back. Does that mean SMBs will suddenly see a huge lift in the price for software? I can't see that coming through yet.
Nathan Marke, COO, Giacom
We've seen a sharper focus across the channel on how we go to market, especially after Covid which prompted a reassessment of businesses in many ways.
Neil Wilson, Chief Product & Marketing Officer, PXC