Pressure is mounting on traditional MSPs to reinvent their business models but laying the foundations for a sustainable and value building future is no easy task. Therefore a primary aim of last month’s MSP Fit for the Future strategic insight session (held in association with ANS Group) was to help answer two critical questions: How much life is left in the traditional MSP model? And how will tapping into the capabilities of non-traditional strategic partners help generate and capture long-term differentiated value?
Today’s MSPs operate in a fast-moving world characterised by technological disruption, greater complexity, the move to the cloud, the exponential rise of applications, shifting customer expectations – all while cyber security is shooting up the corporate agenda. These are just some of the considerations facing MSP business leaders as they work out how to flex and evolve. “The days of high volume leased line and FTTP selling are long gone,” stated Ryan Martin, Indirect Sales Manager, ANS Group. “Yet few seem to understand how to move into the cloud and security space effectively. The partnership model will change and collaboration will be a key enabler.”
The traditional channel business model will likely tick along for a while yet, but the heyday is over and value creation is fundamentally changing, bringing opportunities for growth among proactive MSPs and threats to those that remain static. Yet there remains a big and fundamental challenge when seeking to make the most of these opportunities – enablement and talent. “The UC world is fantastic at supporting partners, their sales teams, account managers, while providing training and regular incentives,” said Phil Scanlon, Technical Services Director, Elite Group. “In the IT space you are likely to have to self-serve, so you end up employing your own people to do what I consider to be the job of vendor support.”
Changing times
For MSPs who lack the resources to self-serve their requirements, identifying the right strategic partnerships will be especially key to gaining the required inputs for their future growth prospects. “The model is changing,” commented Martin. “We come from a world where everything was delivered as a white label service, but that won’t exist in this new world. We are in a major transition period and the most important element for MSPs is enablement. How you bring the partner on that journey and enable them to create value for their own customers is the most important factor.”
There are many great channel organisations that want to move into the cloud and cyber security space, and perhaps areas such as CRM Dynamics, but there’s a huge skills gap. So how do they make that jump?
Business model change is also reflected in the evolving sales process, with the pre-sales function emerging as a particularly time-consuming and costly necessity that comes with some risk. “We have made a significant investment in pre-sales resource and highly accredited technical people,” commented Stephen Dracup, Chief Operating Officer, Chess. “Customers are struggling to know how to transform their businesses and need good advice and great delivery. The trusted provider element has never been more true.”
New sales approach
Antony Black, Channel Sales Director, Wavenet, is also developing a new approach to securing sustained growth by harnessing the power of consultancy. “Sales today are different,” he commented. “You speak to the prospect, do the gap analysis and then there may be a 12 month programme to deliver. We’re expanding our pre-sales professional services team, which is a lot bigger now than our sales team – mainly around cloud and security. There is still growth in traditional connectivity, UC and contact centre, but that is transactional. The wholesale model is purely about how we can enable MSPs with a security play and package those services.”
A cornerstone of any sustainable value building business model is understanding what your differentiating factors are, and therefore your competitive advantage. “We’re heading into a world where everyone will be offering a ubiquitous service and differentiation will become key,” observed Martin. “There are many great channel organisations that want to move into the cloud and cyber security space, and perhaps areas such as CRM Dynamics, but there’s a huge skills gap. So how do they make that jump? There is an opportunity to drive this conversation across the channel.”
It was a seven year transition. We learnt incrementally, and solving each challenge opened up the next market opportunity
It’s not news that business models in the channel are fast evolving, in part based on an understanding of how end customers in general prefer to consume what they buy. This evolution in the consumption of digital products and services will continue to change how value is created, so there is a big question around how far the traditional go-to-market model can survive such megatrends, creating a challenge for MSPs.
“We’re being compared against expectations in the consumer world,” stated Daniel Brown, Operations Director, Curveball Solutions. “Simplifying things and applying that to the customer is a massive challenge and headache. We need to evolve in terms of the services we deliver. But we also face a talent shortage.”
Key decision
It goes without saying that extending the life of a dwindling business model is not a good strategy, and that effective business model change requires a combination of strategic vision and decisive bravery. Therefore to avoid the risk of remaining grounded in its own traditional model, and to re-engineer operations to harness the power of ‘the new’, ANS Group has pursued a ‘burn the boat’ business transformation. “ANS of old was a traditional managed service provider focused on IT infrastructure,” explained Joe Wolski, Chief Revenue Officer, ANS Group. “There was high margin on the kit itself and low touch once it was deployed on a three to five year contract. Then cloud started to become a thing. That shifted the margins and the business model.
“We went through an aggressive transformation with a burn the boat strategy. We didn’t want to look back and knew we couldn’t enable the sales team to embrace ‘the new’ while the old was still there and easy to revert back to. We gave no other option. The same scenario rings true for many MSPs today. We adapted the whole business around proactive services and value. It was a seven year transition. We learnt incrementally, and solving each challenge opened up the next market opportunity.”
For many channel organisations, whether to reassess their strategy and business model could be one the most important questions they have ever considered. And Scanlon noted that Elite Group made the decision to go cloud-first every time in 2016, which has dramatically increased customer engagement. “In the telco world you can put a lease line or an Ethernet line into a business and not hear from the customer for a year,” he said. “But when you put a managed service in you’re speaking to them every day. That’s a big shift and there’s a large team behind it. The differentiator is customer experience which has gone beyond just fixing a problem to having a client portal with automation, plus 24/7 monitoring and management for a few pounds per user per month.”
Deeper collaboration
To unlock new markets and create greater value in the MSP space it is clear that strategic partnership interactions will need to be deeper, especially for traditional resellers wanting to raise their bar. “From what we’ve seen, for IT partners it’s an easier transition and they don’t need much support, but a telco moving into IT needs far more support – it’s a difficult transition for them,” noted Mandy Fazelynia, Managing Director, Zest4. “There is a lot of fear when taking on new products, such as moving from traditional telco into IoT. They’ve had customers for many years and are nervous about selling something they don’t know well. So there is an opening to put a service wrap around the product and take partners on a journey of evolution.”
Growth lies in all of us collaborating with each other to fill the gaps
Another factor in maximising future opportunities is to have a tight grip on what’s coming next. “You can always guarantee that there’s going to be more IT tomorrow than yesterday,” stated Dave Funnell, Senior Manager, Cloud Provider Business, VMWare. “Around 400 million applications were produced over the past 14 years and there will be 400 million more over the coming five years. The velocity is increasing massively – everything is about the application.”
On the flip side, Andrew Wilford, Managing Director – Mobile, Giacom, is on a mission to embed traditional comms into the cloud partner base as part of an all encompassing solution. “Our fastest growing partners are selling across the whole product portfolio,” he stated. “IT partners that add commodity lines expand their margins and multi-product solution set. We have a mix of ex-comms partners that have pivoted into cloud and cloud-based voice. They are playing in the MSP space and market themselves as such. They are creating boiler plate repeatable services encompassing Teams and 365, for example, along with the connectivity and mobile. The most successful partners provide all services on a monthly cost per seat basis.”
A goal of all MSPs is to take customer value to the next level, and Alan Stephenson-Brown, CEO, Evolve, shed light on how his company has grasped a deep understanding of how value is created beyond the initial scope of customer engagement, with trust residing at the core of extended relationships with clients. “The managed service wrap we put around SD WAN has prompted customers to extend the value we provide into other areas, like providing visibility of dispersed devices, the status of which is unknown,” he stated. “We have extended our service wrap to monitor a client’s own internal service and given them a view of the status across thousands of devices. We use the platform to push our management capability out, enabling us to provide trouble shooting support beyond the networks.”
For MSPs, the key to making the most of current and emerging opportunities is enablement and delivery. “It’s easy to buy something, but the differentiation is in implementing it properly,” added Dracup. “Doing it securely may also require a big infrastructural shift from where customers are today. And consider the impact of AI on businesses: It’s all very exciting, but the truth of the matter is that if you let AI loose on a badly constructed data infrastructure you’re going to have problems. The differentiation factors are capability, accreditations and a track record of doing things properly.”
We can see from this discussion that MSPs are under pressure to perform a deeper and wider role in their markets. And achieving long-term success hinges on maximising two interconnected factors: The link between sustained value creation and competitive advantage; and secondly, how the skills/resources gap can be bridged through high level strategic partnerships. “The telecoms channel is unique and some cloud and security vendors don’t understand it, nor the power of the comms channel,” added Martin. “Future growth lies in all of us collaborating with each other to fill the gaps Microsoft has in its portfolio. It’s all about the enablement.
“For example, we work with MSPs that are proficient in Azure and Teams and they may have Dynamics opportunities, but Dynamics is difficult to deliver. So rather than close the door to those opportunities, if you find the right partner you can deliver a broader portfolio to the customer. MSPs will accelerate their success if they get their collaboration strategy right.”
More key points to consider...
Many resellers won’t touch cloud as they don’t understand it. But there are alternatives to the hyperscalers – and cloud can mean many different things to different people.
Ryan Martin, Indirect Sales Manager, ANS Group
Getting the basics right from an infrastructure perspective is a key growth area. There are multi-million pound businesses that don’t have the basic infrastructure.
Daniel Brown, Operations Director, Curveball Solutions
As an ISP, it’s about technically enhancing the product, and connecting securely and directly to the cloud provider without going over the Internet.
Peter Wightman, Managing Director, IP River
Finding the right sales and account managers is hard and you’ll have to commit to training them yourself.
Phil Scanlon, Technical Services Director, Elite Group
We’re seeing 25 to 30 per cent growth in cloud versus comms which is expected to be static at around two to three per cent over the next five years.
Andrew Wilford, Managing Director – Mobile, Giacom
Penetration testing is a great entry point for MSPs, potentially displacing the existing MSP.
Antony Black, Channel Sales Director, Wavenet