The rise of consultative partnering is becoming a major driver of MSP projects, and mastering the new complexities around outsourcing is key to success, according to Geoff Barlow, Technology Practice Lead – Strategy, Node4.
All markets have a need to do more with less and every sector is turning to outsourcing, with finance, healthcare and manufacturing leading the way, observed Barlow. Perhaps the biggest traditional drivers, he says, are the IT skills shortage and requirement for cost efficiencies. “Outsourcing can plug skills gaps that businesses are finding difficult to fill with full-time employees,” he stated. “Outsourcing delivers expertise and knowledge from the outset and reduces the costs associated with hiring and training new or existing employees.”
The skills shortage around cloud and cybersecurity is a particular pain point, with a notable rise in demand for third line support or out of hours cover. “Core tasks such as purchasing and procurement management are increasingly being outsourced, particularly around end user devices – mobiles, tablets, laptops, peripherals,” added Barlow. “There is also more demand around compliance and other regulatory matters as customers look to shift their accountability and risk.”
Another trend noted by Barlow is growing concern around public cloud spend which is prompting businesses to look for MSPs to help drive efficiency and introduce cost controls. “During the pandemic everyone rushed to the cloud to enable remote working and collaboration, but businesses are starting to realise that the move was not cost-effective over the long-term,” stated Barlow.
“There was also a widespread perception that hyperscalers did everything and would take the job of architecting and managing cloud environments away from customers. But the realisation is kicking in that customers still have the same responsibility and accountability as if the systems were on premise, so many are turning to MSPs to share the load.”
High collaborating MSPs have the most to gain, embracing new tech, driving innovation and digital transformation, and helping businesses evolve no matter where they are on their IT journey
There is a significant opportunity for MSPs with the capacity and knowledge to take on these outsourced tasks, including compliance and regulatory matters. “We are definitely seeing a rise in adoption of a cloud-first strategy and security is always a hot topic with the ever-evolving threat of cyber attacks,” added Barlow. “Both of these, alongside the lack of skills and resources in the technology sector, are driving demand for outsourcing and MSPs.”
Other hot topics pointed out by Barlow are automation and artificial intelligence. He is also seeing Power Platforms become central within MSP contracts. “However, it is important for MSPs to realise that having problem solving and project-based skills is one thing, but if they cannot consult, design, build, support and develop all capabilities they will quickly get left behind.”
Customer demand
The need for businesses to do more with less is creating an extra challenge for service providers. Not only are they feeling the pinch themselves, they are also experiencing downward pressure from customers who also want more for less – a wider scope and longer service hours, for example – which means the MSP taking on more responsibilities and accountability.
One example of this trends stems from the rise of self-serve platforms, SaaS and PaaS, where responsibility resides with the customer to leverage and provide portals and tools. “This takes resources, time and training to manage effectively and efficiently, so we are seeing lots of businesses asking MSPs to manage these instead,” added Barlow. “This has created a challenge for the managed service providers who then take on the burden of training, reskilling and resourcing staff across multiple platforms, then integrating them into easy-to-manage consoles or single panes of glass.”
Perhaps the most challenged MSPs are the ones that operate a traditional transactional model. They are typically based upon service credits so a transactional model keeps their revenues high and consistent while still meeting their aims. “But outsourcing is shifting away from this model and innovative MSPs have always had a collaborative approach,” commented Barlow. “High collaborating MSPs have the most to gain, embracing new technology, driving innovation and digital transformation, and helping businesses evolve no matter where they are on their IT journey.”
Barlow also noted that outsourcing is starting to expand into non-traditional areas like innovation and R&D, albeit a slow moving trend. “This is a more cautious shift compared to what we see in core areas,” he said. “Outsourcing can provide access to cutting-edge knowledge and solutions that drive innovation more quickly. This is where the shift is, in having skills such as DevOps and containerisation to help with R&D, rather than outsourcing core R&D itself.”