Part one of this feature explored how leading MSPs are counteracting falling margins by doubling down on the backup services they offer.
But, arguably, cyber-security represents an even larger opportunity for smart players, particularly in light of the recent Wannacry attack.
Seizing the cyber-security opportunity
With end users in more peril than ever from cyber threats, many leading MSPs are turning to security services to bolster their sales and margins. Some have spotted an opportunity to rebrand themselves as managed security services providers (MSSP) or build secure operations centres (SOCs).
Paul Tomlinson, managing director of MSP Mirus IT, said his firm had recently leapt into the MSSP space with its own security-as-a-service solution that it offers on a monthly basis. It includes a tool that searches the dark web and then alerts clients if their credentials have been compromised.
"There are an awful lot of new players coming into the market and it's very easy now to be perceived as an MSP, so we are having to differentiate ourselves so that customers view us slightly differently," he said.
"The change in approach is around saying that there are so many different threats and layers you need to protect that you now need to buy the whole solution. Just buying the components of it will no longer protect you as there are obviously so many different types of attack. If they're bolting every door and window in the house, but one of them is left open, that's the one the attacker will use to come in, so it's about saying let's lock everything down and make sure you are as secure as possible.
"The market is becoming more crowded every day, and it's things like this that will help us differentiate ourselves against the smaller competitors that are coming to the market."
"Ransomware is moving away from attachments in an email to more of a brute-force attack," - Colin Blumenthal, Complete IT
Colin Blumenthal, managing director of SME IT support specialist Complete IT, agreed that MSP margins are falling but that there are opportunities to counteract this by playing a larger role for customers around security.
"I think the threat levels are changing," he said. "Where we're seeing clients being attacked by ransomware is moving away from attachments in an email to more of a brute-force attack. While the email piece is still there, I think the education around that is maybe stronger than around password protection and closing down the firewall ports that are open. It's about reducing the attack area."
Blumenthal said 50 per cent of Complete IT's customers have now moved over to Microsoft Office 365 for email, robbing it of a big chunk of anti-spam revenues.
"Microsoft's built-in solution is adequate for their needs and we therefore need to find new services to replace that income," he said. "So yes, there's pressure. We need to be agile and ahead of the curve and make sure we are maintaining those recurring revenues.
"We are now offering a managed penetration test and are building that into a monthly fee. We want to be innovative at finding recurring revenue opportunities that our clients find valuable and that are also profitable for us to deliver."
Rufus Grig, chief technology and strategy officer at Maintel, said the midmarket MSP had made a big bet on security this year by building a SOC that provides managed network security.
"We launched the service about three months ago and I don't think I've ever seen so much interest so quickly in a new service," Grig told CRN. "So there's definitely appetite out there, but it's not for the faint hearted. We had a lot of expertise in supplying firewalls and providing support contracts, but that is very different to turning that into a managed services where effectively the customer is transferring that responsibility of managing and securing their network to you. We've got three customers on it already, and have got a strong pipeline."
"Essentially, the threat landscape is now such that there aren't enough certified human beings on the planet to be able to cope with the threats that are coming to us" - John Pepper, Managed 24/7
Meanwhile, another MSP, Managed 24/7, is turning to automation in order to stand out from the crowd in security.
"Essentially, the threat landscape is now such that there aren't enough certified human beings on the planet to be able to cope with the threats that are coming to us," its CEO John Pepper explained.
"The government would call it a digital skills gap; I would call it an impossible mission. You have to use some form of automation. I'll give you a great example: when we see a particular threat around Cisco routers, we're then automating upgrades to the latest software to try and get ahead of the curve. It's about predicting and automating something, so one human being can look after hundreds of thousands of devices and keep ahead of what is an infinite security threat."
Alun Rogers, co-founder and director of MSP Risual, said the incoming GDPR regulations, which will see companies face fines of up to €20m for serious data breaches, is also helping MSPs escalate the discussion around security.
"GDPR is a good conversation starter, as it moves the customers' mind into a much more business-centric space," Rogers said. "Although it's another Y2K style thing, that aside it's actually forcing interesting conversations with customers about whether they understand data: where it is, who's got it, how they manage it etc."
A recent survey CRN ran in conjunction with SolarWinds MSP found that nearly half (48.6 per cent) of MSPs regard security as being top of their customers' agenda.
But security and backup aren't the only areas where leading MSPs are overhauling their offerings in a bid to beat the margin crunch, as we will explore in part three of this feature…..
For more information, see:
European VAR powerhouse posts a 15 per cent hike in revenues, with the UK growing by 30 per cent
Lloyd's Register swallows £10m Leamington Spa-based cybersecurity consultancy
Consumer group Which? claims practice has been happening since 2015
Jump of nearly 20 per cent for worldwide integrated systems revenue this year, research house claims