Top five moments from CRN's MSP Transform
We break down all the key talking points from CRN’s MSP Transform event which aired last week
Top reseller and MSP bosses from across the UK went head to head on the challenges and opportunities facing the UK's IT sector as it begins its Covid recovery.
MSP Transform aired on 23 June, but you can still register to watch all content from the event on-demand by following this link.
CRN highlights all of the best moments, candid comments and insights from the day's panelists.
1) ‘Cash, baby!'
"This is an amazing business model - despite the fact that it's illegal," said Dave Sobel, host of the Business of Tech podcast in an interview during Part One of the MSP Transform event.
He stressed that MSPs have targets on their backs because, like vendors, cyberattackers have realised that the channel is the best way to reach as many customers as possible.
"The criminals have figured out that [targeting the channel] is a way to get to as many victims as possible. So this is all financially motivated. They're coming for you because there's cash in this.
"They've completely identified that this is a way to get in. When I started in this business, the worst thing I could do is lose somebody's data because I screwed up a back-up, now a mistake is incredible costly for all kinds of new reasons; the stakes are much higher than they used to be."
Sobel said that MSPs have been identified as prime targets for cyberattackers by the Ransomware Taskforce and that they're not doing enough to keep their customers secure.
Similarly, a consultation was recently launched into the UK looking at whether the government should impose new cybersecurity measures on MSPs.
"Criminals are also observing that this is a ripe space because controls are not necessarily as good. Just recently the ransomware task force published a report specifically citing how managed services providers are not delivering the level of security necessary to protect against ransomware. That puts a giant target on the space and just identifies the existing problem.
2) ‘If private equity doesn't behave, everyone will know about it'
Private equity houses have made more than 18 platform investments and 72 add-on acquisitions of UK resellers and MSPs since the start of 2020 with activity increasing in 2021 according to CRN's recent Private Equity Report.
But Private equity is often cast under a negative light in the media. Celebrities including Taylor Swift have clashed with private equity firms in the past, and isolated cases where private equity has brought much-loved brands to their knees has somewhat tarnished the reputation of the PE industry as a whole.
Partners from two leading investors in the UK's MSP space - August Equity and ECI Partners - talked to CRN during our private equity panel about how private equity is perceived in the channel, and how easily their reputations could be destroyed if they didn't behave appropriately.
"If you as a firm we don't behave in an appropriate manner, then everyone will know, said Tom Wrenn, managing partner of ECI Partners.
"It's such a small ecosystem; in a pre-pandemic world and hopefully in a post-pandemic world they're all going to industry drinks and chatting about what's happening - who's good, who's bad and who they've had approaches from - and we're supremely aware of that."
"We've been around for 45 years and we don't want to trash our reputation just because of one interaction," he added.
Mickey Patel from August Equity added that the idea of private equity houses being "barbarians at the gate" is an outdated one.
"What I always go down to is track record, references and successes. Every private equity house is different. ECS has a longstanding history of doing the right thing and that's why we're here. I always tell people not to worry about private equity houses, look at the private equity house and the individual you're dealing with and go and speak to referees that have exited us who have no agenda," he said.
"Taking a step back from it, we want to grow businesses in the UK and we're proud of it. It's not just about making a buck, and barbarians at the gate, that's such an old adage and we should stop thinking about it in that way. The industry has grown up, and we've grown up and we want to do the right thing not the easy thing for businesses."
3) ‘The pandemic changed partner programmes forever'
Vendors adopting product led growth (PLG) models instead of indirect sales models was flagged as a major disruptive force to partners.
Jay McBain from Forrester pointed to Salesforce, which he said has shut down its traditionally Gold, Silver, Bronze programme to go all-in on marketplaces.
Marketplaces grew more in three months last year than they did in the last 10 years combined, McBain said.
But the Forrester analyst warned partners not to rely solely on margins from marketplaces going forward, claiming that existing marketplaces lack maturity and stressed that there are far bigger opportunities out there for partners.
"In that marketplace mode, there might be some margin which they call private offers, but I wouldn't rely on that. Marketplaces are not at that point of maturity yet where there are these full Gold, Silver, Bronze programmes built inside them," he said.
"For most vendors selling in a marketplace is their indirect sale. They have to pay a 15 per cent tax to sell in a marketplace to whoever owns that marketplace, so they're not looking to double pay on that resell motion.
"These multipliers, the ability to go ask the customer for 200 per cent or 300 per cent of the product deal. So a dollar spent over here on AWS could be worth two or three dollars downstream to you."
4) ‘We all know women have been disproportionally affected by the pandemic'
The pandemic put diversity into sharp focus. Research from McKinsey found that women's jobs are 1.8 times more vulnerable to the pandemic than men's jobs because of existing gender inequalities.
Lyndsey Draper, diversity and inclusion manager at Computacenter, said that data shows women have been disproportionately affected by the pandemic, and it's now time for the IT channel to make up lost ground in 2021.
"Given the industry that we're in is already underrepresented by women, it's going to take some catching up to," she said. "What we're planning for 2021 is how do we make that up, and keep on track with the objectives we had.
"There's good and bad things from a diversity and inclusion perspective from the last year. We're talking more, which is always great - that really progresses things, but from a talent and representation perspective, that's been slow in 2020 because recruitment has paused or reduced significantly in the past year."
5) ‘MSPs need to be careful they don't commoditise their own services'
IT spending isn't set to return to pre-Covid levels until 2020, Gartner said at the beginning of this year. The analyst claims global spending will grow by just 6.2 per cent this year to $3.2tn after falling by 3.2 per cent in 2020.
The pandemic has prompted organisations that have been financially affected by the pandemic to slash their IT budgets.
Air-IT founder Todd McQuilkin said that, while SMB customers want to spend less on their IT, MSPs should be careful not to lower their prices and risk commoditising what they do.
He warned that it will be a "real challenge" for MSPs to avoid commoditising their own business model as customers look for more cost-effective services.
McQuilkin advised MSPs to stand firm with their pricing over the next few years especially as they transform into cloud providers.
"Our contract prices have been going up over the years. It has been about the quality of the service we deliver rather than the price. What's happened over the second and third wave of the pandemic is that everyone's belts have been tightened and people are starting to look at the contracts,"
"I don't like to use the word commoditised managed services, because I've always been against commoditisation; I believe you pay for quality and it costs money to deliver quality as well.
"So our prices have been really high but it has been challenging as SMBs look to tighten their belts and reduce their costs. So they're starting to look more at price on their managed contracts.
"I think for the next couple of years it's going to be a challenge for MSPs to not commoditise their service because it still takes a lot to deliver a quality service and I think we need to make sure we stand firm and keep our prices at the first level so we can at least make some profit out of it. That's going to be really important for MSPs especially as they convert into cloud providers as well. Because then it's easy to commoditise that service and that's something we need to be careful of."