Channelling managed services in 2014
While many VARs and other IT providers have made a successful transition to MSP status, others are still grappling with the move.
It has been a long, strange, yet successful trip for some in the industry, but many more are still waiting for the margins to expand and for the oft-stated benefits of a move to managed services to kick in. Yet the shift has become a necessity for a broad range of resellers, with no sign of a return to profitability relying solely on hardware, or software, for that matter.
With that in mind, CRN held its second annual Channel Conference focusing on the MSP business recently, with consulting editor Simon Meredith presenting the latest CRN Intelligence insights to a couple of hundred channel companies at Prince Philip House in London.
"It's not just about getting the pricing right; making the investment is also a challenge. You're going to have to invest something in billing, in procedures and in processes and in people, to make sure they have the right skills," Meredith told delegates.
The Webroot-sponsored research - available to CRN readers - emphasised the issues, although most VAR respondents also indicated that the transformation was necessary. Most are seeing rewards but still have a long way to go to complete the move.
"Don't take on anything you can't manage," warned Meredith (pictured, left). "If it goes wrong, they [customers] tend to blame you. And one thing you can be certain of: something will come along that you never expected."
Doug Woodburn, managing editor of CRN, then introduced a series of speakers with different perspectives to offer on the managed services business - including Simon Porter, Europe vice president for the mid-market and MSP at IBM; Rufus Grig, chief technology officer at Azzurri; Pat MacKay, new business development manager at AVG Managed Workplace; Luc Eeckelaert, EMEA network security and MSP programme director at Dell Software; and Austin McChord, CEO of backup vendor Datto.
Neil Cross, managing director of Advanced365, revealed the secrets of the company's journey from reseller in 2009 to MSP today. As a major HP hardware reseller in the City of London, it suffered a precipitous fall in turnover as the transformation to MSP progressed - but five years on, Cross confirmed, it has made all that back and expects to expand even further, with 90 per cent of its turnover now accruing from recurring revenue.
"You should be aiming, if you get this [transformation] right, at something in the region of 20 per cent contribution from your revenue. As a reseller we were down around about five per cent," Cross (pictured, right) said. "We're in the second month of our second half and I am not worried about my year-end because it's lined up."
GFI Max partner community director Dave Sobel, Autotask regional sales manager Clark Comer and Mimecast MSP director Nessa Lynchehaun vied for channel interest in the vendor showcase before a panel discussion on how to make the business case for managed services to customers.
As usual, the devil was in the detail during the discussion. Calyx's marketing director Christa Norton and Avnet's director of service provider business Omar Mir suggested too many vendors are stuck in the past when it comes to working with the channel - and that this continues to hamper the growth of managed services and the channel's ability to address customer needs appropriately and in a timely fashion.
Not only was there a need for vendors to work more closely with channel partners, but also to modernise their service-level agreements. Resellers trying to deliver managed services need to be able to deliver them when and how the customer wants - instead of having to wait until the vendor was ready to deliver, as it were, or provide several different points of contact.
"Vendors need to move away from the idea of being completely exclusive, to start working with each other," Norton said. "This is so you don't have those issues of whenever there is a problem, having to work out is it this problem, or that problem. And when something goes wrong, you cannot get an answer from the vendor. We've had to call God knows where at times just to get an answer to a basic technical issue."
Mir agreed that a "reinvention" of vendors would be a great help. "To have what customers require, and to be easier to provide a solution, where the customer is given the choice. It's all to do with customers' choices."
Jon Hunt, business development director at Point to Point, explained: "One challenge we have is to actually work with vendors' SLAs. Because we're now a service provider we have very significant SLAs - but I think some of the vendors still have more traditional support models and we're struggling to get similar support terms back."