The rise of the MSP 2.0 - part one
PRESENTED BY AVG: We examine what it means to be a next-generation MSP as the managed services market comes of age
If there's one market that's in the process of undergoing the transition from awkward adolescence to self-assured adulthood, it's managed services.
Clearly still in the first flush of youth, the MSP sector is predicted to almost double in size between 2014 and 2019, to $193.3bn (£123.7bn), according to analyst MarketsandMarkets. The sector has thrived in recent years as end users warmed to the concept of having an expert monitor and manage their IT from a distance.
But just like a teenager experiencing a growth spurt at age 15, the MSP model is in the process of undergoing the most rapid transformation since its infancy as it heads towards maturity.
MSP 1.0s will find it increasingly tough to compete as a new breed of next-generation players emerges.
First-generation players were technically led and offered services to meet a perceived need. They typically delivered remote management and monitoring, security, networking and backup to a predefined service-level agreement (SLA).
MSP 2.0s may come in many forms, but at the heart of all of them is an ability to help clients achieve their business goals, rather than just offering a reliable service like their first-generation counterparts.
In the first part of this two-part feature, we talk to some of the UK's leading MSPs to gauge what MSP 2.0 will look like and how it will drive sustainable profits. The second part will look even further into the future and ask what the attributes of a successful MSP will be in five years' time.
More than just a reliable service
As remote managed services become an almost standard element of every professional reseller's portfolio, differentiation will become more of a challenge and MSPs will need to innovate to compete, according to Paul Tomlinson, managing director of Mirus IT Solutions.
For Mirus IT, this means moving beyond the provision of basic remote management and monitoring (RMM) services and becoming a 'virtual IT director'.
"Everyone now has an RMM tool and you can buy them for so little because they're available on a SaaS model," he said. "It's very easy for someone to become an MSP overnight, so differentiation is clearly what helps us win and retain clients.
"We're being engaged more to do a virtual IT director role. Rather than just working with the customer and looking after their infrastructure, we are being asked to provide more strategic advice on how to use technology better.
"Customers are also expecting a 24/7 service, so we run our desk 24 hours a day, seven days a week to make sure we are available when they want us to be. Five years ago we didn't offer it as a service, and now 15 per cent of our customers pay for it."
John Pepper, managing director of Managed 24/7, said MSP 2.0 was about moving from standard to custom SLAs.
"It's really about working with the customer as a trusted adviser on their road map and tailoring the service to that road map," he said. "The MSPs that are doing well have invested heavily in the tools to really get to know the customer and are monitoring the customer experience and satisfaction, and continually evolving their service to deliver an almost boutique feel to their customers."
Catering for cloud
Meanwhile, the fall in the cost and growing end-user acceptance of cloud-based compute and storage from providers such as Amazon Web Services and Microsoft Azure is also shaking up the MSP model. Some MSPs now see their role as aggregating on-site, managed and third-party cloud services under a single wrap.
Neil Cross, managing director of Advanced 365, said: "MSP first time around was moving people to our facilities and delivering the services, but in the main the services were not that different from the stuff they had in-house.
"t's more of an aggregation these days.
"For more and more of our customers, the services we are managing for them are not built by us from scratch. We provide a single point of contact for the client to make sure everything is working together."
As an example, Cross said Advanced 365 recently won a contract with a London-based infrastructure company. A lot of its core business functions needed to run on physical servers, so Advanced 365 put these in its datacentre and delivered it back as a service against an SLA. However, the client was happy to push its analytics out to a public cloud provider as the data involved was anonymised. It also ditched its email servers in favour of moving to Microsoft Office 365.
"Under MSP 1.0 we would have built all those services for them and they would have been run by us with very little third-party involvement," Cross said.
"These days, more and more - and I only see the trend continuing - we are basically taking best-of-breed services and putting our own service wrap around it to deliver a single point of contact, so no matter what goes wrong we own the problem and we deal with them. And most importantly to them, they get one bill at the end of the month."
MSP 2.0s may come in various guises but it is clear that the managed services market is coming of age. Those who don't innovate now risk being condemned to a life of perpetual adolescence.
The managed services model is shifting at speed, and in the next part we will look at what an MSP may look like in five years' time.
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This article was commissioned by AVG