Advanced 365 spills secrets of journey from reseller to MSP

Firm's re-invention as service provider means higher margins and less angst about year-end, MD Neil Cross tells Channel Conference delegates

The boss of Advanced 365 told delegates at today's CRN Channel Conference that his firm's five-year transformation from traditional IT reseller to fully fledged managed service provider has paid lucrative dividends.

In 2009, the firm - then known as BSG - was HP's largest reseller in the City and drew 80 per cent of its revenues from traditional product resale.

Five years on, Advanced 365 generates 90 per cent of its £50m sales from recurring revenue, managing director Neil Cross told delegates during his keynote at today's event.

The impetus for the firm's transformation came in 2009 when new owner, Advanced Computer Software (ACS), opted to sell its product supply business to BT and grow its fledgling managed services business.

Cross (pictured) said his firm had spent the last five years building the £8m MSP business to what it is today. He defined managed services - which today's speakers agreed means different things to different people - simply as delivering business IT to an agreed SLA, adding that Advanced 365 does this from desktop to datacentre.

"The journey has definitely been worthwhile," Cross said. "We got the revenue number back in four years to the same sort of number; in fact slightly more than before we sold the reseller business. But it's very different revenue.

"I'm not allowed to tell you what our percentage contribution [profit margin] is but [as an MSP] you should be aiming - if you get this right - at the region of 20 per cent contribution from your revenue line. As a reseller we were down around about the five per cent mark."

Just as importantly, Cross said moving to a managed services model means he no longer frets about hitting the current year's numbers.

"We're in the second month of our second half and I am not worried about my year-end because it's lined-up, recurring revenue, I know where it's coming from, and the risks I've got I've got covered," he explained.

"That's given us the space to make the big decisions. Our team is already selling next year's revenue so it takes the pressure off and allows the management team to take a step back from the business and look at what we're going to do next. As a reseller, you worry about it until probably the 34th of your last month and it's very difficult to find that space."

Cross advised any aspiring MSPs in the audience to evaluate how they will differentiate themselves, asserting that those selling vanilla cloud services will be swamped by the competition.

Advanced 365 itself has a big differentiator in the form of parent ACS, which is one of the UK's largest software suppliers, he said.

"That's actually quite key for us as it gives us a big differentiator," he explained.

"One of the advantages we have in this marketplace is we have content. Our software is run by about 20,000 organisations across the UK, some of which are very big and about 5,000 of which we provide their core business systems. Because I've got that content, I can then use that to drive service opportunity - so that gives us a unique position."

Advanced 365 embarked on its managed services journey a decade ago when customers began asking if it could do more for them beyond just selling them HP kit. Initially, this meant hosting it for them, prompting it to invest in a comms room.

Ten years on, Advanced365 covers the full gamut of managed services. This includes hybrid cloud services that draw on both its own cloud capabilities and the public cloud offerings of the likes of AWS and Microsoft.

"We have never tried to position our cloud capability as being the be-all-and-end-all," he said.

"For example, we have a client with an incredibly heavy requirement during a one-month period… It didn't warrant us putting it on our cloud platform because we didn't want to reserve that amount of capacity for them, so we worked with a third-party cloud provider for our client and that's been very successful."