Take a leap into the MSP space

Resellers not embracing the managed services provider model will find themselves left on the ground, says CA Technologies' Tamar Brooks

A new year is the perfect time for organisations to take a step back and evaluate their achievements and objectives.

Some set themselves new business goals as new year’s resolutions. But if you are a reseller, there is only one resolution you need to make this year: to take the first step towards becoming a managed service provider (MSP). Why? The answer is simple.

Today, a business’ fortunes are inextricably bound together with its applications. We are now operating in an application economy, an environment in which applications will increasingly make the difference between growth and stagnation, success and failure.

For resellers, the application economy can present a truly wide range of opportunities – but they need to be equipped to capitalise on the trend. To succeed in this new economic reality, end-user organisations need to embark on a fundamental transformation, and if resellers are to remain relevant, they will need to respond in kind.

Because end-user organisations need to focus on getting new apps to market quicker, they need to put all their resources into driving their differentiators. Increasingly, this means that customers expect much more from their partners than just great technology, and cutting costs in the traditional way will not work for them in the long term.

Why would end-user organisations want to manage a legacy-style datacentre, if they can outsource it to a service provider that will swallow up the overhead associated with people, skills, software, hardware and maintenance, on a per-device, per-month licence? They wouldn’t.

The world is moving fast in the tech industry: speed, time to market, and customer experience are the things that count. That means trouble for resellers that are not servicing that need on the market and are primarily focused on decreasing margins. Moving to an MSP model could ease those worries and is a relatively straightforward process.

Contrary to common belief, getting out of traditional software reselling and into a service provider-type model does not have to be scary.

Of course, many traditional channel executives may be unused to not seeing the upfront payment or having revenue spread over a long period of time but the reality is not that grim – quite the contrary.

Gone are the days when vendors were asking for big upfront costs. There are many vendors that are looking to partner and which offer attractive buy-as-you-grow programmes.

The key to getting the transition into the MSP space right is to look at future-proofing your company’s growth – working with vendors that will monetise new service offerings to take to market quicker and that will at the same time help productise new offerings.

And while cannibalising the existing revenue stream and moving from an upfront model to opex/capex can be painful initially, if resellers do not take the leap, they will likely see their upstream revenues dwindle anyway.

To limit the shock to revenue streams and ease the transition, resellers should look at keeping the business running as it is and developing service offerings alongside it.

An added benefit of that approach is that once a reseller has established recurring revenues, it can plan and forecast its earnings, which is difficult to do with an upfront earnings model.

It is becoming increasingly clear that in the application economy more and more customers will need to get rid of their incumbent datacentres and if you, as a reseller, are not there to capitalise on the opportunity, someone else definitely will.

Tamar Brooks is head of channels at CA Technologies