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The managed IT services market is arguably undergoing its most dramatic changes since its inception nearly 20 years ago.
The need for businesses across all industries to be digitally connected - particularly in the SMB market - is rapidly increasing, and the onset of cloud computing, a widening skills gap in the IT labor force and unrelenting cybersecurity threats are forcing service providers to re-examine their core competencies and find new means of optimizing service delivery and scaling profitably.
This article is the first in a series that explores how these new market dynamics are impacting managed services providers (MSPs) and IT solution providers (ITSPs).
In this installment, we explore three key growth drivers that these organizations must look to leverage and enhance in order to achieve success in 2017 and beyond.
In a constantly changing managed services industry, it’s important to remember that what got us here won’t get us there.
In the same way that point solutions and outsourced IT services continue to evolve, so too must the business strategy, mindset and practices that service providers are employing to drive continued growth and success in the years to come.
And while key revenue-driving aspects of any current MSP portfolio - things like remote monitoring and management (RMM) and backup and disaster recovery (BDR) - will remain paramount for the foreseeable future, there are three key areas that service providers should invest in to support sustainable growth, scalable customer acquisition and long-term employee retention: operational maturity, sales and marketing and the development of security-as-a-service offerings.
The modern MSP must have a certain set of operational disciplines and maintain a level of maturity in order to continue growing and thriving in 2017.
This begins with a clear definition and specification of scope of services and carries all the way through to service delivery and customer satisfaction.
Maintaining a repeatable and scalable process through which sales are executed, contracts and agreements are created, and service is delivered is essential if an MSP is to maintain operational discipline and avoid catering to every whim or nuanced request from incoming customers.
A well-defined organizational structure - complete with the appropriate customer support, technical and strategic resources (i.e. vCIO) - is also required, as these enable MSPs to define specific selling, onboarding and retention processes.
Furthermore, MSPs should look to invest in an effective, outsourced model for service delivery.
The modern MSP should be focused on the sustainable, high-value aspects of the service delivery supply chain - and should look to codify, automate and completely outsource lower-value aspects of the business.
This enables providers to redirect high-cost labor toward high-value work - which not only dramatically improves retention, but frees in-house resources to focus on nurturing customer relationships, identifying new business opportunities and contributing to revenue-driving activities.
By forming and leveraging strategic partnerships, MSPs can offload the monitoring, maintenance and user support that their technicians spend too much time managing on a daily basis.
This allows the MSP to more aggressively acquire new customers, grow existing accounts, and even increase profitability by restoring balance to a labor model which - due to the episodic nature of IT and unforeseeable spikes in service requests - has left many MSPs either overworked or understaffed.
Sales and Marketing
MSPs must also demonstratively possess the ability to grow the customer base through commercial means of sales and marketing.
Whereas traditional word-of-mouth and referral-based sales are limited to the size of an organization’s direct network, digital and inbound marketing strategies enable providers to greatly extend their reach and generate qualified leads by curating valuable and informational content across a variety of channels.
By identifying a target audience and defining some form of buyer personas (fictitious representations of your ideal prospects which explore the needs, pain points, objections and other criteria that will impact their desire to purchase), both sales and marketing staff can ensure they’re targeting the right prospects and leveraging the right resources or messaging in any given situation.
Through the use of blogs, newsletters, video and other materials, MSPs can transform their own websites into healthy vehicles for lead generation while demonstrating authority and expertise in the field.
This content can help grow the brand organically, while providing information that SMB stakeholders can leverage in their research and decision-making processes.
To achieve real success, MSPs must work to hire a professional, dedicated sales and marketing team; this team needs to be chartered with the goal of attracting high-value, long-term customers to its portfolio, and to do so in a consistent, predictable and repeatable way.
We believe that all IT services are (and will remain) local, particularly in the SMB market. Maintaining a dedicated sales and marketing staff who understands your market and industry is essential.
Managed Security Services
As cybersecurity threats increase both in number and complexity, the MSP market has set its sights on security services as the next frontier (and revenue opportunity) for service providers.
As with RMM and BDR, the key to success lies in the MSP’s ability to be viewed as a trusted expert and advisor - not simply a vendor.
And to do so, MSPs will need to develop service-driven security offerings that offer remediation in addition to monitoring and detection. This is something MSPs must keep in mind when evaluating solutions and potential partnerships.
MSPs must also take a multi-layered approach to cybercrime, as they need to protect both client environments as well as their own internal systems, networks and endpoints.
Doing so requires a combination of anti-virus, anti-malware, firewall and other technologies, which combine to form a comprehensive defense mechanism against ransomware and other emerging security threats.
Furthermore, MSPs must consider that cybersecurity is no longer limited to traditional desktop- and server-based attacks.
The proliferation of smartphones, tablets and internet-connected devices that can access corporate data only continues to grow - and service providers must be prepared to support and defend these as well.
These complex challenges have further-magnified the growing skills gap that exists in today’s IT labor force.
Cybersecurity specialists are not only difficult to find in the MSP market, they’re extremely expensive - and although software solutions and tools will continue to evolve, there will always be a need for human resources who can effectively monitor, manage and maintain these applications.
As such, MSPs must be intentional and thoughtful when deciding how they plan to hire, partner or outsource these increasingly important roles.
Lastly, it’s worth noting that an effective backup and disaster recovery solution can act as the final line of defense when a cybersecurity attack is carried out.
If preventative measures fail and a network or endpoints are infected, the ability to roll back to a previously-saved backup can prevent businesses from being forced to pay ransom or run the risk of losing significant amounts of data.
Service providers that are unable (or unwilling) to invest in these areas and maintain the right business metrics will struggle to survive when competing with well-funded and highly disciplined service delivery organizations.
It’s important to pay attention and embrace this new operating model as quickly as possible - the stakes are high, and the opportunity is significant.
Michael George is CEO of Continuum Managed Services.