Solving the Profitability Problem for MSPs

Forrester’s recently released channel trends for 2019 sports some rather startling statistics. One big one: The average MSP margin fell 17% in 2018 — a significant dropoff.

This is a big problem, and it’s now more important than ever for MSPs to focus on creative ways to stay profitable.

We sat down with Vadim Vladimirskiy, CEO of Nerdio, the cloud IT management company whose main goal is to enable MSPs.

Vladimirskiy provided an expert look at what MSPs are doing and have done well, and shared a few secrets to building a high-quality MSP practice. He also talked about the importance of adopting new technologies and provided valuable insight for MSPs that are craving more information on how to build and grow their businesses among current challenges, such as aging IT infrastructure, attracting and retaining talent, and so on.

What to do. Vladimirskiy says it’s now more important than ever for MSPs to focus on creative ways to stay profitable. For an MSP building a cloud practice in Azure, for example, one of the most important considerations is to understand how to transact in Azure.

This includes getting familiar with the various types of Azure resources and how they work, how each type of resource is billed, how to design an Azure IT environment, and most importantly, how to make money.

What MSPs are doing well so far. There are many types of channel partners, and MSPs lead the way in terms of being able to build strong and lasting relationships with their customers.

Nerdio’s Vadim Vladimirskiy

“Many MSPs we’ve met have worked with some of their customers for multiple decades,” said Vladimirskiy. “The smaller and midsize customers they serve look to them as subject-matter experts who guide them on their technology transitions. This bond they’ve created makes them uniquely qualified to recommend and implement the newest and most forward-thinking technologies for their customers.”

According to Vladimirskiy, here are a new technologies and tips that can increase MSP’s margins with Microsoft Azure:

• Become a CSP.
• Take advantage of Azure Reservations (aka Reserved Instances).
• Take advantage of Azure hybrid usage and CSP software subscriptions.
• Utilize auto-scale for cost optimization.
• Consider implementing burstable VM instances (or B-series VMs).

How to build and grow businesses. Many MSPs face challenges like aging IT infrastructure, attracting and retaining talent, and so on. How are they to build and grow their business in the face of these hurdles?

“Many MSPs are at a crossroad in their business,” said Vladimirskiy. “They are used to doing things a certain way and have done so for many years. Most MSPs are used to purchasing a server, installing it at the customer site or even in a data center, monitoring the server, and providing a fixed-cost model for servicing their customers. The ‘next big thing,’ and in fact the “current big thing,’is the public cloud.”

Vladimirskiy says every MSP needs to become fluent in the public cloud and know how they can leverage it to transform their customers’ businesses and make more money. Cloud vendors such as Microsoft Azure can be used to take advantage of Microsoft’s hyperscale network of data centers.

It’s also important to turn an eye to the newest talent graduating from colleges and graduate schools — these folks entering the workforce have grown up in a cloud-first world. It’s critical for MSPs to bring more and more cloud skills into their organizations so their customers can benefit from the latest and greatest technology available in the market and not be beholden to a model that will over time dramatically lag to what’s available in the cloud.