The Doyle Report: The Case for the Modern MSP
Happy Hump Day.
The work we have been doing in past two weeks have put me in a reflective mood. To recap, we provided an update on the Channels Think Tank last week and unveiled the 2017 MSP 501 ranking and study on Tuesday.
Which brings me to you.
If you’re grinding out a week of trouble tickets, sales forecasts and financial transactions, then step back for a moment and consider the case for the modern MSP as seen through eyes of Datto CEO Austin McChord.
Datto, of course, is the “total data protection” company based in Norwalk, Conn. It sells security, business continuity, networking and cloud backup technologies exclusively through third parties like you. At Datto’s annual partner retreat held in Denver last week, I sat down with McChord, who offered a unique perspective on the market.
When discussing the state of the cybersecurity, McChord asked me how many restores his company had to provide to customers affected by the recent WannaCry malware incident. Knowing this was one of the largest malware attacks ever, I figured the number had to be big.
So I guessed: 10,000? 5,000? 1,000? Surely at least 500, I thought.
But every time I guessed, he shook his head. “Lower,” he said. At a certain point, it became comical.
“Fewer than 10,” he finally said.
How can that be? The world’s largest malware attack strikes and one of the fastest growing players in disaster recovery has to restore fewer than 10 customers? McChord explained.
“MSPs,” he said, “are world class at updating systems, downloading patches and otherwise doing the mundane things that are required to function properly in today’s world.”
In other words, he said, small business customers who rely on MSPs were better protected from the WannaCry attack than the British National Healthcare System.
That’s a bold statement. But it’s true just the same. Amid talk of market consolidation, price commoditization and other existential threats, it’s worth taking a moment to reflect and what makes the MSP community so valuable. You simply are unmatched when it comes to taking care of customers’ vital information and communication needs.
Lessons from Afar
The above bodes well for local trusted advisors. But let’s put it into perspective. For context, turn your thoughts to India for a moment.
On Tuesday, NPR produced a story entitled, “India’s Tech Firms Face Fundamental Shift From IT To More Advanced Tech.” In the story, NPR notes that, “For decades India’s IT talent has maintained the world’s computers, databases and back offices. But new technologies are overtaking that old business model, and India’s tech giants are scrambling to keep pace.”
The “new technology,” of course, is artificial intelligence, automation, big data and other digital innovations that have made the “your mess for less” outsourcing business less lucrative. Instead of hiring cheaper employees to manage and monitor systems, why not use chatbots, AI and more?
As more customers ponder their options, the value of offshoring falls. The implications are hardly surprising. Estimates vary, but IT outsourcing giants in India are believed to have shed tens of thousands of jobs within the last year. More layoffs are expected to follow.
“…[C]heap outsourced labor that performs routine tasks is being eclipsed,” says Peter Bendor-Samuel, CEO of the Dallas-based research consulting firm Everest Group, in the NPR report. Instead of cheap labor, customers want disruptive technologies, “like artificial intelligence, cloud [computing], big data analytics, … robotic process automation.”
Connecting the Dots
So how do the two thoughts above connect? Glad you asked.
Right now, it’s tough to find a reputable MSP that isn’t thriving; there’s simply so much demand for professional IT help that even interlopers and “Johnny-Come-Latelys” can build a book of business.
Beneath the surface, however, price commoditization looms large. So does technological disruption—the kind that is confounding offshoring giants so much. Then there’s customer intimacy, which has concerned me for some time.
More MSPs I talk to have optimized their businesses to manage and monitor their customers’ operations remotely. On the face of it, this is sound business. But it’s not if this mode of business comes at the expense of customer intimacy.
In the future, running a successful MSP business will depend on three things:
- Running an efficient services business at scale
- Participating in the business outcomes of your customers
- Creating new experiences that increase your level of customer intimacy
Agree? Disagree? Let me know your thoughts.