Are MSPs Focused On the Wrong End of the Market?
If you're a traditional MSP (managed services provider), you may have an antiquated business model. PC sales fell 6.4 percent in Q4 2012, according to IDC. Dell, HP, Intel and Microsoft each are struggling to reinvent their businesses. Windows Small Business Server is dead. Two MSP-centric software companies are seeking buyers but competitive bids have yet to emerge. Yet many MSPs are focused entirely on getting “more devices” (i.e., PCs) under management. Now, consider the flip-side of the story…
… which includes:
- VMware (NYSE: VMW) just invested $30 million in Puppet Labs, which develops IT automation software for configuration management, cloud management, DevOps, VMware, IT compliance and OS X desktops.
- Boundary, a cloud monitoring start-up, raised $15 million in Series B funding in mid-2012.
- Nimsoft, now owned by CA Technologies, apparently remains in growth mode thanks to its ability to monitor complex data centers and converged infrastructure such as VCE.
- GFI Max, which offers a suite of MSP software, also has a hosted monitoring solution called Monitis. More than server or networking monitoring, it pushes into MySQL, cloud and web traffic monitoring.
So what's my point? Generally speaking, a large number of MSPs remain too fixated on PC management. Of course you should continue to proactively monitoring and manage PCs, laptops and servers. That's bread-and-butter revenue that you should never leave on the table.
But we're 10 years into the MSP revolution and I suspect fewer than 10 percent of all SMB PCs are under MSP management contracts. And the PC market as a whole is struggling.
Meanwhile, millions of dollars continue to flow into cloud management and monitoring. Sure, some investments will go bust. Some of the venture capitalists won't hit the mark. But consider these data points:
- Puppet Labs has experienced more than 3.5 million product downloads in the last 12 months;
- Puppet Forge experienced more than 450% growth in downloads since February 2012; and
- Puppet Labs now has more than 700 paying customers.
With those metrics in mind it's time for MSPs to spread their wings. Keep the best of your PC management business in place and keep expanding it. But figure out how you're going to manage customer applications in the cloud. Until you'll solve that riddle, you're greatly limiting your business's growth prospects.
David S. Mulvey: We're on the same page. A lot of MSPs say it's all about the end user experience. And that's absolutely right. But delivering that experience is less about server to desktop and far more about cloud to mobile and on-premises. Same end goal, different plumbing and connectors.
Thanks, by the way, for your readership over the years. Each time I return to our comment boards I'm reminded of the great relationships I've gained. All the best for 2013.
-jp
I partially agree.
Your vision is based on technology, not on customer needs.
We are an IT company based in Paris, France. I don't know if our market is different here, but our customers are not asking for tablets, smartphone and so on. They are not asking to reach their application from anywhere.
They are just asking for us to help them focusing on their Business rather than on technology.
If I take a typical customer with 20 employees, only 1 or 2 are asking for tablets (usually the executives), and 18-19 of them are asking for…nothing. They want to work when they are in the office, and to stop working when they leave the office. If they want a tablet or a smartphone, it's for their private use, not to be able to work from home.
The fact that two MSP are seeking buyers, or that some Cloud startups gets $15M funding has nothing to do.
Two MSP is not significant representation of the MSP market.
And $15M is only a drop if you consider the billons invested in the PC or server market.
Puppet has 700 clients? Woaw ! The small bakery next to my office sells almost 10000 “baguettes” per month. And they do that with no Cloud computing ! Could you believe it?
Don't take my arguments as aggresive.
I really appreciate the power of the Cloud and all the possibilites it gives us to provide new services.
But after all, the buzz around Cloud is just that, buzz…
Sorry if my English is bad, my French accent doesn't help 😉
David: Thank you so much for the extended comment. A few thoughts:
1. I didn't say two MSPs were for sale. My report said two MSP software companies — which are strategic suppliers to MSPs — are up for sale and can't really find buyers… at least not at the valuations/price they want. That's a disappointing sign for the traditional monitoring market.
2. Business vs. Technology Requests: I agree fully with you. It is all about the business case.
3. Consumer vs. Business Devices: Generally speaking in America more and more small business owners and executives are using tablets and smartphones for business. The line between business and consumer devices is disappearing here. Or stated a different way, more and more U.S. employees use a device for both business and home needs. I'm not suggesting that's always a good trend.
-jp