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.
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