When MSPs first came into being a decade or so ago, they focused on basic PC-server management, specific geographic territories and/or vertical market niches. Market realities are very different today, says Kaseya CEO Fred Voccola.

On the eve of the Kaseya Connect 2016 conference scheduled for May 3-5 in Carlsbad, Calif., Voccola talked about emerging market trends with MSPmentor. Among other things, the CEO of the IT systems management company discussed the company’s desire to reestablish itself as a thought leader in the Professional Services Automation (PSA) and Remote Monitoring and Management (RMM) space.

To that end, Voccola plans to devote a significant amount of his stage time next week defining the market as he sees it. Among other things, he believes market consolidation and partner evolution is having a profound impact on the competitiveness and profitability of today’s MSP market. Mergers and acquisitions, plus new business entrants are making it difficult for companies with a traditional geographic or horizontal technology focus to succeed, for example.

In wide ranging conversation, Voccola conjured the expression “MSP 2.0,” which has been germinating in the channel since 2007. It essentially refers to the transformation that MSPs undergo to prepare themselves to do more than manage basic systems and applications management for their customers. In the era of MSP 2.0, service providers will leverage new technology to influence the business outcomes of their customers. This is especially true of those who service SMB customers, who now depend on digital innovation as much as their enterprise counterparts.

To wit, digital capabilities that used to be relevant to only big, corporate customers with IT staffs and deep pockets are now de facto must-haves for SMB customers, Voccola says. This includes cloud computing, mobility, data analytics and more. To compete with larger and richer counterparts, many SMBs are increasingly turning to digital cloud services for help.

While this has presented enormous opportunities for MSPs, it has also put significant pressure on many to expand their capabilities.

“After embracing first generation MSP services, SMBs are now looking for next generation technology capabilities. This includes cloud services, enhanced security, big data and more,” says Voccola. MSPs that cannot keep up with the pace of technological change, he says, have turned to outsourcing or offshoring as a means to sustain their customer influence. But even these methods have come under pressure today as the era of MSP 2.0 unfolds.

“You now have MSPs that are coming to fore with a specific focus on things like identify and access management or remote firewall management. They are able to do this the same way that the original PC-server MSPs started. And they are growing very quickly and taking customers with them,” says Voccola.

The rise of specialists and large, super-MSPs is having a profound impact on the market. The one-or-two person MSP that catered to a small market a mere few years ago? It faces challenges from companies that may be hundreds if not thousands of miles outside of its traditional trading zone.

MSPs have reacted to the shifting market by doubling down on their operational excellence, Voccola says, significantly increasing the level of professionalism in the market.

“Every MSP today is a professional organization. But that has led to an increase in expectations. Customers don’t just want help managing their PCs; they want their MSP to manage their entire security infrastructures and SaaS applications. And they want their MSP to provide not just systems continuity, but also regulatory compliance and vertical market expertise,” says Voccola.

To help MSPs better understand the market forces and dynamics affecting their businesses, Kaseya plans to devote considerable energy at the Connect 2016 conference on helping assembled partners better understand the realties of today’s market. Among other things, Kaseya will unveil the results of a new study on the state of the SMB and MSP market. In all, the company surveyed more than 1,000 SMB customers and MSPs. Some interesting findings include the following: when a customer switches to Microsoft Office 365, MSPs not only lose the ability to back up and secure this customer’s on premises servers, they also lose an additional 22 percent of a customer’s IT spend, which also winds up going to the cloud.

Kaseya will also reveal the cost of capital investments into technology and people required to hold onto existing business.

In addition, Kaseya plans to discuss its recently unveiled “MSP Leadership Summit Program,” which is a series of thought leadership events at which MSPs can discuss ways to overcome emerging challenges to their businesses. This includes a changing competitive landscape that has led to growing customer turnover.

“We’re seeing in many instances customers who are tempted to switch providers anytime they sense that a key service has become commoditized. When another provider with a lower cost basis comes along and offers one or two new services not offered by an incumbent, an MSP finds itself in a tough position,” says Voccola. “Everyone has to figure out how to deal with that and this program is designed to help.”

The best way to prevent customer loss, Voccola believes, is by developing what he calls “second generation, revenue-generating managed service offerings” including complex network and systems management services, and cloud access management, just to name a few.

The organizations that can adapt to new realities and embrace new, second-generation MSP services will thrive, he says, while the companies that cannot will struggle. Many will lose revenue while some will be pressed to sell their businesses ahead of their preferred timetable.

“The good news is that there are a lot of buyers right now. People are paying good multiples to buy recurring books of business,” he says. But if and when interest rates increase, sales prices will likely decline while earn-outs will likely be extended.

In addition to providing thought leadership on the MSP market, Kaseya promises to provide plenty of news next week. This includes news on new products and updates on key company developments, including its recent acquisition of Vorex, which many expect to lead to a price war in the market for PSA platforms.

“What MSPs need to compete in the 2.0 world is a unified platform that combines the most comprehensive set of revenue-generating software applications with the most modern, purpose-built, run-your-business software tools available from a company with the financial resources to continue to deliver innovation for them,” says Voccola. “That’s what we do.”