Managed Services A Commodity? (Only If You’re Slacking)
I keep getting emails from marketers, some of whom suggest the managed services market has become one big commodity. But I prefer to look at the market differently. The downside: If you focus on managing commodities (PCs, desktop software) you’re services will be a commodity. The upside: If you focus on managing your customers’ highest-value assets you’ll never become a commodity. Let me explain why.
Managed services is no different than the broader IT industry. Over time everything becomes a commodity. So if you’re “banking” on managed services you built in 2007 to drive your business in 2012, you’re hosed. I sense that the best, most profitable MSPs have moved in at least one of three directions:
1. The obvious — going vertical: When All Covered this week acquired Wave Two to push into managed IT for health care, I could feel All Covered CEO Todd Croteau’s excitement through the phone. All Covered is betting heavily on three verticals — health care, education and legal. Croteau obviously sees good margins ahead in those markets, and I bet he’s paying a premium to acquire the the right MSPs.
But be careful of vertical market hype. Anybody else remember all the Electronic Medial Records (EMR) software companies reaching out to MSPs with big, rich promises back around 2010. Where are those players now? Software alone won’t allow you to go vertical. A true understanding of our customers will.
2. The less obvious — go big: I’m tired of Big Data hype in the enterprise. But in the IT channel and among IT service providers, I think the vast majority of folks have overlooked the Big Data opportunity. Still, that’s changing. Keep an eye on next generation monitoring tools — particularly Boundary. Some top service providers are working with Boundary to monitor Big Data applications — both on-premises and in the cloud.
Can you do that? Really?
3. Blend MSP and ISV: I suspect about 5 percent to 10 percent of MSPs now offer IT project teams focused on software development. The best folks are actually writing applications that they can host in the cloud or sell to on-premises customers. Here are some examples.
Just be careful, again, of the hype. Software projects often go over schedule. You could wind up booking a lot of revenue without generating any profit.
The next time someone tells you that managed services are a commodity: Challenge them. I concede, basic remote management services from 2007 are now commodities. But so is every other piece of IT that your customers purchased in 2007. Stop making a 2007 sales pitch. Like a car company, update your service catalog with your 2013 pitch now.
Otherwise you’re starting to look more like a laggard trunk slammer rather than a leading MSP.