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This top MSP 501 company says the market is at a crossroads, and provides advice on how fellow peers can react.
September 19, 2018
PCM says MSPs are at a crossroads and must change their businesses yet again in order to thrive in the years ahead.
Who is PCM and why is it promulgating this message? Here’s what you need to know.
Founded in 1987, PCM is one of the world’s largest and most successful managed service providers (MSPs). Based in El Segundo, California, PCM is the No. 2-ranked company on the 2018 MSP 501 list. Today, it provides a mix of professional, vertical market and horizontal-technology products and services to customers in North America, Europe and beyond. A top partner of Cisco, Google, Dell, Apple, Oracle, Fortinet and others, PCM racked up $2.2 billion in sales in 2017. A public company, its shares trade on Nasdaq under the symbol PCMI.
Over the summer, Stephen Moss, the president of PCM’s services division, spent a good deal of time thinking about the future of technology-solutions delivery and managed services providers in particular. He captured his thinking in a series of blogs that he published on LinkedIn. (You can find his “Journey” blogs here.)
While Moss believes MSPs are ideally positioned to be the primary service-delivery vehicle in the cloud era, he nonetheless believes MSPs must reinvent themselves yet again in order to help customers with their biggest opportunity, digital transformation. This marks the third time in the last dozen or so years that market conditions have forced companies like PCM to make changes. This includes adjusting their business models, vendor relationships, personnel and best practices.
Before getting to those, here’s some background. According to Moss, who has worked in the channel for more than 25 years, the first major shift MSPs made occurred more than a decade ago. That’s when transaction-oriented VAR organizations developed full-blown remote support capabilities that enabled them to pull most of their techs from the field. Soon thereafter, real MSP organizations began to take root.
MSPs were then challenged to offer a broader array of services. Among other things, customers looked to them to host workloads, manage applications and integrate on-prem and off-premises equipment. More recently, MSPs have been challenged to provide more seamless experiences that go beyond infrastructure technologies to automation solutions that help end customers deliver their value to their own customers.
In layman’s terms, Moss says the latest transition requires MSPs to think beyond their traditional customer base – IT departments – and engage line-of-business managers and organizational functions. (Think HR, marketing, legal, accounting, etc.) In the last two years, PCM has seen a significant increase in the number of deals that it takes on that involve customers’ line-of-business owners. Some deals are initiated by business functions themselves, while others are overseen by IT but funded by functional department heads.
This shift has put pressure on PCM to offer new services and address different customer priorities. Instead of reducing costs and simplifying technology infrastructures, PCM and other MSPs are now being tasked to help end customers increase their revenue and embrace new, and in many instances, more complicated digital innovations.
Another change impacting MSPs is technology procurement, which some service providers have backed away from in recent years. Today, they cannot, Moss says, lest they could lose out on the management of investments that wind up going into the cloud.
“You don’t want to be relegated to the ditch-digging work of MSP world and be taken out of the higher value equation,” says Moss.
In his final installment on the latest “journeys” of MSPs, Moss explains his thinking:
“As I meet with customers and prospective customers virtually every week, the array of demands everyone is facing to “just keep the lights on” in the IT space continues to steal away precious energy cycles from even the most talented and outsource-savvy teams. Time to innovate for their respective business is relegated to projects like the typical platform upgrade decisions, ERP/MRP replacements and operational activities to ensure we’re all keeping all the technology patched well enough to thwart all known security threats. Unless we change the paradigm to reach nearly 100 percent rapid-release management in virtually all sectors, where micro improvements occur in rapid succession, these monolithic decision approaches to platforms, applications and even service delivery will only continue to steal away a disproportionate amount of our collective talent capital.”
One way MSPs can add new value, Moss says, is by helping customers understand “one version of the truth” when it comes to their technology investments. This is especially true when it comes to security. Customers, he explains, need help distinguishing between applications problems, network issues and cloud abnormalities.
PCM struggled with this for years before deciding to jump all-in into the managed security services provider (MSSP) space.
“We had to make sure that we avoided the fox and the henhouse problem that a lot of MSSPs face,” Moss says. By that he means PCM worked long and hard to put processes, structures and technologies in place to avoid overtaxing its traditional engineering team and providing customers a false sense of security. For example, PCM recognized that it was a bad idea to task engineers from its MSP operations to provide full-blown security services.
“You cannot have engineers doing change management as an MSP responds to an event monitoring alert. They may have been the ones who triggered an incident, which in and of itself could already be a security event at that point,” Moss says. “We have been very cautious and careful in articulating how we work as a multi-function [organization.] Our MSSP business doesn’t even live directly inside our MSP business.”
That’s not to say that the two aren’t tightly integrated; they are. The challenge for MSPs and MSSPs going forward is developing interconnected command and control decision-making environments that have the capacity to protect customers fully — and the flexibility to do so in a cost-effective manner. This transcends any one technology or organizational model.
“The world is changing,” Moss says. MSPs that don’t recognize the industry is at yet another inflection point risk getting left behind.
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