Race to the Bottom, Or Race to the Top?

April 18, 2008

3 Min Read
Race to the Bottom, Or Race to the Top?

By Peter Sandiford 1

Joe’s recent blog entry — asking whether MSPs were killing their own margins — touches on one of the most widely held misperceptions in the business.

The growth of the managed services model has always been accompanied by the specter of commoditization and the related “race to the bottom” discussion. But on the contrary. the race will be to the top. Here’s why.

The fact is remote monitoring and management products like ours — and the integrated arsenal of products that are part of the ecosystem are in fact driving the industry away from highly commoditized hourly professional services to highly differentiated value based offerings commonly referred to by the umbrella name “managed services.”

I am always amazed when I visit one of our Partner’s web sites to see what they are doing with our product. Every one of our thousands of MSP Partners is offering very different services based on their target customers. And when I speak with them they are clearly relishing their newly liberated ability to differentiate their businesses from their traditional competitors.

Gone are the “my MSCE is better than the competitor’s MSCE and at $5/hour less” conversations, replaced by “here is how we can help you improve the contribution of IT to the value of your business.”

The challenge that faces new entrants is not and should not be “how do I become an MSP?” It is and should be “how do I get started down the path to delivering value=based offerings to my customers with minimal investment and immediate impact to my profitability and my customer’s satisfaction?”

Once they are up and running and the real power of the technology becomes understood the entrepreneurial forces within them, the very forces that got them into this business in the first place, begin to take over and they are on their way to long term success.

Our recently announced new partner program (MSPmentor coverage here; Level Platforms press release here) provides a fail-safe, proven, step-by-step approach to get up and running with a profitable basic managed services operation out-of-the-box. This program is designed to ensure each new service provider has the basics in place before they set out to create their own customized service model designed specifically for them and their target customers.

Heading for Higher Ground

The race will not be to the bottom. It will be to the top of a much more clearly differentiated target set of customers with a unique offering that will capture those customers’ long term loyalty and commitment, a commitment that will be unassailable by any new entrants while providing long term profitability and revenue visibility that would never have been possible in the old model.

The number of vertical and horizontal market segments and specific services that will win over these customers is truly infinite. The prize will go to those that can define a customer segment (which could simply be their existing customers), and then create and deliver a service of unique value based on their needs and their own core values.

We need to stop thinking of managed services as a destination and begin thinking of this as a journey to create and continuously evolve highly differentiated new value propositions.

Our mission at Level Platforms is to be the core platform that every service provider relies on to help them realize the transition from an undifferentiated, low profit commodity business to a mass customization in the new services economy that will be the dominant business trend in the lifetimes of everyone reading this short article.

Peter SandifordNote: Peter Sandiford is CEO of Level Platforms. Guest blog entries such as this one are contributed on a monthly basis as part of MSPmentor.net’s Platinum sponsorship.

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