Do MSPs Need Software Development Teams?
During Microsoft Worldwide Partner Conference 2012 (WPC12), I spoke with two managed services providers (MSPs) that are building software development teams. The teams focus on Dynamics CRM and database work, with an eye toward long-term cloud integration projects. Is software development a smart strategy for MSPs — or a fatal distraction away from bread-and-butter recurring revenues?
I’ve got a pretty strong opinion on this one: I think the most profitable, most strategic MSPs will have some in-house software development expertise.
But that doesn’t mean every MSP should have a software development arm. In some ways, a software focus is a return to the past for MSPs — requiring strong project management and somewhat unpredictable revenue spikes and lulls. Drop the ball on a project here and there, and you’ll mess up your profits, customer satisfaction levels and perhaps even your company focus.
Big Upside?
Still, there’s huge upside for MSPs that have developers on-hand. A traditional MSP only has one real asset: Customers under contract (as long as those deals deliver healthy profit margins). But software is intellectual property.
- Write some code that bridges the gap between two cloud apps, and you’re generating incremental revenue while adding IP other MSPs can’t match.
- We’re hearing from MSPs building app extensions atop SharePoint and Dynamics CRM, with an eye toward Windows Azure opportunities.
I suspect fewer than 10 percent of MSPs have in-house software developers. But I bet those MSPs are best positioned for the ever-growing cloud wave.
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Do MSPs need software developers? Yes. Would most MSPs mess up in the software development world? Yes. You’ll never see a big number of MSPs with software developers but I think you’re correct to suggest the most strategic MSPs currently have/will have developers. That’s a lot of words to basically say I agree with your blog.
Joe, this is right on the money, At CNS, we’ve been doing development since before we did managed services and our internal capabilities have given us the power to develop an internal metrics interface that pulls from our PSA and RMMs to give us real time insight into our managed machines. This really gives us a great ability to custom report with meaningful information – pretty much on demand.
Additionally, it’s a great way to get in the door. We cross sell into our client base and can provide a complete end to end solution.
Jason
In our case, having in-house developers has created more lucrative opportunities that resulted in long term, recurring relationships. I can’t imagine being in the healthcare vertical without some in-house development expertise.
Richard, Jason, Jeff: Thanks so much for weighing in. This is a topic we’ll be tracking more closely going forward.
I think some MSPs fear or overlook this opportunity because they aren’t wired as coders. And they wonder if they can really manage a programming team… Just a hunch. We’ll keep digging.
-jp
JP…I think the real argument or discussion points are not around software coders but alternative streams of revenue. When I ran IT Matters in Calgary, we did more than the traditional MSP to generate revenue. Started simple with enhanced Sarbanes-Oxley audits, Oracle database support plus much more. We knew back in 2006 that fixing networks was OK but it wasn’t going to net us huge revenues. I love this story of how an Ottawa MSP started a SharePoint practice to fullfil a need with their clients. Now, their SharePoint business brings in new MSP revenue. You see, MSPs need to find new ways to connect with the market. RMM doesn’t cut it and that is not what will win new business. This is why I am huge on verticals and simply knowing everything going on with one or two industries.
Coding is just another way and a great way.
I even look at Winnipeg MSP, Evident IT who offers a website and SEO services as part of his managed services deal. Again, thinking out of the box….
Great discussion JP
Stuart Crawford
MSP Business Development Consultant
Toronto, ON