Digital Disruption: 70% of MSPs Will Be Gone in 3 Years

If channel companies, especially managed services providers (MSPs), think they can ride the digital disruption wave without wiping themselves out, they’re sadly mistaken. Disruption is wreaking havoc on the channel’s old ways of doing business.

This means channel companies must make a couple of pivots, says Mark S. A. Smith, owner of consultancy Bija Company and author of “Pivot to Profit from IT Disruption” and “Security in the Boardroom.”

Bija Company’s Mark S.A. Smith

For starters, the channel must move away from hardware and software, and toward cloud services that bring recurring revenue streams. Channel salespeople also need to stop selling to the tech pros and start selling to the line-of-business (LOB) executives.

At stake is the very survival of channel companies, Smith says. He says doomsday analysts predict that 70 percent of MSPs won’t be around in three years.

At the upcoming Channel Partners Conference and Expo in Las Vegas, April 17-20, Smith will deliver this tough talk. As part of the IoT conference track on April 18, in a session called “Profitably Pivoting to Embrace New Business Models,” Smith will explain why these pivots need to happen and why some channel companies won’t be able to make them.

In a Q&A with Channel Partners/Channel Futures, Smith gives a sneak peek into his session.

Channel Partners/Channel Futures: What is the new business model?

Smith: I’ll be talking about the shifting business models in the world of IT and how disruptive they are to traditional service providers, such as MSPs. The challenges that we face today are extraordinary.

The services that we’ve traditionally delivered over the past 50 years are no longer desirable or valuable. Nobody is architecting five years’ worth of IT to be purchased at the maximum possible price, chronically overprovisioned for two years and underprovisioned for three years.

Everything is in the cloud, and this radically changes the value that IT providers bring to the party.

CP/CF: What should channel partners do?

MS: The pivot they must make is to stop selling exclusively to the data curators — server admins, storage admins, system admins. Traditionally, business partners and IT resellers have had an exclusive relationship with the data-center curator.

Most of the vendor value propositions today are about the value of data. This has zero value to the data curator, which is why it’s getting harder and harder to sell to the data curator. As long as the data is secure, safe and available, the data curator doesn’t care about the data.

The next level are the data creators — CFOs, marketing departments, sales departments, manufacturing departments. These people generate data for the LOBs to consume. Data creators couldn’t care less about how the data is curated. All the shadow IT stuff exists because …