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Underwater

New ConnectWise Research Shows MSPs Are Underwater

  • Written by Kris Blackmon
  • June 7, 2018
The channel landscape is more demanding and competitive than ever before. A new report from ConnectWise sheds some light on exactly where MSPs are struggling.

New research announced Thursday by ConnectWise holds mixed news for partners. The good news is that there’s never been a bigger demand for IT managed services, so the channel opportunity isn’t doing anything but growing. But the resulting market is introducing and intensifying pressures on managed service providers (MSPs) to adapt to quickly evolving customer demands.

Eighty percent of MSPs surveyed are worried about being able to keep pace with today’s managed services market, which holds more sophisticated security threats, the commoditization of services and a more difficult road to building market share in a channel that has never been more competitive.

The research was conducted in the U.K., but it reinforces the growing worldwide concern that partners are having to support more devices, customers, services and solutions than ever, says ConnectWise vice president of international sales and strategy Gregg Lalle. More than half of respondents say they’ve experienced increased customer demand for managed services in the last year, but not many feel their MSP shop is equipped to keep pace with such fast-paced growth. As a result, many MSPs are forced to take shortcuts in order to keep up with the demand for their services.

Nearly every respondent (92 percent) plans to introduce new services to meet that demand — primarily security, cloud and cloud-service monitoring. But it’s a catch-22: More than half of them say it’s harder than it was just a year ago to meet customer needs without threatening customer-service levels. It’s the lack of insight that’s causing trouble. Forty-two percent of these MSPs, faced with an explosion of available service offerings, struggle to find the right mix of solutions. As a result, many find it difficult to develop new business and cultivate new customers.

A big source of worry is the ever-changing threat landscape. As customers become savvy to the need for increased security, MSPs struggle to stay educated on the latest threats and how to mitigate them. This need for constant self-education and training in new security offerings is bound to impact profit margins on these services, and nearly half say finding a way to offer services at a competitive price is high on their list of strategic imperatives.

As a result of this pressure to improve the customer experience, many MSPs are devoting more resources to IT/technology roles than sales and marketing. Surprisingly, a full half of those surveyed say they don’t prioritize the customer experience when evaluating their managed-service offerings, and one-quarter don’t measure customer satisfaction at all. Such a gaping operational hole is shocking, and bound to lead to lost market share. How can you retain customers if you don’t even care enough to see if they’re happy with the way you’re servicing them?

“In an increasingly competitive marketplace, differentiation derived from technological advantage will not in itself be enough,” says Todd McQuilkin, CEO of managed service provider Air-IT. “MSPs looking to embrace new revenue streams and remain pertinent to their existing customer base will need to master the ability of expanding their service-delivery options in line with customer expectations, while adopting a more strategic approach to enabling new levels of efficiency and profitability.”

For MSPs struggling to exploit the opportunities presented by the growing managed services market, joining a peer group might be a very good idea. Partners that report belonging to a peer group such as HTG, which was acquired by ConnectWise earlier this year, say they’re better prepared to keep up with customer demands, and report they provide nearly three times the number of managed services than the primary survey group. In addition, these MSPs have pulled away from the pack when it comes to competitive differentiation; an overwhelming majority of respondents that are members of a peer group offer value-added services like on-site visits, remote management, consulting services and out-of-hours support.

“Our acquisition of HTG Peer Groups earlier this year will allow more ConnectWise partners to have access to the leadership and management resources that that organization provides,” says Lalle. “As the study indicated, MSPs that are involved with peer groups such as HTG tend to be more successful. I think that this is applicable to all companies, whether they are in the U.K., Australia or New Zealand, in the U.S., or in any other country.”

If MSPs want to succeed in today’s channel, it’s critical they find a way to sell and package services that leaves them with a healthy profit margin. Key to doing this, the research says, is listening to your customers and asking your peers how they’re navigating the market. It might seem counterintuitive to consult the competition, but two (or more) heads are better than one, and MSPs that work together have a better chance for success.

Tags: Cloud Service Providers Digital Service Providers MSPs VARs/SIs Channel Research Cloud MSP 501 Sales & Marketing Security Strategy

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