Have 10 Percent of MSPs Closed Shop?
I need to make sure the following blog entry is in the proper context: Many managed service providers continue to grow and thrive. We’ll be sharing some early data points from our ongoing MSPmentor 100 research over the next few days. But this little anecdote is important to note: A few folks allege that 10 percent of MSPs have disappeared or closed up shop in 2009. True?
I first heard that “10 percent” nugget down at the N-able Partner Summit (Oct. 14-16, Arizona). N-able CEO Gavin Garbutt was his usual optimistic self. But for one brief moment at the conference, Garbutt noted that the North American Managed Services market is fundamentally broken — pointing out that the vast majority of small businesses had yet to benefit from managed services. Eager to overcome that inertia, N-able introduced a “freemium” strategy to help its partners broaden their customer bases.
There was also brief talk at the conference about 10 percent of MSPs disappearing or closing up shop in 2009. No need to press the panic button. There were 350 healthy MSPs at the event. And I suspect many defunct MSPs were resellers that briefly tested SaaS tools but didn’t really have a managed services strategy in place.
Still, the chatter was a healthy reminder that a rising tide doesn’t lift all boats. As Arlin Sorensen from HTG Peer Groups has mentioned to me a few times, the best VARs and MSPs over the long haul will have two things in common: Great sales and great marketing efforts.
Plenty of aspiring MSPs email me — asking for guidance on which RMM or PSA tool(s) to use. When I reply back asking about their marketing, sales and business strategies the conversation often goes silent. I think those are the 10 percent of folks capsizing right now.
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Good points, Joe.
I would also add in that those falling off or already fell off the cliff have not grasped the notion that regardless of the model they choose to use, they have a business and it needs to be operated in that fashion. That means both in their delivery of services/products and internally regardless of their size, niche or anything else.
Putting 2 more cents in, over the long haul those that will be rising to the top of VARs and MSPs will not only have great sales and marketing efforts, but the structure, systems and processes to operate a sustainable/scalable business to take advantage of an increased client base and still deliver services as promised.
George Sierchio
JP…great post!
Here are some additional thoughts I would add. Still today many MSP’s are caught up in paralysis by analysis! With tools do I use? Flip flopping between tools and then thinking about how to make the best QBR. Here is a tip! Microsoft didn’t become the leader in desktop and server software because it had the best product, it got it out there and then adjusted along the way.
I also agree with my trusted colleague George. Systems and processes are critical. Why is McDonald’s so successful or even Starbucks? They create a repeatable process which provides the same end user experience all the time.
Also, many MSP’s leave way too much money on the table, they never truly capture their fair share of the IT wallet of the client. This is where the sales and marketing team comes in. At Bulletproof, we have invested heavily in Marketing and Sales, to a point where it is a good percentage of our overall expense, however it is an investment in the future.
Stop by technical and start being focused on business and do something to attract clients to you.
Cheers
Stuart Crawford
Bulletproof InfoTech
Web: http://www.bulletproofIT.ca
Blog: http://stuart.calgarybloggers.ca
Great follow up post George. My bet is most failed MSPs never ask the most basic universal questions, i.e. What business am I in? Who is my ideal customer? What’s is in my offering catalog? How do I price my services to achieve and sustain profitability? Do I have the engineering and support skills required to be in a 24X7 business?
When a hardware partner pushes a new box out into the channel, it come with specs, collateral and pricing already on board. Because of this, VARs have little experience “productizing” their new MSP offers. Like Joe said, until the VAR-turned-MSP gets over this hump, why spend time shopping for a service desk tool or RMM solution.
Looking at our numbers (though to be honest, we do not break down the VAR / MSP / IT Consultant / IT Solution Provider categories for our partner base) the number is far higher than 10%.
That may sound like a bad thing but when you consider the ordinary failure rate of small business (which almost all MSPs are) the 10% is almost statistically insignificant.
-Vlad Mazek
CEO, Own Web Now Corp (ExchangeDefender, Shockey Monkey, etc)
I would have to agree 100% with the responses so far to this article. From the vendor’s perspective, we see this all the time. Someone get’s lured over to the managed service model based on recurring revenues or increased utilization rates but doesn’t take the time to figure out how they’re going to make it work. It truly is a different business model and requires a solid plan all the way from the points highlighted by Phil amp; George to finding the right sales resources and having a compensation model that will incent them.
Also, as a vendor in this industry we’re directly linked to these issues as outlined in earlier MSP Mentor articles like MSPs: Meet the Elephant in the Room amp; The Biggest Risk to the Managed Services Market. In order to mitigate your exposure these issues you really need to ask yourself one question, “Am I prepared?”
Once you have an answer to that question and have a pretty good handle what you need in order to go forward, make the right partnerships with organizations and resources that will help you reach your managed services goals.
Mike Byrne
PacketTrap Networks
Director of Partner Management
We are an MSP service provider doing IT support in Los Angeles for 15 Years. Marketing during economic slow-downs has always worked for us. In fact, during the last year, we have brought on more new clients than at any other 1 year period in our history. At the same time the economic climate has caused some of our biggest clients (i.e. retail furniture and garment wholesalers) go out of business. So, the new blood has been a life saver.