Race to the Bottom, Or Race to the Top?
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.
Note: 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.
Mr. Sandiford,
I wonder if you can tell me if MSPs are increasing their geographic footprint compared to resellers.
Do you have any data indicating how many the total miles a typical small business MSP serves? I ask because I’m trying to determine how much additional reach, if any, my business can gain through remote services. Thank you for your consideration.
To me “race to the Top” is selling to bigger enterprise level clients. But it is completely another game… You cannot offer commodity to those guys, they have money to pay but you have to be able to bent over and integrate around their needs rather then just pushing your ideas. I was on a meeting with a large potential client for monitoring services. They totally kill our proposition and basically said, you want the deal? you integrate with us. If you don’t, we can figure out something on our own…
Maybe it is just our experience…
Christopher,
If remote monitoring and management means that you essentially don’t need to go on site except for hardware and customer relations (which I and most others I know believe to be true), then the entire issue of physical proximity to your customers becomes less important and maybe not even relevant at all. One of our partners is managing the IT for a customer’s small overseas offices in several countries and many are narrowing their focus to vertical and horizontal niches on a regional or national level, outsourcing the small amount of off site work to sub contractors. The only remaining issue is customer management so the key question is whether you need to be face to face with your end customer. I think the jury is out on this one and ulitmately it depends on your business model.
To answer your question any small service provider should be able to dramatically extend their range. The math is fairly simple. If you used to visit a customer once a week and now you only go once a month to discuss customer priorities and opportunities, all of which can be tightly scheduled, you should be able to factor this into a cost model, pick a niche where you have a competitive advantage and start to grow your business competing based on strategic business focus rather than on customers within a 30 minute radius of your office.
Digital Edge,
I think your experience is universal. Big customers call the shots so a standard monitoring plan may not get you to first base. A successful enterpise strategy is typically targeted at solving problems for which they do not have the skills. So this could be monitoring and management of their IP telephony, email, security, etc. A lot of our partners are actually selling the entire platform to the larger end customer for their internal use but bundling this with a specialized monitoring and management service package – a great way to make a lot of money while building a deeper customer relationship by delivering solutions that meet their needs. Would this kind of strategy be useful way for you to differentiate your services and target these larger businesses?
I agree that the race to the top or the bottom is not just about price, but also quality of service, and selecting tools that allow you to provide efficient high quality service based on your offering.
@Christopher M
“I ask because I’m trying to determine how much additional reach, if any, my business can gain through remote services.”
Another component to consider in this determination is how you can more quickly and efficiently service local customers, increasing the value of your service to them.