The Biggest Managed Services Question of All

Sometimes a seemingly complex question has a simple answer. For instance: If managed services is the future of the channel, how many so many resellers have yet to really thrive as managed service providers? That question came up (yet again) during the Ingram Micro Seismic Partner Conference in Dallas. I considered some data points, looked at the numbers then drew my own conclusion.

Let's start with some raw numbers. In North America, there are roughly:

  • 80,000 to 120,000 VARs and resellers
  • 8,000 to 12,000 of those VARs/resellers have transitioned to managed service providers
  • 800 to 1,200 of those VARs are doing managed services really, really well
So I'm basically using the the 10 percent rule: Based on speaking with a range of vendors regularly, I think 10 percent of the channel has moved to managed services, and 10 percent of those MSPs are performing extremely well in managed services.

Moment of Clarity

Earlier today, an IT reporter from Canada asked me why more resellers aren't successful MSPs. In other words, if managed services is such a great business model how come more resellers don't embrace it?

Then, a simple two-part truth occurred to me:
  • First, I believe only 15 percent to 20 percent of resellers really run their businesses extremely well.
  • Second, why would anyone expect the other 80 to 85 percent of "average" or "poor" resellers thrive as managed service providers?
In other words: Bad or marginal leadership in a reseller organization won't suddenly become good leadership when transitioning to managed services.

Bottom line: The MSP industry continues to grow. MSPs that run into problems typically face business rather than technical challenges.

Still skeptical of this market? Ingram Micro Seismic VP Justin Crotty noted this morning that the Seismic business grew roughly 150 percent in 2008 vs. 2007. And Seismic now encompasses more than 1,000 MSPs.

For a market that isn't living up to some skeptics' expectations, that type of growth is rather impressive -- especially in a recession. The sooner we all realize that many resellers will never become successful MSPs, the faster we'll see the MSP industry live up to (or exceed) expectations.

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