Service provider showing a colleague data on his monitor

Managed Service Providers: Looking to the Future

7 Apr 2017 by Howard M Cohen

In the beginning — August 1981, to be specific — was the reseller, dubbed so by IBM because of its rule that “nobody but IBM sells IBM.” The plan was for IBM to sell its new personal computers to large chains such as ComputerLand, Nynex and Sears Business Centers, and for those salespeople to “resell” them to end-user customers. Thus was born the “reseller channel,” which went from manufacturer to distributor to reseller to customer.

Resellers went through many transformations between 1981 and now. Many, calling themselves Value-Added Resellers (VARs), added value to the purchase of PCs by preparing them, performing “burn-in” testing, loading software and more.

As profit margins eroded to basis points (fractions of a percent), VARs could no longer afford to give away free services and started selling and providing solutions. With the rise of local and wide area networking, these solution providers flourished.

Networks needed management.

As network services grew more popular, it became obvious that someone would have to monitor and manage them. Small companies had no IT staff, and large companies had IT services focused on their legacy systems and couldn’t be distracted to tend to these networks of small computers.

Many solution providers who previously sold only IT hardware support services found themselves learning how to monitor and manage networks, identifying themselves as Managed Service Providers (MSPs).

Eventually, almost every technology service provider that provided any IT service from IT implementation to device management to IT management to temporary IT staffing referred to itself as an MSP. Customer confusion reigned.

Then came the cloud.

With the rise of the cloud, one would think many MSPs would start calling themselves cloud service providers, but many resisted the transition to the cloud because it eroded their product sales, or they didn’t trust it.

Cloud computing for business grew exponentially despite doubts. MSPs had to find their place in this new world, and many began to expand their monitoring and management services from on-premise infrastructure to include new cloud infrastructure and related cloud computing services.

Focus for success.

In a world where everyone is an MSP, it becomes nearly impossible to establish your sustainable competitive advantage in the minds of prospective customers. They think an MSP is an MSP is an MSP. This only creates market confusion, making it harder for all MSPs to sell their services.

At the same time, an overload of MSPs provide essentially the same services, making it hard for customers to differentiate them from one another. In such an environment, the lowest price solution often wins. Anyone who has spent any time in any professional services company knows that competing on price is a sure formula for disaster.

Innovative MSPs have heeded advice from leaders such as Microsoft, which has long implored MSPs to take a journey of business model transformation. Microsoft has carved an intriguing variety of new paths, including:

Specific solution provider

The introduction of Microsoft cloud services such as Office 365 has given birth to a generation of “born-in-the-cloud” providers of enterprise business cloud solutions. These specialists focus not only on the productivity suite itself, but also on all of the relevant utility and other services required to successfully build cloud-based solutions that every company needs.

Looking forward

As the cloud continues to replace on-premise infrastructure, solution providers that formerly focused on on-premise infrastructure will need to find new paths. Many will turn to creating their own cloud-based software, transforming into Independent Software Vendors (ISVs). They will need an effective channel to sell their software for them, opening another opportunity for specific solution providers.

Data analytics provider

Data scientist is one of the fastest-growing professions in IT. While almost every company needs to crunch data, analyze it and create narratives for decision-making from it, most are currently ill-equipped to do all of the analytics required. Many MSPs will refocus on helping customers manage and leverage their data assets for business advantage.

Network deployment and integration, mobile and other wireless technologies will all continue to develop, as will the management requirements of the exploding Internet of Things. Where is your company headed as you move forward from infrastructure to your next management challenge?

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