Techaisle Analyst Insights

What is the current state of managed services in the channel?

Techaisle’s SMB global channel partner research shows that in the US 71% are currently offering one or more managed services solutions and another 18% are planning to offer managed services within one year. Techaisle believes that the channel is at the beginning of a migration from generalist to specialist firms that will play out over the next few years. With that in mind, it is fair to ask, how widespread is managed services delivery today?

Figure below, taken from Techaisle’s US SMB Managed Services Channel Study illustrates the proportion of channel partners that currently offer managed services to SMBs. Unsurprisingly, 100% of MSPs report that they do so. What might be more surprising is the extent to which channel members with other core business models provide managed services to their SMB clients. Roughly two-thirds of VARs and SPs, and 80% of SIs, offer managed services to SMB customers. IT consultants are less likely to do so, but here, too, one-third of firms are already using managed services delivery to support SMB clients.

Above data demonstrates that there has been and continues to be substantial take-up in managed services as a business delivery model outside of MSPs. This will help to build SMB customer awareness of the benefits of the approach and comfort with managed services as a delivery model. It will also have a positive impact on the channel generally, as experience with managed services helps build channel familiarity with recurring revenue models which will be important in other important channel business areas, such as cloud.

Comfort level with – and profitability of – managed services

Clearly, SMB channel members of many types are investing in developing managed services capabilities. This trend begs the question, to what extent are these firms benefitting from these investments?

This is a two part blog article. The first part, published earlier, reviewed the predictions we made for 2015 and the second part, below, focuses on outlook for 2016 and for the longer term (2017 - 2020).

Top 10 Predictions for Year 2016

1. 2016 will see even more intense emphasis on “CIA-Plus”
IT Suppliers will begin to align their offerings with Cloud, IoT, and/or Analytics; products that do not address end-user needs in these areas will be positioned as infrastructure and integration services needed to capitalize on these technologies. This trend, like hybrid IT, will continue into 2017. In 2016, Cloud and Analytics will remain among the top five IT priorities of SMBs and midmarket businesses. IoT will inch its way up into the priority list, though adoption will remain limited.

2. Rise of IoT will be constrained by a lack of real-world examples
From a buy-side perspective, the rise of IoT will need to be fueled by real-world examples showing the benefits of automating tasks and processes within IT and in other sectors. Within the SMB community, we expect sporadic implementation and a lack of concerted effort towards creation of IoT strategy, even though IT suppliers will continue to push forward their solutions hoping to remain top-of-mind in order to claim leadership in this emerging space. Each IT supplier will create its own solution set causing decision and adoption inertia, despite the wave of innovation that we expect to see emerge from the smaller & more agile IoT providers that are able to more easily align IT expertise with real life solutions. Experienced consultants and system integrators in particular will hold sway in matching SMB adopters with suppliers.

3. IoT supplier success will be determined by ecosystem management
On the sell side, the rise of IoT will be accompanied by an intense wave of interest in ecosystem management. It is difficult to buy or sell a “box of IoT”, though providers will claim to provide complete solutions. Parenthetically, this constraint is not limited to IoT. While it is possible to sell a “box of cloud” under the right circumstances, only AWS really manages to do so. And while one can sell a “box of analytics”, the boxes themselves come in a lot of different shapes and sizes. To meet SMB and enterprise buy-side demand for IoT, sellers will assemble coalitions that provide the many products and services that comprise an IoT solution. This will make alliance management a key success factor in the marketplace. The last time alliances determined market leadership; SAP became the global standard in ERP. Niche value added reseller may find a new source of success in IoT.

4. Business transformation will continue to elude analytics users
Analytics users will find that they are not achieving the expected benefits, prompting divergent responses. Some SMBs will find that analytics has not been transformative, and will blame the technology; others will look to move past descriptive and diagnostic views, piloting predictive or prescriptive initiatives. One of these responses is clearly more sensible than the other, but that does not mean it will be universal, at least in 2016. Focus on visualization will increase (mine is better than yours), on how the technology can solve business issues and challenges for SMBs and midmarket customers. Simplified implementation of customer and social analytics will be key drivers of adoption.

5. “Hybrid” will be used more often in conjunction with “IT” than “cloud”
User organizations will accept the notion that their focus on cloud needs to evolve into a focus on hybrid IT, as firms realize that their platforms and management scope must encompass on and off-premise systems. Truthfully, there is still a lot of work to do in cloud adoption. But the nature of the discussion has changed from “what and how do we move to the cloud?” to “what do we do to build an integrated, manageable infrastructure?” In 2016, there will likely no longer be an infrastructure debate about use of cloud, but there will be an important emerging discussion around managing hybrid IT.

6. Collaboration will drive “silo” to the realm of four-letter words
Anywhere, anytime also means any type of collaboration. SMB & midmarket businesses will look for unified shared workspaces that allow employees to enter into the workspace from any entry point to work together, collaborate and interact. Collaboration solutions cannot be deployed on stand-alone platforms – they need to be viewed as a framework for integrating multiple capabilities, native to multiple applications.

December has traditionally served as the occasion for the publication of New Year forecasts. It’s understandable that we want to look ahead to the sources of opportunity that lie ahead. But in the business world, December also marks the beginning of the review season. And while detailed forecasts focus on the next twelve months, the planning horizon needs to look a little further, so that tactics provide support for business strategies, rather than simply delivering a series of course adjustments.

This is a two part blog article. The first part, below, reviews the predictions we made for 2015. Second part will focus on outlook for 2016 and for the longer term.

A look back – what was it we said was right around the corner, again?

Here are the issues we highlighted, “Ten predictions for 2015 – and five issues to keep an eye on for 2016 and beyond” and how we think we did in our prognostication.

The Top 10 for 2015

1. Hybrid arrives – not as a strategy but as the result of many discrete decisions

With the benefit of today’s perspective, we might fairly say that in 2015 and for several more years to come, a more apt description of hybrid is journey rather than destination. Digging into the detail, though, we believe our prediction that “an ability to manage hybrid infrastructure will become a key corporate IT requirement in 2015” has been borne out by the focus on tools and strategies (ranging from Docker to Agile) that we saw throughout the year. In Techaisle’ SMB Cloud adoption studies, there was a sense of growing ubiquity in the usage and plans for private, hybrid and public cloud. Use of hybrid cloud continued to increase as both a conscious strategy and as a reaction to use of both public and private resources within a single infrastructure; by the end of 2015, two-thirds of companies with 100-999 employees were using hybrid models.

2. Collaboration becomes a much bigger concept

In 2015, collaboration began to expand beyond file-sharing to become a necessary tool for driving decision-based agility, fostering innovation and extending customer intimacy. Collaboration is a process rather than a discrete outcome. Our key notion that collaboration “extends beyond the corporate staff (and as a result, beyond large enterprises) to include customers” clearly did reflect strategies and investments in 2015. Within the SMB segment collaboration is increasingly becoming a central component to virtually all business activities rather than a means to enable connections between discrete tasks. Other changes in this area will further reshape collaboration, but you’ll need to refer to the “forecast” part of the blog for that discussion.

3. Collabmobilicloud becomes a management reality

The core concept explained that despite vendor tendency towards defining collaboration, mobility and cloud as separate domains, both enterprise and SMB users have started viewing them as integrated components of business solutions. The user belief that collaboration, mobility and cloud should all be attributes of modern applications has become clearer, and even suppliers are starting to recognize the importance of an integrated collabmobilcloud approach.

In the course of Techaisle’s SMB & Midmarket IT Decision Making Authority: IT vs LoB, BDMs (business decision maker) and ITDMs (technology decision maker) were asked to identify the “greatest benefits” and “key attributes” of both cloud and mobility solutions.

There is an interesting pattern apparent in the survey research findings. When adopting mobility solutions small business BDMs are focused on addressing near-term pain points: attracting new customers, improving accuracy, addressing work/life balance. The ITDMs appear to be taking a longer view, focused on applying automation to bring structure to business processes – improving the quality of interaction through application of mobility solutions, improving the quantity of those interactions, increasing process efficiency.

Midmarket BDMs are looking to mobility to help increase business process efficiency and customer interaction quality. Midmarket ITDMs, on the other hand are focused on increasing the quantity of customer interactions, which would logically impact other core areas (such as business user productivity and process efficiency) as well.

When discussing the mobility solution attributes that BDMs and ITDMs consider important to delivering on mobility benefits BDM and ITDM buyers have similar and common perceptions across all business sizes. “The ability for the mobile solution to be integrated seamlessly with existing corporate systems” – ensuring consistency across devices – is ranked as the most important mobility solution attribute by small business BDMs, and the second-most important attribute by midmarket BDMs. The ability to create and sustain secure connections for remote workers and the ability to deliver seamlessly across the “three screens” of PCs, tablets and smartphones are also priorities for BDMs in both small and midmarket businesses. ITDMs also have some key common areas of focus: the ability to integrate multiple media types into outbound communications and the ability to read or write data from/to corporate systems are the two top-ranked attributes in both employee size categories.

It is clear that each IT and business professional’s perspective on the mobility journey is shaped by their context – by their business objectives, and by the requirements imposed by the size of their organization. In the figure below we have taken the results from the Techaisle survey and plotted them in three dimensions.

A look at the findings from parallel questions on cloud also reveals differences between ITDMs and BDMs, but similarities between small and midmarket firms. Looking at cloud benefits, BDMs, especially in small businesses, view cloud as a means of introducing capabilities that would have been cost or time prohibitive, and of reducing business process costs. ITDMs, on the other hand, view cloud primarily as a means of reducing IT costs. ITDMs in both small and midmarket businesses recognize that cloud can enable their organizations to be more agile, which connects well with a theme expressed by BDMs.

When analyzing the key attributes leading to realization of the above cloud benefits, data shows some differences in emphasis between small and midmarket firms. The most important difference between BDMs and ITDMs is the BDMs’ emphasis on collaboration: BDMs in both small and midmarket businesses are more likely than their ITDM counterparts to view support for collaboration as a key cloud solution attribute. BDMs are also more likely than ITDMs to look to the cloud for detailed reporting and for support of features – disaster recovery, on-demand data access, and mobility support – that may be lacking in their current environments. ITDMs, on the other hand, are focused on technical attributes (scalability, integration, IT management capabilities) that are difficult and/or expensive to develop without third party support.

Understanding the requirements, preferences, success metrics and areas of focus of BDMs and ITDMs within both small and mid-sized businesses is critical to structuring an effective SMB sales and marketing strategy. The findings open the door to an important issue: the requirements in structuring and communicating messages to ITDMs and BDMs within small and midmarket businesses. To effectively engage with and manage the increasingly-diverse decision making unit, IT suppliers will need to structure messages that address the "care-abouts" of BDMs and ITDMs, and deploy those messages through the channels that are most effective at reaching each community.