Techaisle Blog

In a word, the most significant potential disruption factor for the managed services market and channel partners is still cloud. Techaisle data shows that 68% of VARs are offering managed services to their SMB customers but only 46%, that is, less than one-third (31%) of all SMB-focused VARs have been very successful in achieving consistent growth and profitability within managed services. On the flip-side, 83% SMB-focused MSPs have become very successful in their managed services business model. But the MSPs have not achieved the same success in cloud. Only 63% of MSPs are currently offering cloud and although 72% of them have achieved cloud success, it is still, only 45% of all SMB-focused MSPs, slightly less than half of the managed services success. In fact, when extended, data shows that VARs are still caught in a spaghetti junction, they are neither achieving great success in cloud nor in managed services. In the case of MSPs, the overwhelming vendor forces are proverbially narrowing the banks of the river with over capacity.

The success in SMB mobility-focused business model is even lower than cloud and managed services.

Inability to balance product resale and services revenue, inability to adjust to a customer-centric approach and inability to align recurring and non-recurring revenues are severely holding back the MSPs. Since 2008 Techaisle has been conducting managed services studies, both demand side within SMB & Midmarket segments and supply-side within the VARs, MSPs, SIs, SPs, Consultants offering managed services. Each year Techaisle (latest report deliverables are here) has been quantifying what separates the successful and unsuccessful managed services channel partners. And there are several data-evinced barriers to entry and success factors. To understand barriers to entry, it is important to first define the characteristics that are important to success as an MSP. There are many but let us discuss three that always percolate to the top:

1. The ability to sell services independently from product sales (while maintaining the ability to sell products to customers as well).
2. The ability to package and efficiently deliver standardized services to multiple customers, growing by expanding portfolios of discrete services rather than by simply agreeing to address sprawling customer requirements on a ‘one-off’ basis.
3. The ability to align internal processes and costs/cash flow with a recurring revenue (rather than transactional) approach to the business.

Techaisle research substantiates the importance of each of these key characteristics.

The subject of “IT/business alignment” has been a hot topic of debate for many years. Yet despite this interest, business and IT interests and objectives frequently diverge. To some extent, this is inevitable: the business is concerned with issues that extend beyond IT, and IT needs to manage issues that are (at least, as long as they are working) beneath the notice of most business professionals. However, today’s business environment is increasingly dependent on IT support, and IT products and services that improve productivity and efficiency or which expand market reach and potential. IT initiatives that can be linked meaningfully to broader business objectives are best positioned to attract corporate support – meaning that products and services that address key business priorities have the greatest potential for growth.

The Techaisle SMB survey, which captured the perspectives of both business decision makers (BDMs) and IT decision makers (ITDMs) in US SMBs ranging from 1-999 employees, looked at key business issues and in particular IT challenges. The list of the most important IT challenges faced by SMBs such as budget constraints and the need to control IT costs and improve justification for new IT investments are both tied to the goal of reducing operational cost, and effective maintenance of current IT infrastructure contributes to reduction in operational uncertainty, and thereby get linked to managed services.

US and European SMB buyers believe that managed services contribute to both cost savings and to business growth. As the figures below show, managed services is seen as helping buyers to achieve lower IT costs, greater control over IT environments, and higher performance with less IT downtime; managed services also helps businesses to “maintain a lean business environment” and to provide predictable performance, user experience and cost. On the growth side of the equation, superior (relative to internal options) MSP responsiveness to IT problems is seen as a means of achieving better productivity; MSPs are also seen as helping SMBs to maintain focus on core business competency, staying abreast of technology changes and providing support for business continuity and disaster recovery.

54% of US SMBs and 68% of Europe SMBs say that managed services help improve bottom-line, contribute to profitability and reduce costs. On the flip side, 46% and 32% respectively state that they view and have experienced managed services as a technology contributing to growth and revenue. A more detailed look at the data underlying this summary analysis illustrates the many benefits that SMBs obtain from managed services (and MSPs).