What Is a Managed Services Provider Or MSP?
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What Is a Managed Services Provider or MSP? Amy Luby, IT Channel Evangelist Acronis [email protected] Dual headquarters in Switzerland and Singapore Dual headquarters in Switzerland and Singapore 1 Introduction Dual headquarters in Switzerland and Singapore 2 Introduction 26 Years in IT Channel Former MSP, Master MSP CompTIA Community Member: Managed Services, Security, Emerging Tech ASCII Board Member Awards: • CRN’s Channel Chief & Women of the Channel Awards • Forrester top 100 Most Influential in the Channel Amy Luby • MSP Mentor Top 250 Influencers & Top 100 Global MSPs Channel Chief Evangelist, • SMB Nation’s SMB 150 Acronis • COMPTIA’s Industry Leadership Award Dual headquarters in Switzerland and Singapore 3 State of the Channel Dual headquarters in Switzerland and Singapore 4 State of the MSP Channel 75% of world trade flows indirectly 90% of IT trade flows indirectly through the Channels Dual headquarters in Switzerland and Singapore 5 Global IT Spending in 2020 2% 20% 3% 7% 32% 14% 5% The Global Information Technology Industry: 6% $5.2 Trillion 11% Estimated 2020 spending at constant currency. Encompasses hardware, software, services and telecommunications Source: IDC Dual headquarters in Switzerland and Singapore 6 What is a Managed Services Provider? A Managed Service Provider (MSP) is a company that remotely manages their client's IT infrastructure and devices, on a proactive basis, under a subscription model. Proactive IT Subscription Management Model MSP Dual headquarters in Switzerland and Singapore 7 How Many MSPs? 600,000 Globally 162,000 50,000 17% Partners NA MSPs NA Profitability is quickly declining for MSPs Average MSP Margin Increased Commoditization Increased Margin Pressure Forrester 2019 Dual headquarters in Switzerland and Singapore 8 State of the MSP Channel Explosive Growth New Buyer’s 65% IT Purchases Revenue Opportunity of Cloud Applications Journey made Outside of IT is Downstream Top SaaS platforms built Channel Ecosystems: ▪ SalesForce, Marketo, WorkDay… ▪ DreamForce had 65,000 in attendance, all adding value to the Force.com platform ▪ For every $1 in SF licenses sold, there is $4.14 in indirect revenue ▪ Integration, Implementation, Installation, Security, Compliance, Continuity MSFT today is adding 7500+ partners ▪ All coming through the Channel per month, 80% non-transacting at 40%-70% Margin Dual headquarters in Switzerland and Singapore 9 2020 Channel Trends XAAS TECH CHANNELS The average channel program will grow 500K Telco agent / SUB 30K the number of partners by 10X in five VAR years, and 80% of these new partners ISV Print / Copy 10K 175K 600K Pro A/V 5K will be non-transacting partners. EMTECH, Retail/POS 2.5K STARTUP Trifurcated Channel 800K MSP SHADOW • Influencer Channel 50K CHANNELS a) Affinity partners, referral agents, RSI Accounting/CPA 150K b) affiliates 2.5K Digital agency 108K MSSP 5K MGMT consultants, • Transactional Channel GSI legal, prof SVCS, etc. a) Traditional Resellers 20 • Shadow Channel INFLUENCERS Alliances, advocates, affinity, a) Consultants, integrators, ambassador, affiliates, social / digital b) adjacent ISVs, accountants, Forrester 2020 c) digital agencies Dual headquarters in Switzerland and Singapore 10 Evolution of Managed Services Outcome Focus Service Focus Client Focus Value Strategic Support Focus Proactive Orchestration • Product Focus Automation Innovation Catalyst Reactive • Problem Management • Predictable Results • Strategic Business Ad Hoc • Operational Efficiency Partner Alerting KPI Management & • Focused • Task driven Reporting Repeatable Process • Full Outsourcing • • • Controlled Asset • Inconsistent Manage to SLA Incident Driven Management Utility Computing Documentation • Projects • • Flexible • Subscription Model Product-centric Outsourcing Limited Asset • • Management Bundled Services Technology Silos 2000 2005 2010 2020 Dual headquarters in Switzerland and Singapore 11 Core MSP Service Offerings Today Cloud Storage Help Desk Managed Backup Hardware System Monitoring Core Procurement System Services Change Management Management System Security BC/DR Dual headquarters in Switzerland and Singapore 12 MSP Core Tools Contracts SLA Cloud Storage Projects CRM Help Desk Managed Backup Invoicing Workflow Ticketing Hardware System Monitoring Escalation Core Procurement System Services Change Management Management Monitoring Management Patching System Security BC/DR Alerting Scripting Automation Dual headquarters in Switzerland and Singapore 13 MSPs by Size Forrester 2020 Sizing the U.S. IT Channel Using the North American Industry Classification System (NAICS) 189 Large Channels Firm Channel-Oriented 500+ employees Establishment 1,511 Medium Channels Firm 119,139 by NAICS 100-499 employees $1M Annual 14,926 Small Channels Firm 10-99 employees Revenue Solution providers, Integrators, Consultants, Micro Channels Firm Systems Builders, MSPs 122,728 1-9 employees 16,377 Forrester 2020 139,354 Est. Total for 2016 VARs, BC/DR, MSPs, YoY growth estimate: 4,7% Average Software Installation 8 Employees Services + 199,756 self-employed, sole proprietors working in a 3,838 capacity that could be related to the IT channel Computer facilities +N number of firms a NAICS classification that makes it management difficult to assign directly to the IT channel. A percentage services of these firms are likely involved in reselling or influencing IT product or services sales (e.g. custom software development, distributors, consulting firms) CompTIA 2019 State of the Channel Report Dual headquarters in Switzerland and Singapore 14 MSPs are Security Focused Perceived driver of positive MSP performance Growing need for cybersecurity 52% expertise 52% of MSPs say gaining Customers needing to 48% modernize IT systems more skills in cybersecurity will be the #1 action Growing awareness of managed 47% services model of outsourcing to help ensure solid market performance over the next Growing opportunities in 47% specialization two years Growing need for compliance 40% Customer challenges in hiring IT 40% staff / need expertise 50,000 MSPs NA Expanding base of customers in 37% new markets 25,000+ Focused on Security in NA CompTIA, Trends in Managed Services 2020 Forrester 2020 Dual headquarters in Switzerland and Singapore 15 Three Pillars of the MSP Model Dual headquarters in Switzerland and Singapore 16 Managed Services Business Model Sales = Word of Mouth Finance Sales Operations = Tight Controls (>Margin) Finance = Subscription Model Operations Dual headquarters in Switzerland and Singapore 17 Sales Top Business Pain Points for MSPs (%): Marketing/Sales 44 Word of Mouth Work/Life Balance 38 Revenue Growth 33 Slow Revenue Growth Ransomware/Cybersecurity 30 Hiring Good People 30 Technology or Vendor Issues 28 Rely heavily on vendor MDF Profitability 27 and joint Marketing Internal Operations 25 Company Culture 13 Low Churn Compliance or Data Privacy Issues 13 Competition 9 Customer Churn 6 CompTIA, Trends in Managed Services 2020 Dual headquarters in Switzerland and Singapore 18 Customer Base and Monthly Recurring Revenue (MRR) Effect Most revenue comes from the customer base, not from new customers Time Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Source: www.bmtoolbox.net/patterns New customers and revenue Lost customer and revenue Customer base and recurring revenue Dual headquarters in Switzerland and Singapore 19 Simple Subscription Business Logics Period 1 Period 2 Period X If + … > then Customer Lifetime Value (CLV) Subscriber Profit Acquisition Costs (SAC) If + > then New Subscriptions Cancelled Growth Dual headquarters in Switzerland and Singapore 20 MSP Pricing Models Device and end-user- A la carte pricing User-based pricing Flat fee pricing Bundled / Portfolio based pricing (aka ‘all you can eat’) (aka SLA-based, tiered pricing) Customers select and pay for A flat fee for an user, user’s A flat fee for every device, Value-based standardized model, Different levels of support the specific service elements multiple devices are all covered price varying depending on customer pays for the total ‘meal packages, portfolio approach they need device type deal’, as opposed to ‘a la carte’ • Allows "foot in the door“ from • Concept is simple and easy to • Is flexible and easy to • More effort is required to sell • MSP‘s can offer different "reactive" customers sell administer and quote for as individual service items are package tiers reflecting • BUT can extend the sales • Consistent delivery of service not priced separately different service levels cycle, as the customer has to services and support accross • BUT it doesn‘t communicate • Can produce higher margin • Bundling can reduce the Impact select from many choices a business the value as pricing is solely • BUT on the flip side can cost complexity of offering • Doesn‘t communicate value • BUT risky for MSP‘s margin if based on the number of margin if usage or cost of • BUT risk that customer well the number of devices and end users delivery is underestimated choose the cheapest option MSP‘s support/delivery costs for managed • More effort is needed to sell each devices are not factored • It can make it difficult to upsell the value of more expensive correctly further services packages • Most flexible option for • Everything is handled • Flexible approach for • Customer benefits from • Customers can choose customers within the one user seat customers as devices and an all-encompassing a bundle that closely reflects • Completely tailored to their • Customers benefit from end-users