What Is a Managed Services Provider or MSP?
Amy Luby, IT Channel Evangelist Acronis
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 can be added as managed service solution their service requirements requirements knowing all aspects business grows with a single cost and budget • Assumes a full understanding of their IT are accommodated • BUT it can be difficult to see • BUT it may be more difficult • Simplifies the sales process of their requirements within the cost the value, as they tend to to justify internally, as from the customers point • Easy to administer as the view the cost purely as a opposed to the more of view number of users grows number-based calculation transparent "a la carte“ • They don‘t see the total value payment
CustomersBenefits of services offered
Dual headquarters in Switzerland and Singapore 21 Conclusion
Dual headquarters in Switzerland and Singapore 22 50,000 MSPs in NA Proactive IT Management + Subscription Model
Average 8 Employees, $1M in Annual Revenue
Sales Operations Finance
>50% Focused on Security Integrated Tools 2/3 Technical Leader Word of Mouth Manage to SLA Core Services Low Margin #1 Constraint Tight Controls 40%+ Margins Downstream IT Low Churn Predictable Outcomes Highly Profitable Over Time
Dual headquarters in Switzerland and Singapore 23 Building a more knowledgeable future
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Dual headquarters in Switzerland and Singapore 24