What Is a Managed Services Provider Or MSP?

What Is a Managed Services Provider or MSP? Amy Luby, IT Channel Evangelist Acronis <a href="mailto:[email protected]" target="_blank">[email protected] </a>Dual headquarters in Switzerland and Singapore Dual headquarters in Switzerland and Singapore 1Introduction Dual headquarters in Switzerland and Singapore 2Introduction 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, Acronis • SMB Nation’s SMB 150 • COMPTIA’s Industry Leadership Award Dual headquarters in Switzerland and Singapore 3State of the Channel Dual headquarters in Switzerland and Singapore 4State 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 5Global IT Spending in 2020 2% 3% 20% 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 6What 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 Management Subscription Model MSP Dual headquarters in Switzerland and Singapore 7How Many MSPs? 600,000 Globally 50,000 162,000 MSPs NA Partners NA 17% Profitability is quickly declining for MSPs Average MSP Margin <ul style="display: flex;"><li style="flex:1">Increased Commoditization </li><li style="flex:1">Increased Margin Pressure </li></ul>Forrester 2019 Dual headquarters in Switzerland and Singapore 8State of the MSP Channel Explosive Growth of Cloud Applications New Buyer’s 65% IT Purchases made Outside of IT Revenue Opportunity <ul style="display: flex;"><li style="flex:1">is Downstream </li><li style="flex:1">Journey </li></ul>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 <ul style="display: flex;"><li style="flex:1">▪ All coming through the Channel </li><li style="flex:1">MSFT today is adding 7500+ partners </li></ul>per month, 80% non-transacting at 40%-70% Margin Dual headquarters in Switzerland and Singapore 92020 Channel Trends XAAS 500K TECH CHANNELS The average channel program will grow the number of partners by 10X in five years, and 80% of these new partners will be non-transacting partners. Telco agent / SUB 30K Print / Copy 10K Pro A/V 5K VAR 600K ISV 175K EMTECH, STARTUP 800K Retail/POS 2.5K Trifurcated Channel SHADOW CHANNELS MSP 50K • Influencer Channel a) Affinity partners, referral agents, b) affiliates RSI 2.5K Accounting/CPA 150K Digital agency 108K MSSP 5K MGMT consultants, legal, prof SVCS, etc. • Transactional Channel GSI 20 a) Traditional Resellers INFLUENCERS Alliances, advocates, affinity, ambassador, affiliates, social / digital • Shadow Channel a) Consultants, integrators, b) adjacent ISVs, accountants, c) digital agencies Forrester 2020 Dual headquarters in Switzerland and Singapore 10 Evolution of Managed Services Outcome Focus Value Service Focus Strategic Client Focus Support Focus Orchestration Proactive •Product Focus Automation Innovation Catalyst Reactive •Problem Management •Predictable Results •Strategic Business Ad Hoc •KPI Management & Reporting •Manage to SLA •Operational Efficiency Partner Alerting Focused • •Repeatable Process •Task driven •Full Outsourcing •Utility Computing •Controlled Asset Management •Subscription Model •Inconsistent Documentation •Product-centric •Incident Driven Projects Flexible Outsourcing •Limited Asset Management Bundled Services Technology Silos <ul style="display: flex;"><li style="flex:1">2000 </li><li style="flex:1">2005 </li><li style="flex:1">2010 </li><li style="flex:1">2020 </li></ul>Dual headquarters in Switzerland and Singapore 11 Core MSP Service Offerings Today Cloud Storage <ul style="display: flex;"><li style="flex:1">Help Desk </li><li style="flex:1">Managed Backup </li></ul>Hardware Procurement System Monitoring Core Services System Management Change Management <ul style="display: flex;"><li style="flex:1">System Security </li><li style="flex:1">BC/DR </li></ul>Dual headquarters in Switzerland and Singapore 12 MSP Core Tools Contracts SLA Cloud Storage Projects CRM Invoicing Workflow Ticketing Escalation <ul style="display: flex;"><li style="flex:1">Help Desk </li><li style="flex:1">Managed Backup </li></ul>Hardware Procurement System Monitoring Core Services System Management Change Management Monitoring Management Patching <ul style="display: flex;"><li style="flex:1">System Security </li><li style="flex:1">BC/DR </li></ul>Alerting Scripting Automation Dual headquarters in Switzerland and Singapore 13 Forrester 2020 MSPs by Size Sizing the U.S. IT Channel Using the North American Industry Classification System (NAICS) Large Channels Firm 189 1,511 500+ employees Channel-Oriented Establishment by NAICS Medium Channels Firm 100-499 employees $1M Annual Revenue 119,139 Small Channels Firm 14,926 122,728 139,354 10-99 employees Solution providers, Integrators, Consultants, Systems Builders, MSPs Micro Channels Firm 1-9 employees Forrester 2020 16,377 Est. Total for 2016 Average 8 Employees YoY growth estimate: 4,7% VARs, BC/DR, MSPs, Software Installation Services + 199,756 self-employed, sole proprietors working in a capacity that could be related to the IT channel 3,838 +N number of firms a NAICS classification that makes it difficult to assign directly to the IT channel. A percentage of these firms are likely involved in reselling or influencing IT product or services sales (e.g. custom software development, distributors, consulting firms) Computer facilities management services 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 more skills in cybersecurity will be the #1 action to help ensure solid market performance over the next two years Customers needing to modernize IT systems 48% Growing awareness of managed services model of outsourcing 47% Growing opportunities in 47% specialization Growing need for compliance 40% 40% Customer challenges in hiring IT staff / need expertise 50,000 MSPs NA Expanding base of customers in new markets 37% 25,000+ Focused on Security in NA <ul style="display: flex;"><li style="flex:1">CompTIA, Trends in Managed Services 2020 </li><li style="flex:1">Forrester 2020 </li></ul>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 <ul style="display: flex;"><li style="flex:1">Finance </li><li style="flex:1">Sales </li></ul>Operations = Tight Controls (>Margin) Finance = Subscription Model Operations Dual headquarters in Switzerland and Singapore 17 Sales Top Business Pain Points for MSPs (%): Marketing/Sales Work/Life Balance Revenue Growth 44 Word of Mouth 38 33 30 30 28 27 25 Ransomware/Cybersecurity Hiring Good People Slow Revenue Growth Technology or Vendor Issues Profitability Rely heavily on vendor MDF and joint Marketing Internal Operations Company Culture 13 13 Compliance or Data Privacy Issues Competition Low Churn 9Customer Churn 6CompTIA, 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 <ul style="display: flex;"><li style="flex:1">Period 1 </li><li style="flex:1">Period 2 </li><li style="flex:1">Period 3 </li><li style="flex:1">Period 4 </li><li style="flex:1">Period 5 </li><li style="flex:1">Period 6 </li><li style="flex:1">Period 7 </li></ul><a href="/goto?url=http://www.bmtoolbox.net/patterns" target="_blank">Source: www.bmtoolbox.net/patterns </a>New customers and revenue <ul style="display: flex;"><li style="flex:1">Lost customer and revenue </li><li style="flex:1">Customer base and recurring revenue </li></ul>Dual headquarters in Switzerland and Singapore 19 Simple Subscription Business Logics <ul style="display: flex;"><li style="flex:1">Period 1 </li><li style="flex:1">Period 2 </li><li style="flex:1">Period X </li></ul>…<ul style="display: flex;"><li style="flex:1">If </li><li style="flex:1">then </li></ul>+><ul style="display: flex;"><li style="flex:1">Customer Lifetime Value (CLV) </li><li style="flex:1">Subscriber </li></ul>Acquisition Costs (SAC) Profit <ul style="display: flex;"><li style="flex:1">If </li><li style="flex:1">then </li></ul>+><ul style="display: flex;"><li style="flex:1">New Subscriptions </li><li style="flex:1">Cancelled </li><li style="flex:1">Growth </li></ul>Dual headquarters in Switzerland and Singapore 20 MSP Pricing Models Device and end-user- based pricing Flat fee pricing (aka ‘all you can eat’) Bundled / Portfolio (aka SLA-based, tiered pricing) A la carte pricing User-based pricing Customers select and pay for the specific service elements they need A flat fee for every device, price varying depending on device type Value-based standardized model, customer pays for the total ‘meal deal’, as opposed to ‘a la carte’ A flat fee for an user, user’s multiple devices are all covered Different levels of support packages, portfolio approach • Allows "foot in the door“ from "reactive" customers • Concept is simple and easy to sell • Consistent delivery of services and support accross a business • BUT risky for MSP‘s margin if the number of support/delivery costs for each devices are not factored correctly • More effort is required to sell as individual service items are not priced separately • Can produce higher margin • BUT on the flip side can cost margin if usage or cost of delivery is underestimated • Is flexible and easy to administer and quote for service • BUT it doesn‘t communicate the value as pricing is solely based on the number of devices and end users managed • MSP‘s can offer different package tiers reflecting different service levels • Bundling can reduce the complexity of offering • BUT risk that customer choose the cheapest option • More effort is needed to sell the value of more expensive packages • BUT can extend the sales cycle, as the customer has to select from many choices • Doesn‘t communicate value well • It can make it difficult to upsell further services • Most flexible option for customers • Completely tailored to their requirements • Everything is handled within the one user seat • Customers benefit from knowing all aspects • Flexible approach for customers as devices and end-users can be added as business grows • Customer benefits from an all-encompassing managed service solution with a single cost • Customers can choose a bundle that closely reflects their service requirements and budget • Assumes a full understanding of their requirements of their IT are accommodated within the cost • Easy to administer as the number of users grows • BUT it can be difficult to see the value, as they tend to view the cost purely as a number-based calculation • They don‘t see the total value of services offered • BUT it may be more difficult to justify internally, as opposed to the more transparent "a la carte“ payment • Simplifies the sales process from the customers point of view 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 <ul style="display: flex;"><li style="flex:1">Sales </li><li style="flex:1">Finance </li></ul>Operations >50% Focused on Security Word of Mouth Integrated Tools Manage to SLA 2/3 Technical Leader Core Services Low Margin 40%+ Margins Downstream IT Highly Profitable Over Time <ul style="display: flex;"><li style="flex:1">#1 Constraint </li><li style="flex:1">Tight Controls </li></ul><ul style="display: flex;"><li style="flex:1">Low Churn </li><li style="flex:1">Predictable Outcomes </li></ul>Dual headquarters in Switzerland and Singapore 23 Building a more knowledgeable future CREATE, SPREAD AND PROTECT KNOWLEDGE WITH US! <a href="/goto?url=http://blog.acronis.com/" target="_blank">www.acronis.org </a>Building new schools • Providing educational programs • Publishing books Dual headquarters in Switzerland and Singapore 24

What Is a Managed Services Provider Or MSP?

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