In Search Of Managed Services
Managed services may be more of an evolution than a revolution
3:00 PM EST Fri. Mar. 24, 2006
From the March 27, 2006 issue of CRN
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A new in-depth survey of 250 solution providers, conducted by the Institute for Partner Education & Development (IPED) and administered in partnership with CRN, revealed that MSP offerings evolve quite naturally from traditional solution provider business models. In fact, the survey results challenge some common assumptions about how new MSP customers are transitioned, which managed services are most popular, how MSP services are performed and the importance of issues such as more flexible vendor financing. IPED, a CMP Media channel consulting firm in Manhasset, N.Y., conducted the survey during the first quarter using this definition of managed services: Managed services are recurring services provided either on-site or remotely on a contractual basis. Based on that guidance, a whopping two-thirds of respondents said they already were providing some form of managed services. Another 19 percent planned to move into managed services within the next 12 to 18 months. Only 13 percent said they had no plans to become an MSP. Respondents offering managed services said MSP revenue already accounts for more than one-third of their total services revenue. That healthy number indicates that many solution providers have been offering managed services for a considerably longer period of time than the handful of years that the practice—and the term MSP—has been widely popularized, according to IPED. “The data shows managed services have not only been around for a while, it shows this thing is already here and full-blown,” said Stanley Elbaum, director of research at IPED. According to the survey, the top three incentives for becoming an MSP were traditional ones: building revenue, adding competitive advantage and increasing profit margins. The top three managed service areas offered by MSPs were storage, peripherals and network infrastructure, respectively. More than half the respondents said they offered managed storage. At the bottom of the list was security. Only about 20 percent of respondents said they provided managed security, a figure far lower than the hype around managed security services would suggest. The survey, though, also showed security was likely to grow faster than all other areas, with 33 percent of respondents planning to add security to their managed services portfolios over the next 12 to 18 months. The survey results also indicate that solution providers are spending more of their time and resources transitioning their existing customers to managed services than prospecting for new ones. And MSPs have a pretty good idea which customers are ready for managed services and which are not, according to IPED.  Respondents estimated about 44 percent of current customers were potential managed services customers, out of which 39 percent were already engaged in an MSP relationship. On average, nearly half the customers of those surveyed will still be holdouts for managed services by the end of 2007, and winning this group over will require a strong effort, respondents indicated. Still, solution providers expected their MSP revenue to grow to three times faster than other services revenue, the survey showed. That so much effort goes into converting existing customers to managed services shatters popular myths peddled by many MSP platform vendors that managed services are a fast track to bringing new customers in from the cold, said Larry Baum, chairman and CEO of The Computer Center, an Ithaca, N.Y.-based solution provider who has been offering managed services for about two years. Baum said the resources his company directs toward converting existing customers to managed services dwarfs the efforts it makes to bring in new customers. “Ninety percent of our marketing dollars go back to existing customers,” he said. “As far as trying to add new customers, we just run a Yellow Pages ad. That’s it.” One reason for that is there’s a higher risk involved in becoming the MSP for a completely new customer. “New customers are other people’s networks, and you can inherit big problems,” he said. The effect of a market where practically every MSP platform vendor preaches a different pricing gospel had a significant impact on the survey results. Like MSP vendors such as LPI Level Platforms, N-able Technologies and SilverBack Technologies that offer MSP platforms ranging widely in price from just tens of dollars to thousands of dollars, respondents reported price points that ranged from $10 per month per seat to thousands of dollars per month per seat. Without even a blip of concentration at one particular price point, there was no average result from respondents when it came to the pricing of either on-site or remote managed services, the IPED survey found.  Some solution providers just wing it at first, applying their best judgment to initial MSP pricing, then adjusting up or down accordingly. “We set a price based on what we know about a customer [and] then watch it—going back to [the customers], talking to them, making sure we were not getting killed and they weren’t getting killed,” said Steve Quigley, business development manager at Clear North Technologies, a solution provider in Eden Prairie, Minn., who began offering managed services about six months ago. |
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