MSP Zenith CEO: 'Time To Draw the Line' At Outsourcing Managed Services

CRN: They've got a managed services offering, it's direct, it's still small. It's in Houston, or in the Dallas area, I think.
Saraf: Well, take Dell. Dell is putting a network management card in every server. What do you think is Dell's intention? Do you think Dell is channel-friendly about it? No. They want the channel's business. And I don't know what to tell the channel to prevent this from happening, except for saying, make sure your 30 or 40 key clients are locked in tight. And you're not gouging them. So long as you don't gouge them, they won't switch for a 10 to 15 percent price difference. Because if Dell is even 20 percent cheaper, your client won't ditch you. But if you're pricing at five times over them, then you have a problem.

CRN: So would you say that MSPs today would have an interest in not commoditizing managed services?
Saraf: See, it's an interesting thing. But it's going to happen; whether you like it or not, it's going to happen. There's multiple layers to look at. I think the server monitoring, the desktop management, is going to become a commodity, like it or not. But what we're seeing in the channel is they're sort of graduating to becoming the customer's IT department.

And that's not commoditizable, because well, take one of my channel partners. He's a virtual CIO for 20 of his clients. Dell can't produce a virtual CIO. So what we're saying to the channel is move to that virtual CIO level and wrap your managed services around that. Then you're very hard to shake off, because the client can't unpick something you provide and go buy it from Dell, and go, "I'm only going to use you when I need you."

But if you're just saying I want to do desktop and server management, then, yeah, I think you're in for trouble after some point in time. I think the smart guys realize that, look, commoditization will occur. But if you can move up the chain, where you do application design work or business design work, that's very hard to commoditize because that's very one-to-one, that's very personal. And the quality of manpower you need for that, you know, Dell can't assembly-line 20 business analysts out there.

CRN: Or the Geek Squad.
Saraf: I'm not too worried about Geek Squad, except I'd say for the channel that goes out to the less-than-10-user market. I'm very worried for them, because that's a market that Geek Squad will take over. Geek Squad or Dell. But the moment you start looking at 25-, 30-, 40-user environments, the customers need something more professional.