MSP Co-Managed Services On The Rise: N-able Report
‘We are seeing more co-managed in our environment, but that's mainly because of the fact that our customers are growing,’ says Simon Beckett, director of UK-based MSP Dynacom IT Support Limited.
As MSPs still struggle with labor shortages and customer acquisition remains a problem, more and more are turning to a co-managed business model, according to an N-able report.
Burlington, Mass.-based vendor N-able Wednesday released the MSP Horizons report that dives into some of the biggest disrupting trends for 2024 with actionable insights for MSPs and the future of their businesses.
The report gives MSPs some prescriptive views on what's going on today but also takes a more forward-looking approach.
“You need to plant those seeds today to get the fruit of tomorrow,” N-able CEO John Pagliuca told CRN. “The rate of change is going faster and faster. If you're focusing on today, tomorrow is going to be looking at you in very much of a blurred vision. It's going to pass you by.”
The report surveyed 354 channel partners across Europe, the Middle East and Africa (EMEA); North America; Asia-Pacific (APAC); and Latin America.
Pagliuca believed the biggest opportunity for MSPs to grow their revenue is to go into a co-managed model. It can help them grow their bottom line and offer additional services.
In the report, 43 percent of respondents said they would primarily manage a customer’s IT themselves whereas 20 percent said they operate under a co-managed model and work alongside the customer to manage their IT environments.
Another 17 percent said they co-partner with other IT providers to deliver solutions to the customers, with another 20 percent saying they operate under a blended model of all three.
As the ecosystem of MSPs and vendors grows and customers learn that they can access a suite of services from multiple parties, N-able expects co-managed model to grow rapidly over the next five years.
“There's much more of an awareness that they can't do it all,” Pagliuca said. “They need to partner and co-partner to get to their goals.”
And the co-managed business model helps with the labor shortage. Midsized companies are looking to augment and keep costs down, so MSPs are leaning in and getting bigger, stickier accounts.
“They're having a technical conversation with an IT director who understands the challenges because they live those challenges as well,” he said. “My advice to the MSP is to be specific, use a tip-of-the-arrow approach when you're trying to get into these big market accounts. Say, ‘We can help you with a specific service.’ Also be somewhat concentrated in the persona that you're going after. You can land then you can expand once you get into the account.”
When it comes to co-managed, Simon Beckett, director of UK-based MSP Dynacom IT Support Limited and an N-able partner, uses a blend of all three.
“We are seeing more co-managed in our environment, but that's mainly because of the fact that our customers are growing,” he told CRN.
In co-managing with other MSPs, sometimes Dynacom offers a service the other co-managed MSP doesn’t and vice versa. In co-managing with the client, sometimes they only service one aspect of their IT needs.
“We have clients who have grown large enough that they don't need us to manage their day-to-day activities,” he told CRN. “We do look after their infrastructure…but then they come to us for the complicated stuff.”
A co-managed model also helps with customer acquisition, which the report found is the number one problem MSPs face.
While technology is always changing, one of the key tenets of business remains the same, acquiring and keeping talent and customers.
Twenty-two percent of respondents said customer acquisition is their biggest problem, followed by customer budgets then finding talent.
But it depends on where the MSP is in the market, Pagliuca said.
“I believe in the small end, there's no focus or deliberate strategy on how to acquire the customers, that's always a challenge,” he said. “A lot of the smaller MSPs don't have dedicated salespeople, they don't have dedicated marketing and or they don't have the effort or the focus as to how to acquire a customer.”
In the enterprise space, he said the challenge is acquiring the right customers. In talking with partners, he said some MSPs get rid of customers who don’t standardize or aren’t taking cybersecurity seriously.
“I know it seems like blasphemy to go fire your customer but if they're not subscribing to what you're doing and they're not willing to be standardized, that's dragging you down and adding a headwind,” he said.
Beckett said he has definitely seen a slowdown in client acquisition.
Most of Dynacom’s customers come from word of mouth, but their needs are becoming more and more complex.
“Over COVID there was a lot of movement in terms of clients moving from one provider to another, particularly if those providers had expertise in security and working remotely,” he told CRN. “We picked up quite a lot of business over COVID simply because we had some really, really good remote support tools.”
And when it comes to AI, the report found that many MSPs are using it with marketing. At N-able, the sales and marketing teams are using AI to kickstart responses to customers.
“We're leveraging machine learning to better understand the behavior of the customer,” he said. “Now we're not blasting them, nobody wants to get hit with an email that doesn't relate to them. We're leveraging technology in the data to give people a message that will actually resonate with them as opposed to junk mail.”
The report dives into many topics such as M&A, services, technology and sustainability. Pagliuca said MSPs can take this report to get a better sense of their business, the industry and what to focus on going forward.
His message to MSPs: Take part of the day with the leadership team to talk about the horizons of the business.
“How do you need to present to your market and your customers in five years,” he said. “Take that time and articulate the tactics and strategies for each of these horizons and then look at the trends. Hopefully you can see what others in the industry are saying and how they're going to advance their agenda, then see what you can lift and leverage from that.”