Solution Providers Weigh New Business Models

The executives expect hardware-as-a-service adoption to increase dramatically, while MSPs also will have the capability to remotely manage new household appliances and systems embedded with IP addresses.

Gavin Garbutt, president and CEO of N-Able Technologies, an Ottawa-based MSP platform vendor, says within three years many end users will buy laptops for $170 a year, a price that includes the hardware, software, support and management. It's a price more affordable now than buying a laptop up front and allows customers to better budget their IT needs. "You'll get the security system, support and at the end of three years, you'll get a new one," Garbutt told CMP Channel at XChange '07 in Orlando, Fla., this week.

The evolution will be spurred by managed services that Dell likely will bundle with its PCs and servers through its Silverback acquisition, Garbutt said. That merger is likely to lead other PC makers to seek partnerships or deals with other MSP platform providers, Garbutt said.

"Dell wants to increase services revenue, and why shouldn't they. A lot of other vendors want to roll out managed service solutions to promote their hardware and make it more attractive to the channel to be selling it. Within six months, a number of these things will be rolling out," Garbutt said.

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Ken Totura, vice president of channel sales at MXLogic, an Englewood, Colo.,-based MSP platform vendor, also sees a bright future for hardware as a service (Haas), but doesn't expect it to become the norm.

"[Sales of] hardware as a physical product won't go away. E-mail didn't displace the envelope business," he said at XChange '07. "I want Dell and SilverBack to be successful. I want Google and Postini to be successful, Microsoft and Frontbridge. They're my competitors but it's important for them to be successful."

In three years the channel will include 20,000 managed service providers, supported by about 20,000 other solution providers who have specific technical skills the MSPs won't have. Another 20,000 solution providers today will either go out of business or get consolidated, Garbutt predicts.

"Three years from now, the MSP will be the general contractor, the trusted advisor. Under them will be a bunch of players with specialty skills that the MSP will bring in in a sub-contract capacity," Garbutt said. "This market will change in the next three years completely. The MSPs, VARs who rely on their small customers and think they can deliver services as they are today are going to be in real trouble."

It won't be long before the larger service providers, telcos, even the "big box" retailers like Best Buy start offering managed solutions to the SOHO (small-office/home-office) market, Garbutt said.

It's up to MSPs in the channel to enhance their offerings so they're not left behind, Garbutt said.

"Two years from now, monitoring is going to be a commodity. If you're not doing monitoring at the very least, you're going to lose the business. In my humble opinion, why would any MSP not give away monitoring for free. Go in after three months, show them a report of this is what we did, here's how much you paid me. Now here's a fixed fee with a cost that's slightly lower cost. This is what the large guys will come in and do," he said.

And once that happens, there's nothing to stop MSPs from managing new appliances such as refrigerators that have their own IP addresses, Garbutt said.

"The market has to mature, but the home market is a huge market so that's where the technology is going. Think about that with [N-able], it used to take a couple of hours to set up a customer. Now it takes minutes. What happens when a wizard-based application can set up customers in minutes. Who starts looking at markets and where do the markets become more applicable as the cost of support goes down? You can go lower and lower in the market. The largest service providers the Best Buys, Staples, telcos will all try to get into SOHO market."

Added MXLogic's Totura: "I'm convinced that one-to-one marketing is coming. What about your referigratiator, plugged in with all your favorite brand of groceries? When I get low on milk, it will send a call to the grocery store, send me an order. [It can be] your medicine cabinet, or when your car needs an oil change. A lot of that is here today. The technology is ahead of adoption."