MSPs: Where The Money Is

A View From The Service Partners

Autotask has recently taken the temperature of the services market, specifically around preferred market segments and how success is measured. Roughly one-half of the survey's respondents were managed service providers, and approximately one-third characterized themselves as IT service providers. The remainders were VARs, ISPs and that ever-present group known as "other."

To learn more, CRN spoke with service partners to get their take on the service market as well as the survey results. Here's a look at not only the key findings from Autotask's survey but also what service providers had to say.

Show Me The Money

According to the Autotask survey, 44 percent of the IT service providers say that more than half of their business comes from the small business segment. In addition, 48 percent say midmarket will represent their biggest growth area in 2013. The small to medium-sized business segment typically has a high level of need and a limited amount of resources, thereby making them a very strong market for managed service providers.

"The key to success in SMB is about being solutions-based," said Chris Vincent, president of Global Data Systems, Lafayette, La. "They'll want a platform that allows collaboration of compute power and access to applications and resilient redundancy architectures that you would typically find in larger organizations. And they will want to buy it through a subscription."

Find The Uptick

Respondents claim that the greatest potential for revenue growth stems from a number of key areas. These would include the expansion of cloud and hosted applications, the BYOD phenomenon, and the expansion of demands upon end-user networks that support more varied devices and applications, combined with an increased need for security. One of the main aspects of success is based not only on pursuing the value proposition of the day but also upon following the growth curves to establish continued success.

"The next inflection point is going to be about holistic vertical solutions delivered through the cloud," commented Pete Zarras, president of Cloud Strategies, Cedar Knolls, N.J. "As the cloud gathers momentum, customers will want an increased focus on their specific industries."

The Most Bang For The Buck

Respondents pointed to efficiency as being at the top of their list for key performance indicators. These are typically measured by SLA performance data, service history, and the ability to maintain mandated compliance requirements. Efficiency is one of the main reasons why customers are willing to engage in managed service providers, as opposed to running their own infrastructure.

"Software managers have been talking about the efficiency of the cloud for a long time, so it helps to invest time in mentoring your customers on how to move that need toward greater efficiency," said Jay Kirby, vice president of networking at Dallas-based Lumenate. "We have to help them change the paradigm."

Know What It Costs

The managed service providers also named financial predictability among their key performance indicators. These include service delivery costs, current and projected revenue streams, as well as billable employee utilization rates. Such itemization is often necessary as a means of securing the deal when costs are being divided among multiple business units.

"Bandwidth is one of the costs that often slips through the cracks," said Jack Gerbs, president of Quanexus, Inc., Dayton, Ohio. "Cloud and managed services also face customer concerns around reliability and then there's just plain old fear of change."

Show Me More Money!

We saved the best for last. The ultimate performance indicator is obviously the extent to which managed services can support the ultimate profitability of the customer organization. Some components of this are easy to measure by looking up the numbers on the spreadsheet. Others are much "softer" in nature because they involve freeing up staff members for other duties, which may be more difficult to quantify.

"Organizations need to be highly committed to using technology to answer business problems," said Cedar Knolls' Pete Zarras. "The overall goal is to not just to cut costs, but to deliver and sustain the productivity of the organization while cutting costs."