Managed Services: Is It Too Late?

Channel Strategy

Solution providers that have failed to embrace the managed services model now face greater obstacles if they decide to offer managed services, as competition heats up.

With managed services shining a rare beam of light in an otherwise gloomy market, a flurry of activity in this space is a certainty in this new year.

The high-tech trade group Computing Technology Industry Association predicts that competition among MSPs (managed services providers) will intensify in 2009 as solution providers zero in on what they have identified as a market with high growth potential. In a recent survey, the association found that more than half of responding MSPs expect revenue growth of 25 percent in 2009.

To help fuel that growth, we can count on managed services platform vendors such as Kaseya, N-able Technologies and LPI Level Platforms to continue adding features to their technology to help MSPs increase and diversify the services they offer customers.

Kaseya, for instance, is getting ready to add tools to support mobile platforms such as the wildly popular iPhone from Apple, as well as the Microsoft CE and Symbian platforms. Level Platforms, meanwhile, is emphasising cloud computing and virtualization in its next Managed Workplace platform release.

Between the new features vendors are adding to their technology and the level of integration between managed services systems and PSA (professional services automation), solution providers will be better equipped than ever to seize the growing opportunity in managed services.

A host of studies have predicted that not only managed services, but also SAAS (software as a service) and cloud computing in general are headed for healthy growth in 2009. The conventional wisdom is that as the economy stalls and businesses put off capital expenses, they will turn to per-user on-demand services and third-party systems monitoring and management to run their IT environments.

While that is unquestionably a positive development for solution providers that have made the investment in IT-as-a-service models, those that haven’t or that only have stuck a toe in the water are more exposed to the economic slowdown. There is no question that some specialties outside of remote and on-demand services are still in demand, but providers that rely too heavily on per-project revenue and equipment sales will feel the pain.

Naturally, a lot of them will be looking to finally get into the managed services and SAAS space, which may explain the expectation of intensifying competition this year among MSPs indicated by the CompTIA study.

Being the only kid on the block offering managed services is already a thing of the past, anyway. Over the past year, MSPs started hearing from customers that the customers were being approached by other providers offering managed services.

At Northwest Computer Support, in Tukwila, Washington, the increased competition helped the company intensify its focus on managed services and win new clients, says Rex Frank, the provider’s vice president of managed services. Those wins were businesses that saw an opportunity to switch from providers with which they were unhappy. Ironically, when their existing providers introduced them to managed services, the customers would decide instead to give a provider with more managed services experience a try.

Northwest Computer Support’s experience illustrates how much tougher it is for solution providers to get into managed services. The model requires not only adopting new technology but also making a cultural shift to a different way of doing business. When MSPs were few and far between in the market, a provider in transition could afford to make a mistake or two, but now the margin for error is much slimmer.

Fortunately for new entrants, they can benefit from the experience of others, and also tap organisations such as CompTIA, MSP Alliance, MSP Partners and MSPSN for best practices and training.

Platform vendors, too, have built up their training offerings, and as competition increases, they need to keep current on the needs of their partners to help them succeed in the market. For their part, solution providers making a decision on which platform to adopt need to evaluate which vendor has the best training program to suit their needs.

For solution providers that have only dabbled in managed services, or ignored the model altogether, getting serious about it now will require careful planning and a fair amount of knowledge acquisition. Managed services may indeed be a rare beam of light in tough economic times, but that light is anything but free.