The dilemma is the same for almost any business in any market: As competition increases, commoditization and price erosion follow. But MSPs are in a far better position than most to turn those challenges into opportunities.
One of the main reasons for this is, by nature, the MSPs’ business model allows them to continuously increase their value, grow revenue, protect margins and enter fresh markets by creating new offerings that help clients achieve greater efficiencies and enable new processes.
Another reason is that MSPs tend to serve the small business market. Today, more so than ever, small businesses are incredibly receptive and in need of the types of services and offerings MSPs specialize in. A few stats from CompTIA’s recent fact sheet on small business and technology state the case:
- Almost half of small businesses say they’d increase their tech spend if presented with innovative solutions that enable new business processes.
- Their top reason for using a third-party provider is a need for greater technical expertise and new solutions.
- A lack of innovative solutions is the main reason why they switch IT providers.
- IT security, data management and upgrading aging hardware/software are the top three areas small businesses need help in.
To successfully develop offerings aimed at these and other areas, high-performing MSPs follow many of the same best practices, strategies and business models. This is far from a comprehensive list, but it provides a solid foundation from which to build.
- Develop a strong consulting practice. Use the pre-sale consulting process to learn all you can about your clients’ business, markets, challenges and immediate goals. The technology/solutions discussion should wait until that key information is gathered.
- Base pricing on value not cost. Almost 70 percent of high-performing MSPs used a value-based pricing model, according to Kaseya’s MSP Global Pricing Survey 2014.
- Add cloud-based solutions. MSPs responding to the Kaseya survey named migration to the public cloud as one of the top services clients will seek throughout this year. But only 53% of respondents offer those services. Opportunities abound. Managed identity and access management security solutions, MDM and BYOD services also topped the list.
- Private labeling enhances value, prevents commoditization and builds brands.
- Offer solution packages that can be easily replicated across a number of markets and verticals.
- Find the niche. Own areas of the market your competitors don’t.
- Become the go-to expert on emerging technologies. Your clients already know about Internet of Things (IoT}, the cloud, security and other buzzy trends. Chances are they don’t know how to leverage the opportunities or handle the problems associated with them.
The key to battling commoditization and price erosion is to do what you do best, bolstered by the proven best practices of high performers. A recent report from MarketsandMarkets found that managed services reduce in-house IT costs by about 35 percent and increases efficiencies by about 55 percent. Global spending on managed services is also expected to top $193 billion by 2019, almost double last year’s $107 billion. Offering unique, value-priced services that enable needed business solutions help you bring home a bigger piece of that pie.
To access more information about best practices in managed services, download our free guide, MSP Matters: A Roadmap to Enduring Business Success.
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