Driving MSP growth through market diversity

Scott Atkinson (BigAir Group), Anthony Rosa (SolarWinds MSP), Zack Levy (Strut Digital), Ryan Spillane (Correct Solutions), Hafizah Osman (ARN), Jamie Deveaux (SolarWinds MSP), Jason Drew (Secom Technology), Chris Greatrex (Artis Group), Jamie Warner (eNerds), Nathan Lowe (ASI Solutions), Joseph Vijay (NTT Communications), Hamish Boot (SolarWinds MSP), Steven MacKenzie (Brennan IT)

Yet many remain bound by the same comfort cycle of doing business within core market segments, ignoring opportunities to deliver stellar growth outside of traditional methods.

In short, change is now mandatory in the Australian channel.

To drive such change however — in an industry influenced by new technologies, fluctuating conditions and digitalisation — the role of the MSP has moved away from merely building performance and market clarity.

Rather, to one that places the customer at the focal point of its business.

But today, such sentiments barely scratch the surface in terms of the challenges and opportunities impacting MSPs in the local channel.

In 2017, partners must target new technologies, diversify areas of operations — spanning small
to medium business, mid-market and enterprise — while finding new verticals routes to explore and new alliances to partner.

Collectively, these help form ‘customer hooks’, billed as a crucial requirement for success.

“You’ve got to look at what is best from a customer perspective and outcomes, first and foremost,” ASI Solutions managing director Nathan Lowe said.

“From a vendor prospective, you want to know where they want to take their product that you can use to assist your customer problems.”

As customer demands change, the success of an MSP will depend on its ability to respond to such demands, while aligning with end-user supporting vendors along the way.

“So pick a vendor that’s going to enable you to react quickly, be that agile flexible business that MSPs are known to be; this is super important,” NTT Communications ICT solutions enterprise services solution design director Joseph Vijay explained.

In offering a harsh reality to the channel, Strut Digital CEO Zack Levy outlined that MSPs that fail to listen to customer demands, “don’t have the right to be” in the market.

To make matters more complex, customers today are flooded with choice when it comes to technology.

“The whole utility concept has been brought into IT infrastructure,” Levy said. “You can now consume it on a per widget, per second increment, which means that you now have much more control, but much more commercial freedom and they now have a choice.

“As a provider, make a decision on what your use cases are; what it is that you want to offer and what your services are.

“Make sure that you’re clear on a use case and then go find the right vendors that help you deliver because customers today have so much freedom to choose.”

But an MSP sell has to be unique to the Australian marketplace, as Brennan IT NSW sales manager Steven MacKenzie explained, meaning partners must consider the approaches required to succeed.

“We’re not America; we’re not Europe, we’re none of these things,” he explained.

“Unless we truly listen to the marketplace, we cannot craft offerings to take back to them something that is going to be on the money in terms of what they want. It’s all business related. It’s all risk compliance.

“And any of our solutions, unless they’re appealing to those types of things, are completely irrelevant.”

To respond to market changes, vendor support must also increase, around consumption models.

“This is not specific to any vendor,” BigAir Group cloud and managed services CTO Scott Atkinson added. “We’re still where we were five to ten years ago with this buy a license and try to convert it into something phase.

“But it’s a big hurdle, it’s a stepping stone in the industry and until we can get past that point, being able to consume from vendors the way we sell to customers it’s going to be a rough road. And if I look ahead it’s still rough.”

To support MSPs in Australia, vendors must help create return on investment for the channel.

“If I want to sell you something that you already have I have to show you ROI otherwise you won’t change,” SolarWinds MSP Asia Pacific (APAC) sales manager Anthony Rosa explained.

“So I think it’s the same thing that you have to do with your end-user. That’s what I would recommend to my MSP. If you want to separate yourself or you want to bring more margins, you have to create ROI.”

MSP challenges

Endorsing Rosa’s approach, Correct Solutions managing director Ryan Spillane said MSPs must now show ROI to customers, changing the way the channel interacts with end-users.

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“Everything matters to have an ROI attached to it because everyone has matured and society has changed the way they think about buying products now,” he said.

“It’s not just us, it’s not just MSPs, it’s the end-user, it’s our customers.”

In addition, Atkinson cited the “alarming number” of vendors with no concept of how MSPs operate from a business perspective.

“Monthly billing, can we exit contracts?” he asked. “What’s this twelve-month renewal? When we’re trying to buy something, but our customers don’t do that, why do we have to wear that responsibility?

“There’s a whole stack of things and you enter conversations with a number of vendors and it appears like they’re opening their eyes for the first time. It’s like conversations from ten years ago; it’s very depressing.”

Delving deeper, Warner said that as an MSP, dealing with large vendors or distributors can be challenging when they deal with a different person within these organisations every other day.

“You get to some traction with someone and then are referred to someone else another day,” he said.

“Obviously, it’s just a continuity thing but with large businesses, it’s just a challenge for MSPs. It’s very difficult sometimes to get continuity.”

Risk taking?

With decision making becoming a customer-driven conversation, who then holds the responsibility for taking risks — is it the partner, customer, or vendor?

According to Atkinson, the risk of delivering an SLA belongs to the MSP.

“It’s our choice as to how we build our offerings and if the vendor solution doesn’t help us achieve that, then it will be the first thing out of the door,” he added.

“But if you build your house out of a certain type of brick that crumbles as soon as it gets wet, obviously you made a bad choice.”

Rosa agreed that the MSP can be placed in a “tricky situation” when it comes to mitigating risk - from the end of the customer, or the vendor.

“You have the risk based on a technical perspective if the vendor messed up and then you also have to handle the risk on behalf of your client,” he said. “So, you’re pretty much stuck in the middle and if anything happens on either side, you’re in trouble.”

For Artis Group managing director Chris Greatrex the risk ends up with the party that has got the most bargaining power and the most transactions.

“It should be a balance where customers at the end of the day should understand that while they’re outsourcing an IT function, they’re not outsourcing their business and they should retain some accountability to run their own business,” he said.

“But at the same time they should hold their MSP accountable to what it is that they say they do best.”

Vertical visionaries

According to SolarWinds senior regional sales manager (APAC) Jamie Deveaux the role of an MSP goes beyond the ability to understand vendors in the market and what they offer and the profile of customers, but also to specialise sell in verticals.

“It’s not only the ability to understand the vendors out there and what they offer, but it’s also to verticalise and know what kind of customer you’re talking to,” he said.

For eNerds CEO Jamie Warner, when chasing a vertical play, the key is building solutions specific to the requirements of customers.

“We’re integrators, so we’ve got to go look at their needs, do our research and figure out what the pain points are and then build a solution set around that,” he added.

“If you’re building a solution for a vertical you need to have vendor products that are consumed from a reselling perspective in a similar way so that you can match it into whatever your services are.

“But in enabling this, he said vendors need to be cognisant of their solutions and how MSPs and IT providers can put it together and bundle it for a particular vertical.”

But in response, Vijay warned of the possibility of becoming too niche, suggesting a more broad-based solutions offering which can be easily customised to suit demands.

“If you start developing solutions which are extremely verticalised, then you become very niche and you can’t move,” he said.

“However, if you have solutions which are a little bit broad based then you can chop and change; and you know what, suddenly you can take risks because your costs are now being spread across a wider portfolio, you’re getting economies of scale.”

Levy said if MSPs know what they’re doing and make solutions fit for purpose by optimising their workloads and their applications to the cloud, the cost savings can be both immediate and substantial.

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“If you think that the project is finished even after a small size migration project to public cloud, that’s a mistake,” he explained.

“It’s finished the two or three months after you move it across but then, you have to continue engaging your subject matter to optimise the benefits of the public cloud.”

Ownership

In light of the concept of cost of ownership, Deveaux said the margins are “quite large” in this space.

“If I can own something then after a specific amount of time I can generate more profitability on it than a subscription model, I genuinely think that the allure of that is fantastic for the channel,” he said.

“The problem I find is that MSPs haven’t quite worked out how to generate the return on investment on the perpetual spend.

“With people who don’t know the cloud or haven’t been educated properly, they’re a little bit reluctant put their data somewhere where they can’t see the server five steps away or five cubicles away. Australia has had a hard time cracking that nut.”

Secom Technology owner and founder Jason Drew highlighted that different industries have different limitations.

“The legislative part we can’t put it in the cloud,” he said. “But in terms of cloud solutions, what we see from our end is a hybrid. When it comes to contracts, it’s more of a legal conversation than a practical conversation.

“But I am optimistic that I think with the changes that we’re facing in this market we’re starting to deal with that as well.”

MacKenzie added that the concept of more customers utilising cloud is fantastic, but said there are certain limitations around network connection to the cloud.

“We’ve potentially got all of the right elements of the puzzle, and even though they’re not of a sufficiently sophisticated level, they can be leveraged as much as possible to have an on-premise/ private cloud/ public cloud conversation, and have a look at their workloads and see how we can generate income, protect that and give it the best possible chance to survive in the market.”

Progression

Moving forward, the channel agreed on one thing — MSPs, vendors and distributors alike must focus on selling relationships instead of solely looking at doing business.

“We’re good at what we do and we know what we’re doing because we listen to our clients and actually build a set of products into a solution that our customers need,” Spillane said.

“It does come down to sales and marketing sophistication and expertise, but primarily the issue is in building these relationships.”

Echoing Spillane’s sentiments, Drew added that the bottom line for MSPs is to increase subscription revenue, which is through managed services.

“Every one of our solutions has a subscription and we build revenue streams across a range of specific verticals,” he said.

“So when I say the client is sticky, I believe you need to make the client dependent on you. If a client can get up and leave, then we’re in trouble and I don’t think holding them to contracts is going to help us. It’s about relationships and value to their business.”

Looking ahead, Greatrex believes that the market is moving towards a subscription path, meaning MSPs should find a differentiator for themselves to remain relevant in the channel.

“Anything you can productise and if it’s popular, someone else is going to do it as well at some point,” he said.

“So, we will develop specific applications for specific clients that’s very hard to replicate easily. Anyone can be an MSP, but to actually build fairly sophisticated applications on the platform makes you very sticky.

“And we like to try and productise some of those things where we can but often the discrete nature of those applications and the way it’s configured means it’s very hard for them to swap us out. So that’s where we’re going.”

As explained by Lowe, customers don’t necessarily always know everything, but more and more will want to know the direction that they’re heading towards, giving MSPs more reasons to have conversations and satisfy the needs of their customers.

“You might not to necessarily have the right product or the right skill set but it’s your job to come up with a solution that solves that challenge that they’ve got,” he added.

“Whether that’s in partnering with other organisations that have the skill set that you don’t have, you’ve got to look at delivering for that customer. Because in the end, that’s what makes them sticky when you’re solving a business challenge.”

This roundtable was sponsored by SolarWinds MSP. Photos by Maria Stefina.