How to build an MSP

As technology buying habits change, so must companies that sell technology. understanding this shift is crucial if a managed services provider intends to be successful.

Managed services are becoming a major force in the business technology market. These are distinct from outsourcing, which focuses more on deploying a solution that the customer uses. But it has an isolated influence on the company’s operations, other than to save costs.

MSPs offer something different. Though their services may be engaged to help save costs, this isn’t the majority value of the deal. As the name states, MSPs brings a managed option to the services that companies use. They provide the skills and context for the services to fit into a business and help the business evolve.

Instead of offloading operations to save costs, the outcome is that a business can hand over non-core services to an MSP and expect the MSP to deliver results in a way the business would do itself – strategically and progressively.

This is, in part, what distinguishes an MSP from a value-added reseller (VAR), says Daniel Lotter, head: birds and tender. Itec Southern Africa."In our marketplace, distribution is key to the relationship. If you dont shake up the customer a little bit with a new thought process, then there’s no compelling reason to buy. If your services proposition isn’t very compelling to disrupt, then the customers won’t do it,” he says.

Chris Hadjiyannis, Adept ICT Solutions’ communications manager, sees it in the same way. Even though the differences between VARs and MSPs aren’t always distinct, perhaps because an MSP is an evolution of VAR principles, that personal touch is what customers want.

“MSPs should ideally have the ability to offer more than just distinct offerings – they need to be able to blend and create custom all-encompassing solutions. From our perspective, there are some VARs who just resell and don’t manage services or add significant value. Then there are customers – for whom price and accessibility to products are key – for whom this works. MSP customers usually want a more thorough and comprehensive service,” says Hadjiyannis.

The changing face of services

Why is the market shifting towards services? There are several forces at play, including the rapid commoditising effect of cloud. But at the fore is the chestnut we’ve all heard and understand: companies don’t want to deal with the complexity, cost and other demands of IT systems, especially non-core asset.

Outsourcing was once the remedy for this, becoming very popular in the late 80's and throughout the 90's. But a problem soon arose: even though these are non-core services, they still play a crucial role in the company. By ceding them to outsourced operators, businesses often also gave up the nuances needed for good management. The outsourced services became stuck in time and didn’t evolve. They didn’t generate new value or shift as the business did.

Not a problem if everyone did the same, but inevitably some companies found competitive advantages in how they managed these services. Managed services didn’t appear overnight, but slowly evolved out of the connected world that emerged from the late 90's onwards. Over time it asserted its value, yet the real shift arrived as customers became more savvy about technology.

“It’s definitely a more educated customer today,” says Lötter. “In the old days, before the advance of googling everything, a customer would ask questions to level the playing field and get a price point out of you. Now they ask different questions in the sense of what services are offered, your empowerment strategy, sustainability strategies, all of that on top of not wanting the equipment. They want a service and they want to know how that service will slot in with their own plans.

”So beyond the attraction of saving costs and reducing the long-term ownership of depreciating assets, companies expect their MSPs to provide clear and continued value. This is a far cry from the ‘big bang’ projects where a lot of expensive equipment is sold at once. Instead today’s successful sale is an ongoing engagement, and this has prompted changes in how sales teams operate.

“The key with the salesforce (as with the potential client, for that matter) is education,” says Hadjiyannis. “Managed services has to be a value proposition, and that’s a hard sell when you struggle to explain the value. Historically, you would probably note a better return from helping technically proficient individuals with selling, instead of attempting to impart vast amounts of knowledge and experience into people who are exclusively sales-orientated. While opening new doors and building relationships in a sales environment will always be important, we find that sales becomes more solutions-oriented and less driven by product differentiation, which requires greater awareness of the customer’s needs.”

Customers and specialisation

Two characteristics feature strongly in an MSP salesforce. The first is customer relationships, which is back to being the most potent ingredient. As one remark put it succinctly: nobody got fired for buying HP, until HP’s CEO got fired. Brands and checking company requirements no longer cut it: MSP solutions often have to be bespoke in nature and continually evolve as the customer needs it. The second is the end of the generalist. Since solutions have to fit with the respective requirements of various customers, it truly takes a team to deliver on this, says Lötter.

“It’s a team-based approach. There are different roles and people. what we’ve seen in our salesforce is the guys are on point and sharp, but as a result we don’t have lots of generalists anymore. we have uC specialists, office automation specialists, IDMS specialists. You rarely get someone who can do well in more than one area. But nobody in a company knows how everything runs. So it’s about teamwork and not thinking in terms of a big bang sale, but delivering continuing value.”

The same dynamic is important around pricing. As the engagement is continuous and every service offering has to be adapted to the respective customer, pricing doesn’t exist on a spreadsheet anymore. MSPs can blend different vendor offerings while presenting a single price, something customers value.

But this does make pricing more dynamic and Hadjiyannis advises customers not to approach an MSP based on this alone.

“Since MSPs have the ability to blend ‘unique’ offerings from multiple upstream providers (or create their own in-house), they may or may not have more pricing choices, only service package choices. Another factor is whether other sectors of solutions providers are offering mainly hardware and licences. The take-home message here should be that if you’re at the point where you’re strongly considering hiring MSP services, your focus ought to be somewhat more on the partnership that will be created (and the inherent value therein) that what the small differences in the bottom line may be.”

Is managed services for everyone?

Managed services is an evolving field and not all parts of the market are ready for it. The cloud is a clear indicator of this divide: many managed services are now being pushed through cloud platforms. Yet to take advantage of that, a business requires good connectivity.

In South Africa, that can be a challenge. There are numerous medium-to-large cities with significant businesses that want managed services, yet don’t have access to the necessary connectivity. In other regions, companies are less mature and still prefer the traditional route.

So there’s a lot of potential and room for growth among the country’s managed service providers. But there’s not much of a playbook, other than to chase customer value, not product volume. This is a shift from the way technology is traditionally sold and building a good MSP requires understanding the difference. It puts all that talk of customer-centricity into action.

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