Is the Lifestyle MSP Headed for Extinction?

If you are a so-called “lifestyle” MSP, your days of living that dream may be limited. TCI Managing  Partner Sam Attias recently provided his perspective to MSPmentor on where the MSP market is headed, and he sees changes coming. “There will be a lot less of these lifestyle businesses over time. They will be acquired, merged or go by the wayside,” he said. “You are either looking at the bigger picture or you are not. “

Now remember, TCI this week announced plans to embark on an acquisition strategy targeted at vertical MSPs. He told MSPmentor that this strategy, which would keep the brands intact and the teams in place, was designed to help these businesses scale – something that many of them have struggled to do.

So what’s driving the change that Attias thinks is coming? Cloud computing. While cloud computing enabled many small MSPs to get up and running inexpensively, it’s also changed the model for vendors.

“Big guys are no longer taking it halfway down the field. You can be resellers of our service, but we’re going to go get it directly… The smaller guy from a solution provider perspective will not be able to compete.”

Microsoft’s offering of Office 365 with its very limited syndication partner billing comes to mind here.

The answer for smaller MSPs is to shift the business model to become an aggregator and integrator of all the IT needs that customers have.  But that’s not so easy to do. The platform isn’t there yet and to pursue that strategy now MSPs would have to invest to build it out themselves, and  it may not be worth it.

That’s because bigger players are pursuing a similar strategy. That means commoditization and price competition that will come down to price per user, Attias believes.

“Right now there’s value in having an MSP on every corner,” he said. “That won’t go away. But people will become more comfortable outsourcing all of IT to large organizations that have less of a touch. You are charging me $120 a user and they are charging me $80. At some point there will be competition on price.”