Jay McBain's Top Trends for MSPs the Remainder of 2023
Canalys analyst Jay McBain presents his top trends, opportunities and warnings to MSPs.
![Jay McBain at NerdioCon 2023 Jay McBain at NerdioCon 2023](https://eu-images.contentstack.com/v3/assets/blt10e444bce2d36aa8/blt1ddffbf0cbdeb9f4/652403853817f64168800cae/Jay-McBain-at-NerdioCon.jpg?width=700&auto=webp&quality=80&disable=upscale)
There is no longer “one throat to choke” when it comes to working with a channel partner. In fact, medium-size companies are reporting they work on average with seven partners.
“This is different from a single throat to choke. This is different from the trusted advisor that we’ve been hearing about for years. There are different partners doing different things of value for that customer,” said McBain.
This movement is being driven by tech purchasing by non-IT leaders. In terms of SaaS products such as Salesforce, ServiceNow and Marketo, 75% of those deals happen outside of IT.
“Line-of-business leaders are making those decisions. The head of marketing in many companies spends more money on technology than the head of technology. That’s a different kind of partner type that’s in there servicing that model.”
This means a partner’s ability to be successful now hinges on working with others, rather than competing.
Marketplaces are the fastest growing route to market in the world, in every industry. McKinsey forecasts that B2B marketplaces are going to drive $17 trillion by 2030.
“We’ve got 20 major marketplaces that are driving most of the activity – Microsoft, AWS, Google, Salesforce, etc. We’ve got marketplace development firms, we’ve got a lot of stuff going on. But there’s a ton of investment across every company driving these marketplaces, to include us. From private offers to multiparter offers to all kinds of logistics inside,” said McBain.
The analyst noted that 18 months ago Microsoft dropped marketplace fees from 20% to 3%.
“When Microsoft starts charging 3%, Google follows the same day. AWS is pretty close to that right now. All of these marketplace transactions are going down to almost like a credit card swipe in consumer land.
“There’s now 17%-plus margin available. We now have the technology involved for managed service providers to be paid along with every cloud dollar. The economics of it now start to make sense. The technology and the tools to do that for customers is now there as well.
“Marketplaces are growing at 86% compounded for as long as we can see. It’s going to make up a material number of this industry very soon,” he told MSPs. “You should be thinking about how to win in that case as well. Not on the resale side. But making the same or higher margin by doing all the great stuff you already do. And it’s just a different way of money changing hands.”
The average cloud deal today, whether it’s SaaS or infrastructure, is seven layers deep, said McBain. The average security deal today, if the customer is trying to get to zero trust or SASE, is seven layers.
But today’s new embedded integrated buyer is different, and it’s not as SKU-able as the past, he added.
“The No. 1 buying criteria now is integration. Forget about price, service, support, all the things I really care about. If this thing doesn’t come in and work with everything else, I don’t want to buy it.”
This idea of layers, that everything they pull in – hardware, software, services – has to work well with others as a first criteria when they buy, he said. McBain pointed out that MSPs are experts in this. However, the cloud opportunity has gone to system integrators and others to do these implementations and integrations.
“We’ve been a little bit stuck on the client-server elements of it, the IT elements, and not on the broader elements of integrations. But this is way we should be talking and selling as cloud integrators.”
McBain pointed out that enormous distributors like TD Synnex and Ingram Micro are facing competition from all sides.
“They have competition with new cloud distributors that don’t have logistics. They don’t have warehouses, distribution centres, they don’t have capital credit facilities,” he said.
He said companies like Pax8 are the fastest growing distributors right now.
“Because they can focus on the customer. They can focus on the cloud, and they can work with MSPs on the eventual outcome, not on the distribution part of the business,” he said.
McBain also pointed to Canalys’ prediction that AWS will become a top 10 distributor up against TD Synnex and Ingram Micro by 2025.
“We’re less than two years away from AWS being a top 10 global distributor. All the other marketplaces – Microsoft, Google, Salesforce – are going to follow. There will be a point five, six, seven years from now, where AWS and others will compete for the top three spots.”
McBain also set his sights on the telco space, which he said used to have 25 master agents – now renamed tech solution brokers (TSBs). But with AppDirect’s recent acquisition of TBI, that figure has been whittled down to around five.
“They’re coming into the cloud, hot and heavy as well, as communication/collaboration is done from copper lines to the IT network.”
He also cited under-the-radar “aggregators” coming to the fore.
“We know that CDW and Insight have been big distributors for a long time. They’re just not talked about it that way. But when I worked at Lenovo and IBM for 17 years, they would have been my third or fourth biggest distributor globally. We just didn’t talk about it, but now we’re talking about it because they’re aggregating a lot of things.
“This is the new era of distribution in the cloud,” he added. “And these are partners we should all be considering and working with. Because there’s economics within each of these models that can pay us and can provide less friction for our clients.”
One mistake that MSPs make is not monetising everything they offer clients, McBain said.
He explained: “We give away consulting, design and architecture work. We give away implementations and integrations as part of our monthly fee. The people that are being successful in the cloud today are not.
“Accenture is the biggest technology company in the world by employee size. They make an acquisition every seven business hours,” McBain said. “They added 150,000 people a year, in the last three or four years, to the company. They are absolutely all over this multiplier. When they look at Microsoft, they say, ‘How do I make $3 for every dollar that Microsoft makes?’ That’s how they build their strategy. And they don’t give away a bunch of stuff for free to go get the deal. If they do procurement, you have to pay them for their procurement service.
“It’s a different model and it’s the one right now that’s winning in the cloud. You’re not going to build an Accenture, but you should understand the language and the motions that make that successful,” the analyst concluded.
One mistake that MSPs make is not monetising everything they offer clients, McBain said.
He explained: “We give away consulting, design and architecture work. We give away implementations and integrations as part of our monthly fee. The people that are being successful in the cloud today are not.
“Accenture is the biggest technology company in the world by employee size. They make an acquisition every seven business hours,” McBain said. “They added 150,000 people a year, in the last three or four years, to the company. They are absolutely all over this multiplier. When they look at Microsoft, they say, ‘How do I make $3 for every dollar that Microsoft makes?’ That’s how they build their strategy. And they don’t give away a bunch of stuff for free to go get the deal. If they do procurement, you have to pay them for their procurement service.
“It’s a different model and it’s the one right now that’s winning in the cloud. You’re not going to build an Accenture, but you should understand the language and the motions that make that successful,” the analyst concluded.
The future is very bright for managed service providers (MSPs), according to Canalys.
Canalys analyst Jay McBain (pictured on stage above) presented his top trends and opportunities – and warnings – to MSPs at the recent NerdioCon 2023.
He noted that last year, businesses and governments globally spent $4.5 trillion on technology. Of that figure, services comprised two-thirds. The managed services market alone was worth $387 billion in 2022 — a figure greater than McBain was anticipating.
“A couple of years ago, I would have said this is a $200 billion market. It’s a solid, double-digit growing business. We’re in the right industry,” he told MSPs. “Software is eating the world; every other company in 27 industries is becoming a tech company. This is the right place to be this decade.”
Even the recent spate of tech layoffs could prove positive for the channel, he said.
“There are a quarter-million skilled people that are finding new opportunities either as entrepreneurs or joining the channel. So this recruiting problem that we’ve had for years trying to get top talent … is starting to realign,” he said.
The analyst presented some even more interesting findings to the MSPs in attendance. For example, there is no longer a single “throat to choke” when it comes to choosing a channel partner. Elsewhere, the rise of B2B marketplaces is unstoppable — and MSPs should jump on board. However, distribution is facing a wave of disruption from new market entrants, alongside those marketplaces.
See the slideshow above to discover everything you need to know as an MSP.
Want to contact the author directly about this story? Have ideas for a follow-up article? Email Christine Horton or connect with her on LinkedIn. |
About the Author(s)
You May Also Like