Managed Services Spotlight: Asia Pacific (APAC)

With the services companies are demanding today, such as application and cloud infrastructure, managed services are becoming increasingly in-demand. According to International Data Corporation (IDC), Asia Pacific (APAC) – excluding Japan – service providers are scrapping their traditional business models and pressing the “upgrade” button.

The MSP Market in APAC Today

Despite the rapid uptake of managed services among IT providers in APAC, the market remains quite immature, as most MSPs have merely adopted the model as a bolted-on revenue stream, rather than embracing it as a business model in its own right.

“Many managed-services offerings are simply rebadged block hours with an antivirus subscription bundled in,” says Ray Sweeney, operations manager at Premier Technology Solutions (PTS) in Melbourne, Australia. “Many try to hide their support costs and overheads in inflated cloud and software subscriptions designed to lock customers in by making it very difficult to leave, rather than providing a support service worth keeping.”

Sweeney says that a lot of it has to do with the maturity of IT services in general in APAC. From an Aussie perspective, the differences between services in the land Down Under and those “across the Pacific” are quite noticeable.

Ray Sweeney

Ray Sweeney

Whereas the MSP model is well-established in places like the U.S. and Canada, managed services have really only “come into fashion” in the last five or so years in Australia, according to Sweeney. The majority of prospects that PTS meets with have not heard of managed services in IT and are still very much in the break-fix mindset.

There are similarities, though. Although there appear to be some discrepancies in knowledge and adoption across the globe, MSPs everywhere seem to share one weakness.

“Whilst the uptake of managed services is far more prominent overseas, it does appear that the same issues arise around model maturity,” Sweeney remarks. “As engineers, we tend to home in on details and miss the bigger picture. This appears to be a global trend where most MSPs seem to think their value lies in the PowerShell scripts and firewalls, rather than the business outcomes and capabilities they should be delivering to their clients.”

The Times They Are a-Changin’

Sweeney mentions that lately, PTS has been getting a lot of referrals to businesses that are “quite happy with their provider,” but have been presented a large project proposal or cloud service that has triggered them to review their entire partnership and seek other options.

“Whilst shopping around is nothing new, the biggest surprise is that in all of these cases, the companies aren’t comparing price; they’re comparing the solution itself,” marvels Sweeney. “These business have caught themselves right before signing a large capital expenditure (capex) or lengthy three-year commitment, realizing that they don’t have the faintest idea as to why they’re doing it.”

So, this means businesses are starting to become more aware that there are many ways to solve a problem — not just the traditional way. Further, it raises the issue that many MSPs are falling short, not clearly communicating their recommendations, and more importantly, the positive impact that the project or service will have on the business.

“When it boils down to it, I feel the main reason businesses don’t understand why they should make an upgrade [or] change is because the MSP doesn’t know why they should either,” says Sweeney. “So, many recommendations are based on what they will do to the MSP’s bottom line, rather than the client’s. It would appear that the days of blind trust are behind us — this approach just won’t cut it anymore.”

Predictions

Managed IT solutions are getting more and more complex; support now is commonly bundled in with software, cloud subscriptions, backup and disaster recovery (DR), data connections and phone systems. This trend is likely to continue as MSPs seek new ways to keep clients and add new revenue streams to counteract undersold service agreements.

“For most, this is unsustainable as the productizing of these bundles is turning it into a commodity, which in turn, is already being attacked by large enterprises, telcos and global giants,” predicts Sweeney. “I don’t believe the corporate giants will manage to take the whole market, possibly not even a majority.; however, they will render any MSP obsolete that is unable to differentiate [itself] and demonstrate clear commercial value to [its] clients.”