Pre-COVID-19 Days Are Over for MSPs, Says IDC

The MSP market will never return to its pre-COVID-19 ways of doing of business. That’s according to Stuart Wilson, research director, European partnering ecosystems, IDC.

“The most important point is to accept we are never going back to how things were pre-COVID-19,” he said.

The economic situation – and the competitive MSP landscape – will encourage customers to renegotiate prices, Wilson said. MSPs will see customers asking for new, more favorable contract conditions.

“The challenge for MSPs is to demonstrate they offer solutions that deliver business value to customers,” he said.

Wilson said customers will require technology that works across remote and hybrid working scenarios or back to the office.

IDC’s Stuart Wilson

“During 2021, customers will evaluate the strength of the quick fixes they put in place during 2020.” They need to “identify areas where they need to improve or strengthen their technology,” he said.

“Partners – including MSPs – benefitted from a surge in demand in 2020 as customers were forced to react quickly. Specific verticals such as public sector saw increased spending,” Wilson added.

But Wilson said we will only start to see the wider fallout of COVID-19 as government-backed furlough schemes end. This is when the true economic impact on businesses is revealed.

“Partners need to understand how this affects their customer base,” he said.

The analyst also confirmed that talent and skills shortages remain a major challenge for MSPs. This is especially true in areas such as cloud and security expertise.

Untapped Opportunities

Many partners performed well in 2020, helping customers adapt to new ways of working, and digitize their businesses. But now in 2021 there are new opportunities on which partners can capitalize, said Wilson.

Wilson said there is “a huge untapped customer base” of SMBs not utilizing managed services.

“MSPs must differentiate their offering, but that represents both an opportunity and a challenge. The differentiation can come from specialized IP. Customers want MSP partners that can help them be more competitive by offering tailored solutions,” he said.

MSPs offering collaboration, security, and cloud managed services are benefitting from increased customer demand, he said. The provision of managed security services has become more important as threats increase and customers grapple with a highly distributed workforce.

“The MSPs that do particularly well are the ones that are able to fully maximize their resources,” he said. “This means creating business models that are scalable and repeatable, and using shared resources to drive greater efficiency. It’s also a case of knowing where to play and where to partner to bring new capabilities into [the] business. Maximizing your resources means maximizing your use of all available resources – both internal and external – to achieve that.”

Vendor-MSP Relationship

To help MSPs, vendors need to streamline their programs to keep the administrative burden as low as possible,” he said. “The focus must be on accelerating new service creation, enabling differentiation and accelerating speed to market alongside a clear profit opportunity.”

He also said vendors need to create a level playing field for MSPs. This is to ensure the total cost of ownership (TCO) for the customer aligns between different purchasing models. This means making sure there is no conflict with direct or traditional enterprise-focused commercial sales.

“The vendor-MSP relationship becomes more important moving forward,” said Wilson. “It is the vendor and MSP partner working in unison that optimizes customer experience and customer satisfaction. This is vital in terms of maximizing renewals and customer retention, which creates the win-win scenario for both vendor and MSP.

“Strategic MSPs will become an extension of the vendors they represent. But there needs to be mutual trust, mutual benefits, a strategic alignment and clear vision for the development of the relationship.”