Forescout, Cato, Produce8, IT Vendors Eye MSP Programs

If you are the owner of a managed service provider (MSP) company, your inbox is likely shot to pieces with pitches from suppliers.

Channel Futures each month recaps impactful news about vendors and distributors that made changes to their channel partner programs, and new MSP programs frequently make the list. Last month it was IT behemoth IBM making a program for MSPs. This month visibility provider Forescout and secure access service edge (SASE) provider Cato Networks were two big names courting managed service providers to their portfolio.

Canalys estimates that more than 85,000 MSPs exist worldwide, as well as 10,000 MSSPs. That's a large pool of fish for vendors to lure. But with thousands of vendors all angling for the same mindshare, are there bound to be winners and losers in this race?

MSP Programs: Different Purposes

Robin Ody, who studies the MSP and MSSP channels for Canalys, sees a few different categories that an MSP program might fall into.

Canalys' Robin Ody

"Is the vendor targeting true MSPs, or are they really going after MSSPs? Or is it really a way to get big resellers to sell more managed services?" Ody told Channel Futures. (Informa owns bothCanalys and Channel Futures.)

Dave Sobel, host of The Business of Tech podcast, also delineated two different routes to market for software vendors that are courting MSPs: "sell-to" and "sell-through."

Related:Are MSPs Selling UCaaS? New Survey Points to Gap

"A sell-to is something I'm going to sell to the MSP themselves, and they're going to use it internally. And sell-through is something that the MSPs are also going to sell to their customers," Sobel told Channel Futures. "From the software side, you love a sell-through, but sell-to ain't bad either."

Business of Tech's Dave Sobel

Sobel noted that the influx of private equity investment in the MSP space has incentivized these software vendors to court MSPs.

"Smart entrepreneurs are realizing, 'I can build software, I can plug into this model, and in my best version of it I get to 1,000 MSPs, and then I sell,'" Sobel said.

And many MSPs are very eager for new tools and technology that they can leverage to improve their operations or those of their customers, Sobel said.

Obstacles and Opportunities

Erick Simpson and Rich Freeman of Channel Mastered highlighted the missteps some vendors have taken in building MSP programs. An overarching problem is misunderstanding the MSP model.

"You’d be amazed how many vendors don’t have multitenant products, don’t provide subscription pricing that aligns with an MSP’s business model, don’t offer an intuitive billing process, and don’t integrate with RMM or PSA systems," Simpson said last year. "These are table stakes for MSPs, and if you don’t have them, you won’t have success recruiting MSP partners no matter how great your solutions are."

Related:Channel Futures MSP 501: Top Managed Service Providers 2024, 50-1

For Sobel, the fundamental challenge for vendors and their prospective MSP partners is the disconnect between "selling products and selling service solutions."

"IT service providers and MSPs are looking for answers. They're small entrepreneurs, looking for a way to do this," Sobel said. "And they turn to dynamic, well-intentioned salespeople, who promise them a solution and buy them a beer."

Ody said some vendors simply can't make changes fast enough to successfully partner with MSPs, despite their intentions.

"... because they are naturally trying to protect their current go-to-market methods, and they aren't willing to re-architect their sales incentives and benefits programs that quickly because the disruption can cause a lot of conflict between their current partners and the MSPs they may be going after," he said.

Points-based programs can allow for modular changes over time and help alleviate this problem to some extent, Ody said.

Ultimately, Ody said, suppliers must grapple with the concept of "the money and who makes it."

Related:Partner Program Updates at Dell, 8x8, VMware, Others

"Product vendors don't know how to value the business an MSP does if the money isn't flowing into the vendor's own pockets. But the better vendors realize if they become MSP growth consultants, then the rising tide lifts all ships," he said.

To that end, Ody said AI lead generation engines will dominate conversations for the next five years as vendors attempt make it easier for MSPs to gain new customers. For 51% of MSPs in Channel Futures' latest quarterly survey, expanding their customer base was a top challenge, followed by sales (42%).

"Perhaps ironically (given some vendors have questioned the value of distribution in the MSP space) this is an area where the distribution layer is well-placed to execute, and looking at some of the work TD Synnex, Pax8 and Ingram [Micro] are doing in building these kinds of initiatives, we are looking at a fascinating future," he said.

Similarly, Sobel encouraged partners to lean on distribution as a way to help them sort through the mass of vendors clamoring for their attention and dollars.

"Distribution has built out whole service orgs that will do this stuff for you ..." he said. "You don't want to spend your time managing 40 or 50 or 60 vendors to try and figure this stuff out. You want to manage three or four key relationships that are doing most of that, and I think one of those slots is a distributor."

In the slideshow above, read 14 updates about new or revamped channel programs.

Also, check out Channel Futures' May roundup of channel program updates.