MSPs: Focus on Service, Don't Worry About Commoditization

By Justin Crotty 2

As the adoption rate of managed IT services continues to rise, industry talk grows louder that it’s fast becoming a commodity play. Fortunately, for value-focused MSPs, there are two good reasons why commodity fears are largely a non issue.

First, rapid market adoption and commoditization—which, by definition, means the market has driven down price and wrung out value—are not necessarily tied together. In this case, simply because managed services adoption is booming does not mean it’s becoming a commodity.

While we’ve all seen certain elements of managed IT services become commodities in one form or another, as an MSP your business model is focused on selling services not simply reselling hardware and software. So, as basic IT services become commoditized, your revenue and, correspondingly, your profits, should go up as your costs come down.

Second, the real business value offered by any true MSP lies not in the hardware or software sold but in the services, expertise and value (both measurable and perceived) offered to the customer day-in and day-out. That’s where the real money is made and where the dividing line between a good and a great MSP becomes evident.

Without question, if you’re reselling a box or merely repackaging a service offering, commoditization will knock on your door to siphon the remaining profits out of your business.

To stay relevant and avoid margin erosion, MSPs must focus on building efficiencies, aggregating the right solutions and ensuring they are adding value, exceptional service and engineering muscle to every engagement.

Of course, basic brick and mortar IT services are critical and must not be overlooked. But, from a profit standpoint, equally important are the more complex and emerging managed IT services such as SaaS, cloud computing, data center, help desk, data leakage prevention and other security safeguards, including remote backup and recovery.

Bottom line–if your business model is focused on delivering high-value services and your team is ready and willing to go the extra mile for your customers, pay commoditization no mind whatsoever.

Justin Crotty is Vice President Services North America at Ingram Micro, Inc. He oversees Ingram Micro Seismic. Monthly guest blog entries such as this one are part of MSPmentor’s annual Platinum sponsorship. Find all of Crotty’s blog entries here.