Winners and Losers In Managed Services 2.0

By Peter Sandiford 1

There is a new wave of technology that is washing over the SMB IT world. A fundamental shift is taking place from device-based to network-based architectures, facilitated by widely adopted new standards.  The MSPs that embrace and manage these more complex IT environments will emerge the winners as managed services moves solidly into this next stage – MSP 2.0.

Virtualization, unified communications, cloud computing, SaaS, networked everything, and ubiquitous wireless devices are just some of the obvious game changers.

Of equal importance to MSPs, though less visible, is the fact that vendors of both traditional as well as the newer technologies described above, are investing heavily to offer deep management of their devices and applications.

Vendors are seeing manageability as a key product differentiator as the SMB channel embraces managed services—not only because manageability allows MSPs to provide best practices management and ensure a positive customer experience of their products, but because it clearly contributes to increased margins for MSPs that use their products, the perfect incentive for increased channel sales.

MSP 2.0 presents a tremendous opportunity for the MSPs who are prepared for this future. The complexity of the interactions of all of these new elements means that SMBs need expert help to make it all work together. They need MSPs who can advise them on the implications of choosing one solution over another; on interoperability; and to identify and repair problems that can extend across multiple on-premise and cloud-based technologies, all interacting in real time over multiple networks.

Now for the Challenges

However, many of the current management platforms were designed over a decade ago when client/server computing was considered the SMB computing standard. SMB networks were assumed to consist of three elements – servers, PCs, and a LAN connecting them. So it is only natural that these older platforms have led to an entire MSP 1.0 business model built around managing this narrowly defined view of the IT environment. MSPs that want to participate in this market shift now need to assess if their platforms are up to the new challenges and opportunities of MSP 2.0.

MSPs that are limited to the MSP 1.0 technology model will be drawing on a rapidly shrinking piece of the end customer’s IT budget. Their relevance as trusted advisor will quickly erode if they cannot continue to demonstrate technology leadership in this new era. And even for those traditional on-premise products that they can continue to manage, proprietary agents and other hard-coded techniques that were built for the MSP 1.0 world will continue to be rendered obsolete by vendor tools like Microsoft’s Systems Center Essentials and other standards-based vendor management capabilities.

The implications of this are significant—not only for the health of MSPs, but for technology adoption across the SMB market segment. For example, what MSP is going to recommend Microsoft Exchange hosted in the cloud and say goodbye to $300 of monthly revenue for managing the local Exchange Server? Which ones will willingly introduce virtualization if they can’t effectively manage all the layers and offer it on a managed contract? Even today, how many MSPs are not actively selling SBS 2008 and EBS 2008 to their customer base because their platform cannot quickly adopt to these core SMB technologies?

We are at a critical inflection point in technology. The winners will be those who embrace change. They will continue to strengthen their roles as “trusted advisors” by helping their customers navigate and exploit these developments for their own and their customers’ benefit – by orchestrating the new technologies so they operate reliably, efficiently and in harmony.

Note: Peter Sandiford is CEO of Level Platforms. Guest blog entries such as this one are contributed on a monthly basis as part of MSPmentor.net’s Platinum sponsorship.