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The managed services battlefield

Kaseya's senior chiefs on automated managed services

Senior chiefs behind Kaseya's automated managed services platform were in Sydney recently to educate resellers on an annuity-based services model. ARN caught up with Kaseya CEO, Gerald Blackie, COO, Tim McMullen, and Asia-Pacific executive vice-president, Martin Ashby, to discuss why this approach to IT is sounding a death knell for the SMB break/fix channel.

What does a typical managed service look like?

Gerald Blackie (GB): The way IT services have been delivered to the SMB has traditionally been through people. There has been a tremendous focus on using techs to provide IT services to lots of third-party customers. But the way this is going to be done in the years ahead is changing.

IDC put out a report recently that suggested the industry will move into the era of industrialisation by 2011. What does that mean? It just means we're getting systems and facilities in place where we can deliver IT services in an automated fashion.

For IT service providers that get left behind doing break/fix work, it's not going to be fun. Those providing IT managed services will have the ability to deliver IT to a number of customers. They'll be in the same situation as a company's internal IT department, and they've got to learn to provide IT services in an organised way. You need policies in place - what are the access and remediation policies, what kind of service desks are needed, do you look at incident tracking or hot desking, and what do I do to ensure that workstations are remediated immediately if things are happening in the datacentre. It's also about looking at what processes I can put in place to deliver software or services out into the field without having to send a tech out there, what feedback I am getting through monitoring system, and whether those kick off other processes.

If you're still focusing on doing whatever the customer wants, you're just continuously responding to what's going on in their environment. You don't know anything about their configuration, you don't have any control over the policies of how they acquire equipment and software or how they use that IT infrastructure. You're constantly trying to understand what they're doing and then trying to fix it. And you're doing that with people.

Resellers pride themselves on taking on a trusted advisor's role and figuring out how to address a customer's pain points. Isn't this the same mindset behind delivering managed services?

GB: It's not the same. If I'm an IT services provider that just waits for the customer to call about a printer problem, the tech I send out the next day doesn't know what the problem is because he or she has no systems in place to say what happened. There's no auditing and no way to deliver services that maintain that infrastructure to a high level of uptime. Sure, he's a trusted advisor, but what has he done for me lately?

The average customer and the non-savvy IT service provider don't get the difference between management by policy and processes and management by reactive means. It's a vast gap.

Martin Ashby (MA): Most of the guys coming to us re operating in what we call this break/fix mode. They are waiting for something to go wrong for that call to action. But without diagnostics or background to the issue, they have to figure out all of those pieces before they can work out how to fix it.

I liken it to a car: when you buy a car, you service it every 6-12 months because you don't want it breaking down. In the IT sector we do the opposite - we run that car as long as we can until it's broken down, then we call the mechanic. It doesn't make sense that we follow certain approaches in certain parts of life but do the opposite in the IT world.

What makes a good managed services provider?

MA: These guys are out there looking for a new way of delivering their services and breaking free of that reactive grind. When you're working reactively, you are entirely capped by the number of skills you can bill in the hours of the day. If they can turn that around - if the mechanic aligns their interest with yours to ensure your car doesn't break down as opposed to making money off you when it does - you change the nature of the relationship between the customer and provider.

GB: If you're of a break/fix mentality, you're hoping your customers are going to have problems at the start of the month or find you a project to do. You've only got to have one issue where things go south and you lose that customer because you're not bound together.

As a managed services provider, a proportion of your revenue is already fixed, you know what your costs are going to be so you can schedule appropriately, and you can do the work necessary to keep all of those IT assets, such as servers or workstations, humming along.

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And if you're implementing the policies, you're making sure customers are purchasing correctly, things are provisioned properly, what's being used is being used correctly, and you're identifying issues. On top of that, once you're in that managed services role, you're getting the projects because customers won't go out and source other bids.

What is Kaseya doing to help resellers get into managed services?

Tim McMullen (TM): Our emPower program is designed to educate the channel and help them understand the managed services provider's role. From a business point of view, it's about looking at what resources you need, how to work out price, and then applying the technology to get the automation and efficiencies that Gerald [Blackie] has been speaking of. We know these guys are also struggling from a resources perspective, so as they are going through the transition we put a program together with engineers they have access to that can provide these services on their behalf 24/7, 365 days a year.

Is taking a managed services approach inevitable? And which customers should resellers start with?

GB: Yes, it is. There is probably a realistic cut-off where you are unlikely as an IT managed service provider to gain traction, and that's above 100 employees. At that level, you're fighting an uphill battle. That's not to say that a lot of our MSP partners don't have customers above that, but generally it's a small number. If you're focusing on acquiring new customers as an MSP, you'd be at the heart of it from 10-20 employees. Below 10 you're getting into marginal territory where the cost of customer acquisition is too high.

What other initiatives is Kaseya working on to get channel partners involved in managed services?

GB: We're close to a series of announcements in the first month of the year. We don't want to give away too many details at this point.

We've seen Kaseya acquire a desktop migration company, Versora, and strike an OEM partnership with Acronis for AVG endpoint security. Will we see more acquisitions or OEM deals?

GB: You could see more acquisitions - we are very focused on delivering what we think is a long-term vision. We would make acquisitions if they were appropriate and cost-effective. There are other OEM relationships that we will almost certainly do because our job is not to reinvent the wheel. There are a lot of wonderful technologies out there that can be integrated with our framework. Next year we'll also come out with a desktop optimisation model that will incorporate third-party technologies for things like defragmentation.

How about working with some of the larger vendors in the market?

GB: That I can't talk about today.

What other technologies tie in with the managed services play?

GB: We're looking to support most of the functions in which an IT service provider is engaged. Things like professional services, as well as accounting for time, project-related costs and things associated with service delivery. We are also looking at doing a lot of things that facilitate comparatives. This will help resellers to account for and allocate resources in a way that makes sense.

There is a fear in the channel that once services are commoditised, resellers lose their ability to differentiate. Should that be a worry?

GB: It should be a worry for a lot of them and I'll tell you why. What an IT service provider does for the SMB is very important. But, if you boil it down, what is it they have and do versus someone else? It really comes down to the relationship between the service provider and the customer. That's where it happens and that's the thing of great value. The things they provide as part of that relationship are not of such great value.

In IDC's report, the number one message is that we're going to see commoditisation and true industrialization in the IT space. Systems like ours are changing the face of the IT world. If you have a relationship with the customer, you do a great job and you apply the right kinds of systems, you're going to make money and have a good time. But if you're still playing in the old world, you should be worried.

MA: The whole idea of the managed services model is to focus customers on the services being delivered as opposed to the rate being charged. That's where a lot of guys are struggling.

GB: The common question from many of our top partners is how do they continue to improve that value they're delivering to their customers. It's not so much from the things Kaseya is enabling them to do, but how their role is changing in that customer relationship.

And then it's about what new methodologies we're providing for them to be much more strategic. Because when they are face-to-face with the customer, they need to be talking about the budget for 2008, what kind of projects are going to be on tap, what impact IT is expected to make on the business, and what are some things they can do to make it more cost-effective. So resellers are at a much higher level than they were before.

For us, it's about providing them with the data around the underlying infrastructure - such as what was the uptime on the servers through to what the lifecycle cost of a particular switch device. It's about bringing resellers up to that level.

How are the telcos affecting this market?

GB: We don't see telcos being a significant factor at this time. However, you've got to look at the likes of vendor players who have the capacity to deal direct, like Dell. I see the big vendors getting into this space - not so much to provide the reseller with the capacity to improve their business, but because they want the SMB business themselves.

If we do see telcos getting into this space, my guess is that they will focus on very small businesses.

MA: The telcos are more about network provisioning - it seldom gets down to the end point. I don't think they've got the full strength yet to do what the system integrators are doing.

So are vendors the biggest threat then?

GB: I've been in the business of selling software for 20 years and in all of that time the channel has morphed, but it hasn't gone away. That's simply because even if you could, as IBM or EDS, deliver IT services in the most efficient way, you still have to have some connection to the customer. That could be a small business owner who has small business issues and needs a relationship with a person who can service those kinds of issues. We see our role as providing systems that allow resellers to grow their business to a scale that will allow them to be profitable, as opposed to existing in a questionable manner, like a vast majority of them do today.