Building an MSP business in Australia...
- 28 November, 2016 08:28
(L-R) Tristan Warner (eNerds), David Cleminson (StratosQuo), Hafizah Osman (ARN), Simon Barlow (Brennan IT), James Henderson (ARN), Jack Alsop (StorageCraft), Craig Allen (Kaseya), Kirk Jones (AC3), Cam Wayland (Channel Dynamics), Barry Silic (Cavalry) and Muralee Kanagaratnam (APC by Schneider Electric)
Triggered by the rise of new technologies and changing customer demands, partners are turning toward providing services to stay profitable.
Yet in Australia, a clear definition of what an MSP is still alludes the channel.
But despite an increased need for partners to transition, migrating from point A to point B is fraught with complexities and challenges.
Across the industry, the growth of the IT services market is proliferating, creating a desire for traditional resellers to make the transition towards a more lucrative future.
In short, companies that provide managed technology services to customers have expectations of high revenue growth over the next two years, triggering further growth within the industry.
As result, APC by Schneider Electric Pacific channels and alliances general manager, Muralee Kanagaratnam, said partners are evolving from traditional VARs and SIs, moving into the MSP space at a rapid rate.
“We want to be there - whether the solutions are different or the same, it doesn't matter for us,” he said.
“It's about being able to support our partners who call themselves an MSP and being able to provide a solution that fits their demands.”
Optimism aside however, challenges for MSPs remain, with many struggling to understand exactly how to define service offerings to the market.
“They don’t understand what they're trying to achieve with their business,” StorageCraft Asia-Pacific senior disaster recovery planning architect, Jack Alsop, said.
“If you ask any of them - ‘what is your service offering?’ - you will receive a blank stare in response, and you simply know it's either pushing stuff uphill or it isn’t going to go anywhere.”
Delving deeper, Cavalry director, Barry Silic, believes the definition of an MSP is continually changing, causing challenges for the channel as a consequence.
For Silic, 15 years ago an MSP was viewed as a managed support provider that wraps support around a solution, with its role transitioning into managed solutions provider today.
“It's heavily driven by the customer,” he explained. “The customer wants to consume their IT today as-a-service and we translate that to a MSP model to actually deliver the solutions to the customer.
“So the solutions that we're creating today are different to what we did 15 years ago in the MSP environment.”
Yet for Brennan IT executive general manager, Simon Barlow, MSPs are all becoming a bit passé with differentiation as a service route, with questions now remaining as to how different they can be.
“I’d rather be a managed value provider,” he explained. “I need to understand from my customer's perspective where we truly add value into their business.
“It's about understanding, in a deeply seated way, the customer's business drivers and outcomes and adding value for the services that you provide back into their business to enable them to grow.”
According to AC3 software solutions manager, Kirk Jones, however, the issue lies in finding vendors that have a product that works well with MSP solutions.
“From a cloud and MSP perspective, instead of just having normal procurement transactional type products, it makes sense to have something that fits in with us,” he said.
“It’s not all about banging on the door wanting us to sell products, but whether it will fit in with our business model.”
Echoing Jones’ observations, eNerds chief technology officer, Tristan Warner, explained that vendors today remain “very product oriented”, with customers also adding deeper layers of complexity to the MSP mix.
“A lot of clients, because they might not have the relevant technical people, don't really know what they want but have a gut feeling that something is not right,” he explained.
“So it can be challenging to flush out their thoughts and feelings. Getting a competitive advantage means businesses ask the ‘what else’ question and it's up to us to try to proactively be ahead of that.
“Also, there’s no off the shelf billing platform that solves our problems.”
Specific to end-users, StratosQuo CEO and founder, David Cleminson, believes many C-level executives classify MSP solutions as a utility.
“Sometimes, you're looking at someone who's not IT literate and he's buying a service,” he said.
“That actually causes challenges for an MSP to differentiate their service because if you're going in selling a utility, there's no perceived value in that.”
Barlow said that through moving up the stack, some MSPs win larger IT deals that aren't box droppers, but project services takes a hit as it’s the first thing that is discounted, or even given away.
“When you're competing with some of the bigger guys, they go ‘oh yeah, we'll just install it’,” he explained.
“What that does is take your pay back on that deal from three to four months to six to 12 months. And if you get stuck in that, you go back to selling tin just to prop the business up for a little while.
“It completely confuses your sales force; you'll dilute your value proposition and the market won't know what you are.”
Kaseya Asia-Pacific technical director, Craig Allen, said the evolution of the MSP has resulted in vendors selling outcomes instead of product.
“We've had to change the way that we sell our products because just selling software and features isn’t good enough,” he said.
“MSPs see a thousand different vendors with a massive list of different features, but how does that turn into a business conversation to wrap a service around?”
Consequently, Allen believes vendors need to provide different ways that customers can consume services.
“We've still got perpetual licensing and we still got SasS offerings,” he added.
“AWS and migration in the cloud has changed how people pay for software and I think it's forcing vendors to be more flexible about the way that MSPs can use and consume their services.”
Furthermore, Channel Dynamics director and co-founder, Cam Wayland, said vendors must understand that MSPs are now essentially the end-user in the equation.
“There are only a few vendors that have been able to manage the MSP program versus the traditional resell program,” he said.
“Some have merged them successfully into one, but the big end of town chasing the big dollar sale fail to do so.”
In agreement with Wayland, Kanagaratnam said a traditional vendor partner program and an MSP program don’t go hand in hand as the consumption models differ.
“The customers are very different,” he added. “The traditional VAR/ SI is very different in terms of consumption model to an MSP.”
Yet Kanagaratnam acknowledged that occasionally, traditional resellers put on a different hat, blurring the lines between VARs and MSPs.
“That’s something that we're trying to distinguish, but some say they’re an MSP or just a buyer; and a few of them define themselves as both,” he said.
“That's where some hybrid VARs struggle in terms of having to transition their business to provide for managed services support with MSP service levels.”
From a partner perspective, Warner believes MSP can be achieved through adopting the trusted advisor role, fostering and maintaining a strong relationship with customers.
“One of the ways MSPs are differentiating themselves is articulating the business benefit that comes with the service, but also looking at different services to roll to be relevant with the changing environments,” he said.
“The key differentiator is methodology, experience, and commitments to ensure we meet those outcomes that the business owners want.
“The trust is imperative to having a customer not look around for alternatives. If you can, keep their focus on you. We have to be very clear on what it is our clients want, have the products and services and so on that solve that and not get too distracted from the noise.”
Going one step further, Alsop believes resellers don’t value add anything as a result of the confusion in the market over two-hatted MSPs/VARs.
“There's no value add whatsoever,” he explained. “And it's a pain in the neck for me because the end user is coming directly to me asking for professional services and these sorts of things and I've got to put bills together to go through this guy.”
As a result, Alsop said MSPs should adopt a more professional approach to solve the business problem a customer has.
“The business problem is, it's costing a fortune for IT,” he acknowledged. “The MSP has got to become the business model for the customer and the business manager for them as well in addition to helping them with everything else.”
Silic said those that serve as two-hatted MSPs/VARs should work on which direction they want to take and stick to it as it changes the revenue models.
“You can't be a two-headed person,” he said. “But it's a really tough thing for an IT company to change from a typical VAR to an MSP where now, it's about monthly invoices.
“If you don't have the systems in place, they're going to eat into all your profit and you're going to end up with nothing.”
In short, Wayland branded the change as the “cash flow valley of death”.
In terms of financing, MSPs have to consider a variety of options.Is it the MSP that takes the cut? Or are vendors and distributors supposed to play a role in this as well?
Wayland said a few distributors have recently started offering finance offerings.
“It’s now one of their differentiators in addition to the cloud portals and their aggregation, their billing systems and that sort of thing,” he explained.
“The next level is to being able to offer finance to allow the partner to be able to either buy build or buy deploy on behalf of the customer.
“But in saying that, some vendors such as HP and Cisco have been offering finance and creative finance free (on the services) from day one. But more and more distributors are doing this. It's a tight rope and it's not easy. If it was really easy, everyone would do it.”
Looking ahead, Jones added that it’s about picking the right partners and vendors.
“Pick the key ones and they will help you transition,” he said. “Instead of telling a partner and a customer what they want, it's now Mr. customer or Mr. partner how can we make our program fit to work with your business?”
Cleminson advised the channel that critical thinking and focused thinking is what will pull an MSP through.
“Know what you are and what you are not and don't do what you're not,” he said. “If you try to be everything to everyone, you get stuck.
“Make some decisions; reevaluate your vendors; have a look at their compensation structure and their programs to make sure it aligns with where you're actually going and then you can make the right choices to support your business.
“Also, reinvent yourself, keep yourself fresh, and make sure your identity is correct.”
This roundtable was sponsored by APC by Schneider Electric and StorageCraft. Photos by Maria Stefina.