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What Does a “Next-Generation” MSP Look Like?


A next-generation MSP offers cloud services that enable its individual customers to differentiate themselves from their competitors. We recently held an MSP and ISV roundtable in Chicago, asking a few of our current partners to talk about their business requirements and what they see in the marketplace.

This is clearly a huge market globally, which will support a lot of winners. And there are a number of different business models emerging, with specializations in specific areas of expertise.

But it’s become very clear that no man is an island, and no MSP can solve all the needs of its clients without building, acquiring or partnering for more capabilities in the marketplace.

Most of our partners also recognize that it’s much easier to sell more to existing clients than to acquire new ones. Maybe they’re providing infrastructure hosting today, but now clients are also interested in commerce, analytics, mobility or security, and any MSP that doesn’t offer that practice risks losing that opportunity to a different supplier. Or the MSP can partner with someone, and quickly bring that new capability into the business. This way, the MSP is now positioned to sell this new service not only to the interested client but offer it to all clients, thereby expanding the amount of revenue being generated from these clients every month on the recurring revenue model.

MSPs are partnering with each other to provide solutions such as disaster recovery, device management or analytics, where they’ve previously lacked expertise. Infrastructure-as-a-Service (IaaS) firms are looking for deeper engagement with their clients as they move up the stack, and they’re going to seriously consider partnering versus building additional capabilities to address time-to-market requirements

Some MSPs that have expanded beyond value-added reselling have built a new business model by becoming the IT department for their small business clients, most of which can be managed remotely. Other MSPs have built their own data centers and offer selected services to their clients. Still others have opted for colocation. The client no longer wants to manage IT, and the MSP doesn’t want to run the data center. In each model, the “stickiness” of the relationship between the MSP and the client is the quality and breadth of services provided. Service-level agreements (SLAs) and security transcend any specific business model.

The next-generation MSP that targets small companies can demonstrate added value by providing business/tech consultancy, as most businesses this size have neither the funding nor the interest to invest in IT skills. But as the MSP moves up to larger companies, business consultation becomes a requirement—the expertise of the MSP must equal the sophistication of the client.

5 tips for an MSP to get started transforming its business

  1. Listen to your current clients to identify how to expand your service offerings.
  2. Grow your business by deepening your relationship with your current client base through expanded services and more business/IT consultations.
  3. Evaluate your system management tools and processes to identify areas to increase efficiency.
  4. Fully virtualize to deliver savings in your current environment; consider integrated technology for ease in scalability and cost optimization.
  5. Establish new creative pricing and business models available based on the flexibility of the cloud—and develop a road map to transition from your current IT environment into the nexus of mobile, social, analytics and broad cloud offerings.

Interested to learn more?

Click here to nominate yourself for a complimentary pass to the 2013 MSP Summit at IBM Edge, June 10–14 in Las Vegas, Nevada. And feel free to let me know what you think by using the “Comments” section below.

Judy Smolski

Judy Smolski is the vice president for the North American midmarket team at IBM. Her role is twofold: first, she advocates for the needs of traditional midmarket clients, many of whom are transitioning some of their IT workloads to Managed Service Providers (MSPs). Judy also assists many MSPs and Independent Software Vendors (ISVs)–which are themselves midmarket companies–to deliver the services their clients are increasingly demanding.

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