At the onset of the COVID-19 pandemic, many managed service providers (MSPs) feared the worst. A 2020 survey from The Channel Company and consultancy IPED showed nearly three out of five service providers and vendors predicting severe decreases in IT budgets.
Thankfully, for IT service providers, the rapid digital transformation of industry spurred by the pandemic presented a real opportunity to scale their businesses. In a recent update, The Channel Company now reports 81% of service providers expect to see sales increase in 2021. However, seizing the moment demands a deliberate and targeted approach.
In this blog, the first of a three-part series on scaling managed services businesses, three key steps are outlined that are critical to expansion efforts: defining your scaling priorities, identifying the customer base you are targeting and selecting the right ecosystem to leverage.
Before the pandemic, the MSP sector had already been on an upward trajectory with one analysis suggesting that the industry would almost double in value between 2020 and 2026 to reach USD $274.2 billion by the end of that period.
Such growth is driven by an increasing number of companies seeking to streamline their operations and confront new challenges, including rising cybersecurity threats. That sees them handing over the likes of cybersecurity, online management and general compliance to MSPs able to provide reliable and cost-effective solutions in those areas, leaving clients to focus on aspects of their business that are more profitable.
The pandemic-inspired uptick in that shift has meant massive growth for some MSPs. Acronis, for example, reported that MSPs saw demand for remote work support shoot up 50% during the first months of the pandemic, and 70% of MSPs surveyed by Altaro reported increased business when clients moved remote.
For MSPs keen to grasp this opportunity and scale up, getting the following three steps right will be fundamental:
1) Define your scaling priorities
No move to scale up can be done without careful planning, and that translates into identifying exactly how you intend to grow. At the most basic level, that requires defining your specific goal.
Are you looking to go from $1 million in revenue to $10 million, or are you aiming for $50 million? Maybe you are seeking to move into new technologies? Perhaps your focus is on moving up along vendor competency levels, or getting new security certifications? Alternatively, you may be looking to grow your team in specific areas.
Whatever the nature of your scaling efforts, they must be properly defined before you can move onto considering other crucial aspects of your growth plan, such as the timeframe in which you intend to achieve these goals.
In establishing your goals and the time frames in which you intend to achieve them, you’ll need to establish markers along the way to monitor your progress and recalibrate your plan as needed. Setting revenue targets at junctures along your journey, with an ultimate target at the end of the defined period, will provide a good indication of your progress.
You’ll also need to figure out what sort of talent you need to hit these targets, as well as identify new technologies that will help your efforts. Both of these tasks will be fundamental to allowing you to expand into the areas or verticals that you have targeted in your growth plan.
2) Identify the customer base you are targeting
Scaling as an MSP or any business will of course involve growing your customer base, be that through increasing provisioning of existing services or expanding into a new services market.
As such, identifying a clear profile of the pool of customers from which to draw new business is critical because based on that you will be able to design an effective approach to catering to their needs. Creating your strategy will involve identifying their biggest pain points and designing solutions for them.
Are your customers struggling to deal with rapid changes in day-to-day operations brought on by the sudden shift to working at home, or having challenges planning for their future? Maybe they find they lack agility in responding to the IT issues that arise today, or are afflicted by a growing operational workload at a time when economic realities are forcing a hiring freeze?
Whatever pain points may be affecting your target customer base, the solutions you can offer--be that filling an operational or talent gap, or providing a level of flexibility that clients cannot achieve in-house--will dictate how many new customers you win. A great many pain points can be found wherever businesses are forced to quickly pivot to confront a new reality, and for MSPs that signals significant opportunities to offer solutions.
MSPs working in the cybersecurity and cloud-based services spaces saw more growth compared to other technology services during 2020, as companies were forced to radically increase their online presence and activities. This trend will continue after the health emergency has subsided, so it’s one that growth-focused MSPs should be actively engaged in.
For MSPs involved in verticals like government, a wise move would be to invest in broadening their security certification portfolio, achieving the likes of Fedramp and CDDC certification in order to be able to cater to a broader base of clients in their field.
3) Select the right ecosystem to leverage
For every client you work with, you’ll be part of a different ecosystem, with various channel partners, vendors, marketplaces and other MSPs shifting according to the service being provided.
As the managed services industry increasingly verticalizes around technologies such as cloud-based solutions and cybersecurity, or specific industries such as finance or healthcare, MSPs will have to plug themselves into different ecosystems to best serve their customers.
This job involves cultivating a pool of partners and providers from which a tailored ecosystem can be put together. It also means developing vendor competencies in order to increase trust and expertise within major partner communities, such Microsoft’s partner transformation index or the AWS Partner Network. So doing will bolster margins and profitability.
With clients increasingly seeking holistic solutions to their problems, this is all fertile ground for growth among MSPs able to provide integrated solutions.
The big players in the MSP sector understand how critical ecosystems are, amidst rising expectations among customers regarding service provision. They also recognize that while customers expect an increasing number of services, this does not mean they are necessarily happy to work with more providers, and that MSPs able to meet their customers’ varied requirements are those who stand to gain the most revenue--and growth.
This has resulted in the MSP channel becoming “more agile, responsive and cross-functional than ever,” as providers develop and hone their skill sets to meet the growing demands of customers.
A large part of that responsiveness comes from being able to quickly plug into the right ecosystem.
About the Author: Rajesh "Raj" Marar, Executive Director is responsible for business, technology strategy and sales growth for Harmony Business Systems, a CloudBlue Company. Raj joined the Ingram Cloud organization in 2017 as executive director for IaaS responsible for products and services. He launched an IaaS Center of Excellence (COE) for services to accelerate cloud adoption, migration and optimization at scale to help Ingram Micro achieve the Azure MSP Expert designation and to drive exponential growth for IaaS. Raj is an executive with 25 plus years of experience as a leader driving digital transformation. Prior to joining the Ingram Micro Cloud team, Raj worked for the Ingram Micro Global IS team where he had taken on roles with increasing responsibility over a ten-year span. He served as Executive Director for global platforms to lead an application modernization & data center virtualization, consolidation, automation and migration initiatives. He also led several major transformation initiatives for global ERP (SAP) deployment, Middleware, Partner Connectivity and E-commerce to help build a robust scalable & cost-effective platform to support innovation and growth. Follow Rajesh Marar on Twitter, LinkedIn or Website