A little more than a decade ago, I remember several industry experts predicting that the VAR model would be dead and buried within the next five years. With managed services adoption in full swing and cloud computing just ramping up, their assumptions were that no channel firm could or would forego the growing recurring revenue opportunities. The break-fix business was labor intensive and unpredictable, and finding qualified help was getting more difficult with each passing year. Not to mention the margin concerns and inventory costs.
With all those factors in play, the complete channel evolution to managed services had to be inevitable. Right? Not so much. One thing I’ve noted over the past couple years travelling to various channel events is that many solution providers are somewhat reluctant to discuss break fix and other onsite services. But when you dig a little deeper, you often find they still offer that type of support to a fair number of their clients. Truth be told, most are still doing it.
The “dirty little secret” in the channel of 2016 is that few providers truly claim to be pure play MSPs (100% managed services). In fact, just three out of ten respondents in CompTIA’s 5th Annual Trends in Managed Services indicated it was their lead revenue generator in the last 12 months. Onsite support is still a significant portion of channel income, and many providers continue to offer it. In fact, I’ve surveyed the audiences in several speaking sessions over the past two years and found a fairly large number of channel professionals who provide virtually no managed or cloud services yet. And those are the ones willing to admit it.
Many don’t even mention that break fix services are still a part of their portfolio unless you dig deeper. And when they do, they’re almost apologetic for not getting all their clients to adopt managed services. But that’s nothing to be ashamed of. What many of the experts failed to predict is that IT firms don’t have complete control over their destinies or their portfolios. To a great extent, their customers ultimately determine the service mix. Some will willingly move to the managed services model if they have complete confidence in their providers or the business case makes sense.
Unfortunately, not every customer gets it…or is willing to pay for it. Some like to see technicians and won’t fork over cash each and every month if they don’t believe their systems warrant that much attention. Despite all the benefits managed services can provide to businesses, as well as their employees and clients, not every owner or manager will be swayed. That’s reality.
And for every provider who sticks to his or her principles and promises to “fire” any client that won’t transition to the managed services model, there’s another who will continue the status quo. After all, it’s typically harder (and costlier) to recruit new clients than it is to continue a service they’re used to delivering. A bird in the hand…
The new channel reality is that the customer truly is king, especially in smaller communities and unique verticals where new client acquisition can be difficult. That really isn’t something new, as most providers are well aware, but industry experts are beginning to acknowledge that more emphasis needs to be placed on clients rather than the model.
Hybrid: The New MSP
Despite the exponential growth of managed and cloud services over the past decade, they don’t always address the multifaceted needs of the SMB. One of the key channel trends highlighted in the CompTIA IT Industry Outlook 2016 is getting closer to the customer. With all the changes triggered by new technologies, business objectives and industry compliance requirements, they need more help than ever.
Providers attempting to support their clients with managed and cloud services alone, without partners or an IT team on site to address infrastructure and other needs, might not be as competitive in the future. Things change. The way channel firms interact and appeal to their end customers will need to adapt. That may mean partnering with others to support a hybrid model when providers can’t or simply prefer not to offer break fix and other manual, onsite services.
On the flip side, those not currently offering managed services need to take a serious look at the options today. There’s never been more tool and program choices, and members of the CompTIA Managed Services Community made it easier than ever to build a successful practice earlier this year. Their Lifecycle of a Managed Services Client site allows prospective and existing MSPs to access a multitude of helpful resources from a single location. Just scroll over topics and select the tools that apply to your particular situation or business need. It’s that easy.
It really doesn’t matter today whether you call your business a full-fledged MSP, a hybrid VAR or a traditional break fix services company. As long as you can make the model work for you and your clients, no one should criticize which model you go with. Of course, efficiency and profitability will obviously play a major role in long term success, which is why the services that drive recurring revenue are so attractive. Along with the current and future needs of your customers and end users, those are the factors that really matter.
Brian Sherman is Chief Content Officer at GetChanneled, a channel business development and marketing firm. He served previously as chief editor at Business Solutions magazine and senior director of industry alliances with Autotask. Contact Brian at [email protected]