Channel advocacy group CompTIA tracks the MSP market as well as the overall IT space. The group has been covering the market since 1982 — so it knows its history.
Not surprising, the 7th Annual State of the Channel report shows that solution providers must embrace new technologies if they are to have a bright future. Many of these technologies are just emerging, but should be considered as a growing part of forward-thinking MSP’s portfolios. “Respondents cite them as the No. 1 driver of change across the tech ecosystem. The ability to build a business around artificial intelligence, virtual reality, blockchain, drones, IoT, etc., will take companies into a future growth path, for sure. But getting there will test firms on several fronts; most importantly, in areas of skills and training, and cost of entry,” the report argues.
At the same time, MSPs cannot be all things to all clients. Fact is, many customers require, nay, demand their MSPs have vertical industry knowledge and skills. “Nearly two-thirds of channel firms say they embarked on a vertical specialty to satisfy customer demand and as a competitive differentiator. Embracing a niche specialty in retail, healthcare, or other sectors will deliver a proven competitive advantage,” the group finds.
Solution providers such as MSPs are in a sweet spot, despite previous warnings that the channel is in trouble as vendor direct sales and cloud services come more to the fore. “Optimism about the future has grown. In 2016, for example, 63% of respondents from CompTIA’s 6th Annual State of the Channel study said they were generally optimistic about the channel’s future; in 2018 that number rose to 75%. Gloomy outlooks have tempered as well. The number of channel firms expressing pessimism about the future over the same two years dropped from 16% to 5%,” CompTIA says.
In fact, smart MSPs see opportunity in the cloud and cite it as a key reason for optimism.
While the cloud and new technologies such as AI are part of the future, most solutions providers focus on core existing IT technologies, and more and more offer these as services. “Indeed, managed services is one of the top offerings provided by a large swath of channel firms, most notably medium- and large-sized entities. And while admittedly it’s been a long, slow march to transform from a mostly product-based transactional business to a services-based recurring revenue operation, a majority of today’s channel firms now at least offer some managed services to go along with other products and solutions,” CompTIA reports. Obviously, those already in the services business are well placed.
New Competitors Mean New Opportunities
The worry in the channel had been that new provider types would drive out existing players. While this is true for MSPs that stand still, the opposite is true for agile and responsive MSPs. The largest categories of new entrants are cloud-based service provider and ISVs, as well as SaaS-focused organizations acting as reseller or referral partners. “Six in 10 channel firms report encountering this type of company in today’s competitive landscape. Think of the legion of Salesforce ISVs and all their partners, along with other cloud-based distribution ecosystems such as AppDirect’s or Pax8’s. The other new competitor/partner types include digital marketing agencies, which 46% of respondents see in the market today. Then there are vertical industry applications specialists that a third of respondents bump into in the trenches,” CompTIA reports.
The answer is to not beat them, but join them. “Partner-to-partner (P2P) collaboration has always been talked about as a bit of holy grail in the channel. But today it is gathering some momentum as the ecosystem expands. As vertical and application specialization proliferates, channel firms more steeped in horizontal infrastructure are seeing an upside to filling a gap in their portfolio by partnering vs hiring,” CompTIA asserts. “Nearly 6 in 10 respondents said they have had a positive experience with this type of partnering arrangement. The benefits, they contend, are expanded business opportunities and skills gap narrowing. It’s not always an easy model, but most agree it’s a good idea.”
MSPs, as CompTIA finds, are well positioned in the channel space, especially those that turn challenges into new business models and streams of MRR.
Watch our webinar “CompTIA: State of the IT Channel” for the complete story.