The Pundits’ Take on MSP 2.0

Man jumping out of wall

MSP 2.0 is not exactly a new term, but it is really catching on to describe the current managed service provider market.

The Kaseya Take on MSP 2.0

As a vendor largely focused on MSPs, Kaseya has a deep commitment to help MSPs successfully navigate in an MSP 2.0 world.  Kaseya offers a comprehensive collection of solutions, from RMM to PSA, identity and access to cloud monitoring, and more, that are all MSP 2.0 ready.

In our analysis, MSP 2.0 is in part a manifestation of market growth. MSPs have matured from part-time operators and small 1-5 person technician-dominated companies five short years ago to larger process-centric organizations with strong technical capabilities combined with professional sales, support, marketing, finance, and management teams. Because of the larger clients, super-MSPs that could handle the scale evolved. These MSPs are 100% focused on growth and expansion and employ professional sales, marketing, and technical delivery organizations to acquire new accounts and often displace smaller less mature MSPs.

On the other side, small- and medium-sized businesses (SMBs), the prime targets for MSPs, are increasingly demanding and requiring the same technologies and processes that have been pioneered and used for years by enterprises.

This means SMBs are now commonly adopting IT functions such as end-user security, password management, multi-factor authentication, network/systems management, threat monitoring and firewall management, all of which are required as SMBs’ dependence on their network and data to run their businesses grows.

These two developments have created intense competition and downward price pressure, forcing all MSPs to respond.

Here is what MSPs must do if they want to succeed to a MSP 2.0 world.

Embrace the changing dynamics of the market. The MSP community is made up of many diverse types of MSPs with different strategies and goals for success. Some MSPs want to offer multiple services to many different types of customers. Others are looking to expand into larger SMBs, and yet others are running a lifestyle business, and are not interested in significant growth. Rather they just want to continue to operate a steady business serving their customers.  Every MSP – whether they are looking to expand

Change their investment profiles. To meet these broadening customer requirements, MSPs are now forced to evolve faster and invest more time, effort, and money on technical expertise as well as R&D to understand what customers require and build out that service portfolio.  This puts tremendous strain on the MSPs margins as it requires direct investment to meet and address these changes.

Leverage a modern Unified MSP Growth Platform. Old point systems and first-generation tools used in the legacy MSP 1.0 world are no longer enough for MSPs to ensure their ability to continue to succeed in the era of MSP 2.0. A new unified platform should combine the business management need of an MSP with the richest current and forward-looking suite of software applications that MSPs can build managed services around to generate revenue and meet all the needs of their continually demanding SMB customer base.

There are several terms a leading edge MSP may use to describe themself. An MSP 2.0 level service provider is clearly a Trusted Advisor and may have moved on to offering vCIO services as well. Meanwhile many forward thing providers call themselves an Agile MSP, and apply Agile project management principles originally meant for software development.

Automation and MSP 2.0

The three year-old ReframeYourClients is a consultancy that helps providers move towards MSP 2.0 adoption and refinement.

Here’s what they say about MSP 2.0

  • “Focus on business value
  • Management of IT
  • Generating demand – with thought leadership
  • Selling with business assessment
  • Delivery of a distinct and separate vCIO service
  • Current disruption is an opportunity”

The most obvious switch is to stop focusing entirely on technology, and instead lead with business value. And of course business value is achieved by choosing the right technology, using it properly, and turning that technology into an economically efficient solution.

Much of this actually comes from automation software, including PSA solutions. “Software automation could be a huge part of scalability. The software works on methodology and processes and automates tasks and communication. It has to be integrated internally and externally. It has to manage all the processes from marketing, sales, and proposals on the delivery side, and it has to be automated. The platform has to be integrated with other platforms in the industry to leverage the MSP’s current assets as well,” said Reframe CEO Denes Purnhauser argued.

Other automation tools, such as RMM, are also critical. “The question is how to drive down client costs through automation, standardization, better processes, information, communication, and collaboration?” he asked.

Marketing 2.0

There is less use in adhering to MSP 2.0 principles if your customers and prospects don’t know you are doing so.

While customers may not understand the term MSP 2.0, or even think of managed services the way you do, SMBs are indeed looking for more advanced services and benefit from a greater consultative approach. This means you need collateral that explains the benefits of your approach.

One the best approaches here are case studies that explain what clients gain through a deeper, higher-level relationship with your firm.

The MSP 2.0 Term Debate

Back in 2013, the term MSP 2.0 was being bandied about quite a bit, to the chagrin of Joe Panettieri who then managed MSPMentor. Panettieri now helps run ChannelE2E.

According to Panettieri, MSP 2.0 was hot in 2007, but leading MSPs have moved well beyond, all the way up to MSP 4.0!

Panettieri is a true MSP expert, and his analysis is important. The truth, though, is the industry hasn’t latched onto MSP 3.0 or MSP 4.0 terminology, so MSP 2.0 still commonly refers to the world of leading-edge service providers.

Here’s how Panettieri sees the MSP waves. We are quoting the MSP Mentor piece verbatim, but with some deletions.

MSP 2.0: 2001 to 2007

  • “Purpose-built tools emerge in areas like RMM (remote monitoring and management) and PSA (professional services automation).
  • The two areas nearly come together multiple times. PSA and RMM companies consider buying each other but no real deals emerge.
  • Per-device MSP pricing models begin to emerge.

MSP 3.0: 2008-2013

  • Peer groups help MSPs to maximize profits while learning from non-competing executives.
  • All-in pricing (the Chocolate Cake model, as explained by TruMethods CEO Gary Pica) emerges.
  • A shift from per-device to per-user pricing emerges and accelerates in many areas.
  • Deliver a great “end-user experience” becomes the MSP battle cry.
  • Cloud-based backup and disaster recovery (BDR) goes mainstream for MSPs.

MSP 4.0: 2014 and Beyond

  • MSPs manage and optimize customer applications regardless of location — on-premises, in the MSP data center or in a third-party cloud like Amazon, Azure and more.
  • Most MSPs abandon plans to build their own data centers. Why create your own power plant when the cloud grid — Amazon, Google, Rackspace, Microsoft, ViaWest, Savvis, SoftLayer and more — deliver plenty of power for MSPs to plug into?
  • The “dream” of building and selling a very high value MSP dies for many companies because most MSPs do not have their own intellectual property. Still, smart MSPs seeking an exit can fetch a price premium -— especially those that have vertical market and compliance expertise.
  • Some MSPs focus mainly on end-users. Others shift in the complete opposite direction, managing the Internet of Things (Machine to Machine computing, or M2M) and network sensors. If a device is IP-enabled, there’s an opportunity for MSP monetization.

More from the Kaseya View

In this Playbook “IT Complete: Your Roadmap in an MSP 2.0 World”, we outline technical solutions that help MSPs achieve 2.0 status, and gain the rewards MSP 2.0 offers.

The Kaseya MSP 2.0 Definition:  In order for MSPs to succeed and thrive in this new environment, MSPs must evolve. That requires that MSPs:

  • Embrace the changing dynamics of the market
  • Change their investment profiles
  • Leverage a modern unified MSP Management Platform to ensure their ability to continue to succeed in the era of MSP 2.0. Such a platform should combine the business management need of an MSP with the richest current and forward-looking suite of software applications that MSPs can build managed services around to generate revenue and meet all the needs of their continually demanding SMB customer base.

No matter whether you love the MSP 2.0 term, its principles are well worth aspiring to.

Posted by Doug Barney
Doug Barney was the founding editor of Redmond Magazine, Redmond Channel Partner, Redmond Developer News and Virtualization Review. Doug also served as Executive Editor of Network World, Editor in Chief of AmigaWorld, and Editor in Chief of Network Computing.

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