Guest Author: Andy Monshaw, General Manager, IBM Midmarket Business

Small and midsize businesses, often working with constrained IT budgets and limited internal IT expertise, are teaming more with Managed Service Providers (MSPs) as trusted partners to help manage the complexity around IT, enabling them to focus on their core business.

Technologies such as analytics, security, and collaboration are being delivered in a more simplified approach through MSPs. As smaller organizations look to benefit from low cost, pay-as-you-go IT, SMBs are turning to Managed Service Providers to manage networks, run software applications, host services and, most importantly, ensure their client’s services are never down.

Traditional Value Added Resellers (VARs), under increased pressure to find new revenue streams as their customers are dealing with flat IT budgets, are increasingly shifting to the managed service provider (MSP) business model. As a result, many of these VARs are looking to migrate their own businesses into the hosting or Managed Service Provider area in an effort to forge tighter relationship with their clients.

So where should a VAR begin?

The key to becoming successful in the MSP business requires creating the right value-added services clients need and, having the operational capabilities to deliver them cost-effectively. The MSP then needs to build repeatable and effective processes to market and sell its services to prospective clients. Once a contract is signed with a client, an overall plan for resources and delivery is created.

In addition, MSPs need to have an effective go-to-market strategy to identify prospective clients, manage campaigns, leads, pipeline, proposals and contracts/SLAs. Such a process enables an MSP to reduce new customer acquisition costs, increasing profitability.

Lastly, MSPs should have comprehensive reporting and analytics capability, so management always has visibility into all key metrics of the business such as profitability by project/customer/service.

The good news for VARs is, despite the fact that today’s current economic climate is impacting many businesses, MSPs find this environment favorable. As IT organizations downsize or are expected to do more with the same or less staff, they have no choice but to turn to third parties to help accomplish their requirements.

As more enterprises opt to concentrate on their core competencies, MSPs can pick up business keeping their customers’ basic enterprises running while cutting costs with remote management capabilities.

But VARs have to approach the market quickly and strategically. The MSP business model is attracting more and more companies, and competition is becoming more intense.