Seems like an odd question to ask, since one would be hard pressed to think of a really big MSP. But, big MSPs do exist, mostly operating within a larger IT company. Still, the question is one that we ask of our banks, automobile companies, and even of cloud companies. I thought it would be interesting to explore some of the ways in which MSPs have effectively recycled themselves and thereby avoided the problem of getting too big.
MSPs Don’t Typically Get Too Big
MSPs tend not to get too big. Historically, when MSPs reach a certain size, they begin to plateau, both economically and as a provider of valuable customer services. The larger a MSP becomes, they reach scalability problems in the sense that their services tend to become less personal and less valuable to the end-user. Essentially, the services become a commodity.
Big MSPs do serve a purpose, though. In the example of a MSP who owns data centers or deliver Infrastructure as a Service, these MSPs actually thrive on economies of scale precisely because they are larger organizations. Smaller, more boutique MSPs, on the other hand, tend to be more nimble, provide higher intimacy and valuable services (in the perceptions of their customers) and can adapt to market changes more quickly. The question still remains, what happens if a MSP gets too big to fail?
End users actually do think about this question. In fact, I was in a meeting earlier this year where an end user questioned whether there were safeguards to cloud service providers becoming insolvent. Service providers do fail, but they tend to fail due to financial factors, rather than technical ones. In London alone, there have been 2 high profile MSPs who became insolvent and threatened the continuity and data of their customers. In this scenario, the MSPs weren’t too big, but were not nimble enough to change their business model when they should have realized it was at risk.
In the few situations where a large company does provide cloud or managed services, customers are typically dealing with a public company and they can see the financial status of these entities. This visibility should be enough to offer protection and assurance to the customer about the viability of the provider.
Many smaller MSPs complain that their size makes them less competitive compared to larger providers. I actually believe smaller MSPs can use this to their advantage. MSPs can use their size as a selling point against those larger competitors who may be less capable of changing quickly or reacting to market shifts. Customers should be taking into consideration the size of an MSP as it relates to their ability to change. When dealing with larger MSPs, change is not something they are good at doing.
When MSPs Get Into Trouble
MSPs have generally done a good job of handing off customers whenever they get into financial trouble. The process of ensuring that customers are taken care of is an essential and widespread believe amongst MSPs. I have personally witnessed this deep rooted caring for customers first hand and I know it to be true. Caring for customers is one of the biggest priorities for MSPs. When the MSP is in trouble, wants to retire, or simply doesn’t believe the relationship is a fit anymore, MSPs work hard to make sure the customer is transitioned to another qualified MSP. In this regard, our profession has always been looking out for the customer’s needs.
Do I think MSPs will ever become too big to fail? No, I don’t. MSPs will continue to be agile, conservative, and risk averse organizations. When they reach a certain size, if the customers are still happy with their performance, they can continue the relationship. If not, there are plenty of alternatives. MSPs work very hard not to become risky, either to themselves or their customers. Too big to fail just isn’t something most MSPs aspire to become.