By Craig Gunderson, President and CEO, Oxford Networks, and Ed Abrams, Vice President of Marketing for IBM Midmarket Business
As more and more small and midsize businesses turn to managed service providers and the cloud to handle routine IT needs, the MSP market is expected to reach $86 billion by 2016, according to research firm Visiongain. At Oxford Networks, we made the choice to become an MSP several years ago, and many other companies are doing the same.
The benefits are many. Once the business is built, you have a continuous revenue stream that helps you manage your day-to-day business. You can also bundle additional services and products during the term by understanding your clients' needs and challenges. Most important, with a foot in your clients' businesses, you can forge stronger relationships and act more as trusted advisers than providers.
Of course, becoming an MSP does not work for everyone. You must first examine the market you want to get into -- the customer set, product set, competition -- and decide whether you'll be able to penetrate that market. Then you'll need a sustainable growth strategy and a strong management team and the right employees in place to grow the business and make it profitable.
To determine if the transformation to MSP would be a good fit for your company, consider these basic questions:
1. Do you already offer some type of managed service, such as monitoring networks? With their limited IT funds and modest staffs, smaller firms especially want to delegate burdensome IT tasks to service providers to free themselves to concentrate on growing their businesses. Those jobs range from managing networks and hosting services to email and IT help-desk support. If you do not offer a managed service, you can learn more about what clients really want by asking what type of services they are thinking about employing and why.
2. What are your capabilities? What must be added or changed? How much training is necessary for your staff, and how long will it take? Selling services differs from selling products or solutions. If you have skills in house such as security or monitoring, you're a step closer. At Oxford, we invested in a cloud infrastructure and acquired an IBM midmarket MSP Business Partner (Norton Lamb & Company) that had many of the necessary skills. Investing in cloud is essential today because more and more clients are relying on technology providers to help them quickly develop cloud-based services in a more simplistic, secure, and economical way. According to IDC, the loss of business and security breaches that can result from interruptions in service are prompting thousands of SMBs to seek hosted public cloud services. By hosting numerous SMBs on a public cloud, an MSP can offer substantial discounts on hosting costs and analytics.
3. Do you have a data center or will you have to use one owned by a third party? You can save money by already having a portion of your infrastructure in place. At Oxford, we bought a former NATO data center that we transformed with IBM's help to provide the business market with a high-security data facility that offers managed IT solutions. They include a suite of cloud-based technology products that will increase clients' business data security options and help them better manage their telephone and Internet services. Having data center services and managed services capabilities in our portfolio is key to us remaining relevant over time. If you plan to use a third party's data center, you must factor that investment into your business model.
4. Do your customers understand the benefits of managed services? Successful MSPs are those who can explain the value of the model and how it works. Also, don't forget to build your references. Make sure your customers are aware of your new capabilities and offerings.
5. How well do your reps understand your clients' needs? If your sellers truly know about the businesses of firms they're pitching, then you'll be in a better position to recommend a managed service. And unless you're immersed in their businesses, you won't be able to grow yours. The more you know about your customers, the more they will trust you. Try teaming one of your account executives with a sales engineer, who can propose a solution tailored to the company's needs. He or she can then become the project manager to make sure you deliver what you've promised. It eliminates communications hand-offs that typically cause many of the challenges within the delivery model.
Employees who are passionate about seeing your company win over the long term make evolution and company transformations much easier. By encouraging a culture of innovation and giving your employees free reign to dream, you company will lead instead of follow.
