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Succeeding with MSPs – the new challenge for vendors

Many of the vendors and service providers we work with, particularly those targeting the SME market, are prioritising MSPs as a key focus of their go-to-market plans.

This reflects the broader market shift to managed and cloud-based services. The global market for managed services is forecast to grow from $143 billion in 2013 to $256 billion in 2018 (source: Markets & Markets, 2013). As a result, many channel businesses are reinventing themselves as MSPs. TechTarget’s 2013 Channel IT Priorities report found that 79% of channel organisations already offered some form of managed services. Today even many traditional VARs operate a hybrid business model, making money from a mix of transactional product sales, project work and, increasingly, managed services.

As MSPs capture an increasing share of the SME market, becoming in many cases the de facto IT department for their clients, they will increasingly control access to that market, meaning that any vendor that ignores MSPs does so at their peril.
This shift is presenting a challenge for many vendors, as it is forcing them to re-evaluate many aspects of how they attract, enable and support their channel. A different approach is often required for MSPs than has traditionally worked for reseller partners.

Based on our experiences working with MSPs and vendors, we’ve identified a number of factors that vendors should be considering when building their MSP programmes. These include:

Think of MSPs as customers as well as partners
A crucial difference between marketing to an MSP and marketing to a more traditional VAR is that the MSP will typically be a user of the product or service themselves, performing roles such as system admin and reporting on behalf of the end-customer. Therefore vendor communications to MSPs need to reflect the fact they will be concerned not just with how saleable the solution is, but also how usable it is.

MSPs don’t resell vendor solutions; they embed them
A key distinction for working with an MSP is that they will not be promoting the vendor’s proposition in the way a reseller typically does; instead they will be embedding the vendor’s solution into their own broader managed services proposition. This has all sorts of implications for how a vendor engages with an MSP, and the types of tools and assets that the vendor needs to create to support the MSP.

Collaborative engagement not one-way comms
While the vendor/ reseller relationship is often linear and one-directional, the vendor/ MSP relationship needs to be far more collaborative. Vendors need to work with MSPs initially to help them build their proposition around the vendor’s technology, and then on an ongoing basis there needs to be a two-way flow of information and ideas to ensure that the combined service/ technology offering continues to meet customer needs.

Service levels are key
Vendors targeting MSPs need to be aware of the importance of service levels as part of the MSP’s relationship with their end-customers. Vendors need to think through, and be able to explain, how they will underpin the MSP’s service delivery to customers, whether that’s through back-to-back SLAs or effective round-the-clock technical support capabilities.

Focus on enabling differentiation
Core MSP services, such as Remote Monitoring and Management, are becoming increasingly commoditised and many MSPs are finding their margins squeezed. Therefore differentiating their service offering is a top priority for many MSPs. In a 2014 survey of European MSPs, 65% highlighted lack of service differentiation as an important issue impeding their ability to grow. Therefore vendors need to be able to explain how their product will help MSPs differentiate themselves and build higher-margin revenue streams.

Flexible marketing tools needed
As discussed above, MSPs don’t exist to resell technology – part of their value to the customer is that they take away the need for the customer to buy technology. Therefore any vendor whose marketing toolkit for partners consists solely of product datasheets and product-centric e-shots isn’t giving an MSP what they need to build demand. Vendors need to provide flexible marketing resources that enable the MSP to build their own messaging around the vendor’s content, in the same way they are building a service around the vendor’s technology.

The above is by no means an exhaustive list, but for any vendor or service provider seeking to build their presence in the MSP channel it’s a reasonable starting point. With the managed services market set for continued growth, any vendor that’s serious about building share in the SME segment can’t afford to ignore the rise of the MSP.