Chris Sterbenc has been working with MSPs for 30 years. He shares some pearls of wisdom with us about where he thinks MSP businesses have been, and where they need to go. Chris has seen many things come and go. He’s built partner programs and watched this space evolve over many years.
According to Chris, the biggest thing that’s happening in the MSP world is the evolution to the cloud. Between 50 and 80%of MSPs are using these solutions rather than on-premise solutions. However, on-premise solutions are still core to SMBs.
Many MSPs are having trouble transitioning to cloud solutions like Office 365, and training their customers to use it. They struggle with translating the old world to the new world. Many are still using on-premise exchange servers on an “x” dollar per month fee. Eventually, they need to migrate from this good revenue stream. Now a lot of them are making the migration to Office 365 because of the feature functionality. However, they’re only and making 7% per $3 user. The result is that their profit margins are lowered, and that nice monthly money stream has dried up. The dilemma is how to make money from using Office 365.
The best-performing MSPs have moved completely to cloud solutions and have figured out how to make money with it. There’s a huge opportunity here if you can do it. Microsoft Office 365 and cloud solutions will only grow. They’re not going away. Build services around 365. Sell backup for it. There’s only a 30-day retention period with the product. If a user deletes an email and you go back 31 days later, it’s gone. The answer is to build solutions on top of Office 365 to provide the archiving that your customers need. For example, offer business continuity to your clients. Believe it or not, only 50% of MSPs are doing this. And, 30% of their customers are still using tape backups!
Another thing to take advantage of is to Identify workload, a piece of a company’s overall IT infrastructure, and move it into the cloud and put it into production (This is called “Lift and Shift.”), and you bring hooks on premises. Now, part of their IT is in the cloud and part of it is on premises. What you end up with is a customized hybrid solution for your client. There will always be applications in niche industries that will stay on premises.
The conversation is starting to shift at the Partner level—How do I monetize it, how do I get educated on it, what pieces of it should I educate my clients on? The leading MSPs in the high-growth, high-profit margin areas have standardized execution across their customer base. If everyone has a different a different technology footprint, you’re going to have a hard time trying to support them all. They’re religious about selecting a set profile of the customer, but ensure they have a standard stack of solutions they use in all these environments. They know they can’t go in and totally rip apart a customer’s IT infrastructure, so they devise a technology roadmap with baseline solutions that they gradually build on. They eventually end up swapping out old technologies and replace them with the standardized stack they use.
The more disciplined the MSP is in getting their customers to the same solutions (firewalls, antivirus), and the more it is remotely monitored, and monthly recurring, it sets the MSP business up for easier scalability and higher profits. It’s important to identify the right solutions and partner and deploy them across their customer base.
There’s always going to be a need for a technology consultant. Patch management days are long behind us. They key is to adapt to change and find your place. For example, today, businesses need IT consultants to help them navigate the multitude of solutions out there. You’re in a position to grow the scope of your relationship with clients, and increase your MRR (monthly recurring revenue). Promote strategic IT plans so your clients can provide better service to their customers. Set yourself up to be their virtual CIO. The MSP companies of the future will always have one business IT member on staff—Someone with an MBA who understands what businesses need, can be their IT business coach and connect them up with the right IT plan and solutions.
The take-home message: If you haven’t added cloud services, BDR and strategic IT planning to your services, you won’t be able to compete with the best-performing MSPs, and you’ll miss out on new business.
If Chris were to structure a new MSP today, these would be his considerations:
- Assemble a stack of services and make sure they are cloud-oriented and cloud delivered. This is where the world is going;
- You’ll need an Office 365 or G-Suite for your core business applications and email solution;
- You’ll need anti-malware, anti-virus, firewalls, and backup for endpoint devices, including laptops, smartphones, and tablets (These are the most common entry points for ransomware.);
- Construct a standardized stack of services and solutions for better scalability and profitability;
- Bundle offerings to increase your MRR per user;
- If you use cloud apps you’ll have ease of management;
- Then select the right customer. Analyze the data you have on your customers and profile those who provide you the greatest profitability.
- It’s hard to say no even, but, if you can keep the discipline of only accepting ones who buy into your suggestions, and you can move them gradually to your standardized stack of services, you’ll have much greater success with less stress;
- You must “sell” your vision to them, or it’s time to let them go, and finally,
- Your marketing efforts need to be designed for the type of company you choose to serve.
What’s Chris doing now? Chris has been in backup for quite a while. His new business, InfraScale has expanded from the traditional BDR solution to a cloud system.
Their strategy is “Your cloud, Our cloud, Any cloud.” 40% of the businesses around the world that they serve put all their services in the InfraScale Cloud. They can do it for any device on any operating system.
They partnered with all four of the big cloud vendors, Amazon, Microsoft, Azure and Google. With InfraScale, you can use any of these public clouds as well. They’ll help you migrate workload into these clouds. This broad support on the front and backend is unique via a pure subscription model. They don’t publish prices, so you can make some great margins on it.
He’s looking to Partner with select MSPs. They are very partner friendly and have won numerous awards. If you want to learn more, contact Stuart from an introduction at {phone} or {email}.
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