Reasons why MSPs are the future

Bringing skills and talent

Whatever the reason, it’s hard to find anyone who disagrees with Steiner. “With technology stacks for enterprise evolving and becoming more complex to gain a competitive edge in the market, customers value the breadth and depth of expertise that can be offered by MSPs,” says Sahil Rekhi, executive vice-president of global channel and partnerships at Kore.ai.

Tony Beller, senior vice-president of global partner sales at Tanium, says: “MSPs are probably the most undervalued and misunderstood segment of our partner ecosystem, and it’s something that we’re committed to change.”

He predicts vendors will continue to make major investments in helping partners to build their managed services practice. “There is a huge shortage of cyber security workers globally and companies are facing increasingly sophisticated threats. This is especially acute in mid-market customers who lack the resources that their enterprise account peers may have,” adds Beller.

Cyber security is an area where MSPs are increasingly indispensable. Sean Remnant, chief strategy officer at Ignition Technology, says: “There is a lack of skilled resources. People with the skills to understand modern cyber risk and threats are expensive, and it’s really hard to have enough people who understand all the tools needed to secure a modern enterprise, no matter the size. MSPs provide the solution for that shortfall.”

This is a point echoed by Todd Palmer, senior vice-president of global partner sales and alliances at Illumio, who says businesses are increasingly reliant on MSPs to navigate the complexities of digital transformation, cyber security demands and the need for specialised, scalable services.

We’re seeing a growing reliance on MSPs to deliver comprehensive skills packages, helping organisations navigate the complexities of a rapidly dynamic market

“This isn’t solely because of the global cyber security talent shortfall,” he says. “MSPs offer the expertise, flexibility and cost-effectiveness that businesses require to stay competitive. Their role as strategic partners in the technology ecosystem will become more critical as technology evolves to match the dynamic nature of bad actors.”

Jonathan Wright, director of products and Operations at GCX, agrees that organisations are finding it increasingly challenging to develop internal talent to deal with the rapidly evolving technological landscape.

“As a result, we’re seeing a growing reliance on MSPs to deliver comprehensive skills packages, helping organisations navigate the complexities of a rapidly dynamic market,” he says. “MSPs have become increasingly important due to their ability to offer specialised skills and provide a panoramic view of technological progression.”

Wendy Shearer, head of alliances at Pulsant, describes the “historical triangle” between customers, MSPs and vendors as “often being fraught”, but the presence of MSPs in this value chain is not just assured, it’s also critical to ensuring the growth of business technology markets.

Undervalued services

Fred Voccola, CEO of Kaseya, says: “MSPs play an indispensable role in enabling small and medium-sized enterprises [SMEs] to stay competitive and viable in today’s digital world. The UK economy relies heavily on thousands of MSPs who work tirelessly to keep SMEs operational and secure.”

“MSPs are the first line of defence against ever-increasing cyber threats, maintaining robust security postures that can mean the difference between smoothly overcoming a cyber incident or suffering devastating consequences that make headlines,” he says.

Voccola believes MSPs “have cemented themselves as future partners for companies”, but there are aspects of the market that are unsustainable. The responsibilities of MSPs have grown exponentially more challenging as digital footprints and cyber threats have expanded, but “despite their critical contributions, this heightened importance is not reflected in current financial outcomes”.

In other words, while MSPs have become more indispensable, they’re not being paid to reflect their status. Voccola makes the comparison with firms in the legal and finance industries making 30% to 35% profit margins – by contrast, MSPs average between 8% and 12%. “This disparity is unjustified considering the essential services and immense value MSPs provide,” Voccola adds.

MSPs are the first line of defence against ever-increasing cyber threats, maintaining robust security postures that can mean the difference

Unlike their legal and financial counterparts, MSPs must maintain constant vigilance. IT outages demand immediate, around-the-clock attention. “Closing this profit margin gap is vital to acknowledge the crucial role MSPs play in protecting modern businesses and incentivising industry players,” says Voccola. “Recognising and appropriately compensating their contributions will ensure that MSPs can continue to support SMEs effectively, providing the foundations for stable, long-term partnerships.”

Chris Shaw, UK&I and SA country channel manager at AvePoint, believes MSPs are only going to grow in importance as they have expertise, access to vendors, and offer highly customisable services, all of which are beneficial to customers seeking to derisk their environments and lean on that expertise.

Amid all this positivity, Russell Crowley, founder and CEO of Principle Networks, offers a slightly contrarian view, arguing that although there is a future for MSPs, “the traditional model for an MSP is already dead”.

“Vendor technologies and cloud platforms are becoming increasingly simpler for customers to consume and administer, without the need to hand overall control to a traditional managed service provider,” he says. “The old MSP model is cumbersome and inflexible, limiting customers to fixed terms, prolonged change processes, and a predetermined suite of products and services.”

Business owners can take back control by opting to consume a cloud-first platform and blend a best-of-breed selection of the technologies they need to run their business. Even so, they still need help – and this is where, Crowley claims, the new MSP model begins.

“We are seeing an evolution where MSPs are transforming into strategic technology consultants and advisors, providing businesses with the necessary tools and expertise to carry out their own bespoke digital transformation projects,” he says.

Businesses want to avoid vendor lock-in and the onus is on MSPs to create lock-in by value instead. “The modern MSP should not seek to control, but rather augment a customer’s in-house capabilities and help gain maximum value from the best-suited vendor technology platforms,” says Crowley.

Not all MSPs are equal

Notwithstanding Crowley’s atypical response, with so many people in agreement over the vital role MSPs play, how can vendors make sure they gain and retain their loyalty amid such demand for their services?

Ignition’s Remnant says MSPs are looking for a robust offering that delivers the desired outcomes. The commercial consumption models and margins must be attractive to allow them to shrink and grow with the demands of their clients.

“We must be mindful that the MSP is selling a service,” he says. “Often, the underlying technology is not important to the client as long as it meets the desired outcomes. This is where vendors must ensure they get their MSP go-to-market correct to stay ‘sticky’.”

The product must deliver, be easy to wrap a service around, and have a strong and flexible commercial approach that lends itself to a service-based model. If those criteria are met, then the MSP is unlikely to look elsewhere. 

But he adds the proviso that vendors should remember that not all MSPs are the same. “There should be more to the vendors’ MSP programmes that certify and validate the capability of the MSP. Everyone seems to claim to be an MSP these days. There should be more scrutiny around their capability,” Remnant says.

Illumio’s Palmer believes vendors have to go beyond merely offering great products to earn and maintain MSP loyalty. “It is incumbent upon vendors to make intentional investments in building true partnerships by providing consistent, high-quality support, transparent and flexible pricing models, and co-marketing opportunities,” he says, adding that MSPs value vendors that understand their business models and are willing to collaborate on joint go-to-market strategies.

According to GCX’s Wright, MSPs rely heavily on strong vendor relationships, the core of which is a product MSPs want to sell that is relevant and easy to manage, allowing them to easily monitor, administer, manage and maintain it while securing healthy profit margins.

The most important element, in his view, is fostering strong relationships with account teams and ensuring quick and clear problem resolution. “Unfortunately, some vendors have complex engagement methods, which can be seriously problematic as they can hinder an MSP’s ability to secure the right deals for its customers, which is central to building lasting relationships,” he adds. “To build and foster customer loyalty, MSPs must have simple lines of communication and collaboration.”

Dealing with fatigue

With so much admiration being showered on them by vendors, there is a real danger of “vendor fatigue” as MSPs find themselves spending an inordinate amount of time fighting off the attentions of their admirers to do justice to the vendors they have already established a partnership with.

Palmer agrees that vendor fatigue is a concern for MSPs. “They are inundated with pitches from numerous vendors, each vying for their attention,” he says. “This puts MSPs in an unenviable position of needing to separate fact from fiction – on their own – when so many vendors say the same thing, describe their value the same way or self-proclaim their importance in every customer’s environment.”

There’s no doubt this can be a huge strain on an MSP’s resources. “We have seen MSPs becoming more selective about the vendors they choose to work with, prioritising those that offer clear value propositions that are demonstrable, prove a deep understanding of their business and are willing to invest in long-term partnership,” says Palmer.

Vendors need to ensure their engagements are meaningful, focused on mutual growth, and respectful of an MSP’s time and capacity. “They are looking for a teammate in their long-term business, not a partner on a single opportunity,” adds Palmer.

[Vendors] are looking for a teammate in their long-term business, not a partner on a single opportunity

Kore.ai’s Rekhi says vendor fatigue is becoming more real each day, although his interpretation, in common with several other respondents, skews to a vendor perspective. MSPs with specific target market segments need to understand and define the broader solutions they are servicing, he claims, and select best-in-class vendors to build out those solutions.

“MSPs need to understand that regularly swapping vendors will not help them to scale resources or add value to what they provide,” he adds. “Thoughtful selection is required from MSPs to allow them to make long-term commitments with selected technology vendors within the stack.”

Remnant says the last thing an MSP wants to do, having gone through a selection process and building a service in a particular technology area, is to “chop and change” vendor.

“This is where the vendor will benefit,” he adds. “If an MSP has recently gone through a selection process and built out a service around a vendor, it’s normally very hard to introduce another vendor in that space unless they have had a bad experience, the product no longer meets the requirements, the commercials no longer work or there is just a better way of doing things.”

Greg Day, vice-president and global field CISO at Cybereason, makes a similar point. A good MSP will be continually watching the market because its value proposition is about delivering the best customer outcome, but bringing new solutions into an MSP offering requires investment and time from the MSP.

“It’s not just about the technology – it’s also about the relationship and the ease of doing business together. As such, MSPs must continue to weigh up the value of vendor changes versus the costs of change, and balance it against staying competitive with their customer markets. MSPs are rightly always looking for the next technological or service edge to put them ahead of their peers.”