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The 3 Choices All MSPs Must Face with the Rise of the Cloud

Posted February 3, 2015by Chip Reaves

3-choices


We know we have to change. That’s part of the deal when you pursue a career or business in IT, you know it will always be changing.

In 2015 though, we face not just change, but choices. In particular, the rise of “The Cloud” is pushing IT Solution Providers to make choices that will define their business for years to come – choices that may determine whether their business will succeed or fail. 

Recently, I had the opportunity to conduct video interviews for BiggerMSP.com with seven channel gurus, including folks like Karl Palachuk, Gary Pica, and Jay McBain. The topic was how “The Cloud” is changing the Managed Services business model, and I noticed something after the videos were complete: in almost every interview the expert would talk about a choice that MSPs and IT Solution Providers have to make.

Sometimes it was phrased as a good choice versus a bad choice, but often it was two equally valid (though perhaps not equally profitable) choices in how you as a business owner or manager want to build your business.

Here are the three most important choices discussed in the interview series:

 

1. “Are you a Specialist or a Generalist?” 

This is not a new choice – ever since IBM first offered an authorized reseller option in 1982 we’ve had to choose between specializing in one product line or being a “free agent” and supporting many.

With “The Cloud” upon us, we have this choice to make once again. In many niches such as cloud backup, file sync, spam filtering, or VoIP, it probably makes sense to specialize – pick one vendor partner, get very good at implementing and supporting their solution, and keep an eye out to make sure your partner is staying competitive in their space.

In the broader choice between competing ecosystems, the choice isn’t as clear. Do we specialize in Office 365 / OneDrive / Windows / SharePoint, or are we a Google Apps / Google Drive / Chromebook / Android shop? Or do we have the resources to do both?

It’s practically impossible to be in IT and not be ready to support parts of each one, but it’s difficult for a smaller MSP to be an expert in both the Google and the Microsoft ecosystems.

There probably isn’t a bad choice here – both sides look like they’ll be around and growing for years to come, so the choice comes down to your own preference and experience, but know that the choice you make may influence what types of customers you should be targeting in the future.


Want more managed services video interviews? We've DVRed our MSPTV Episodes!


2. “Are you High Volume or High Touch?”

Again, this is not a new choice – in the early 1990s the SMB IT channel was rocked by a huge decline in margins for hardware. Small computer stores lost ground to new mail-order businesses like Dell, Micron, and Zeos who could sell for much lower prices thanks to their high volume. Those businesses that survived had to either create their own high volume solution, or turn to high margin, customer-focused services. 

Today’s MSPs and Solution Providers, whether they know it or not, come from that lineage that chose the customer-focused, “high touch” approach.

But the choice comes up again: traditional high margin sales, like server refreshes or new system installations, are under new pressure from cloud-based solutions.

With the easier implementation that comes from SaaS infrastructure, some firms choose to compete on volume, ramping up their sales staff to sell more, more, more – more Office 365 licenses, more anti-virus licenses, more spam solutions. Others turn again to high touch, choosing to (as Harry Brelsford, CEO of SMB Nation, put it) “explore the marriage between business and technology”, focusing more on implementing and customizing cloud-based solutions that will positively impact their client’s business.

 
For more of this video series, check out BiggerMSP's blog post: How Does “The Cloud” Affect Managed Services? (Wrap Up)



3. “Big or Small?”
 

Again this is not an entirely new choice, but one that has been changed dramatically by “The Cloud” and the evolution of the managed services business model. In past years the question was really “How Big?”, since our industry has had one-man shops and 3000 person companies and every imaginable size in between. 

Today, we’re seeing erosion in what Harry Brelsford has called the “IT Middle Class”. We still have (and will always have) one-man shops, though it’s becoming tougher on them to make a good profit unless they’re highly specialized in a popular niche (think HIPAA, VoIP, App Development).

And larger firms are doing very well, generally reporting growth in the 30%+ range. Having a larger staff and larger budget enables them to specialize in more areas and to better leverage RMMs, PSAs, NOC, quoting tools, remote support solutions, and more while still maintaining a high degree of customer service.

It’s in-between the small and the big that things are becoming difficult. Without the low overhead of the 1-man shop and without the better tools and skills of the big firms, mid-sized MSPs are getting squeezed. In my interview with Jay McBain,‎ Co-Founder & COO at ChannelEyes, he shared that the active number of SMB channel businesses has shrunk by 36% since 2008, with much of the loss coming from mid-sized firms.

 
For more of this video series, check out BiggerMSP's blog post: How Does “The Cloud” Affect Managed Services? (Wrap Up)


The choice then, for mid-sized firms, is whether or not to push through to becoming “big”, and if so how to do it. Organic growth, perhaps accelerated with outside investment? Merge with or acquire another MSP? Partner up with others, perhaps through an organization like ASCII or CompTIA?

Regardless of how it’s done, the choice to maintain the status quo may not exist for a 3 or 5 person MSP because of the challenge of fulfilling all your client’s expectations in this new cloud-first world. As Gary Pica, Owner of TruMethods, LLC and father of the “managed services as chocolate cake” metaphor put it, “The chocolate cake business is booming right now, but the ingredient business is a tougher way to go than I’ve ever seen it.”


Are you making the right choice when it comes to your RMM platform?

The former CEO of both Computer Troubleshooters USA, Inc. and CT-Global, LLC, Chip Reaves specializes in computer service, franchise management, and online training. MSPmentor's 250 List 2014 honoree, Chip is now running four businesses of his own: Bigger-Brains: Uniquely engaging online training for business professionals MSPpromos.com: Customizable web videos for MSPs. BiggerMSP.com: A subscription package of Bigger-Brains + MSPpromos, for Managed Service Providers who want to include eLearning in their value offering. Clever Tech Solutions: an independent franchise of the Computer Troubleshooters network, providing high quality IT support to small businesses in the Anderson SC area.

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