Recurring revenue is one of the most obvious advantages of getting involved in the managed service provider (MSP) market. Once the business matures, you have an established monthly income that you can use to manage your daily business. In addition, risk mitigation through diversification becomes a real benefit when establishing credit or borrowing to grow your business.
Some believe you maximize profit in the MSP model by not having to engage with the client; as long as your service performs as advertised, less client touch means less cost. ESG believes this attitude creates missed opportunities even if you only have one MSP offering or you are just starting out with the service. How are you going to grow your business within an account, unless you are entrenched in their business? Constant touch provides your business an opportunity to become a trusted advisor to the client -- and that is the goodwill that separates all other would-be competitors within the account. The trusted advisor can charge more because they have a proven track record of delivering more. Customer intimacy becomes a self-fulfilling, self-sustaining business model -- the more you know about your customer the more you will be trusted to provide them and vice versa.
Just as a traditional VAR who doesn't offer managed services looks for new products and technologies customers may be interested in, an MSP looks for additional applications his customers want to run through an MSP versus in-house. The one most likely to hear about these opportunities early on is the incumbent, the existing MSP that adds value on a daily basis.
The following list breaks several reasons to become an MSP.
- The greatest benefit of providing managed services is getting closer to your customers and becoming part of their problem-solving team versus just being an option to remedy a point business challenge.
- Recurring revenue is the ultimate goal. The majority of MSP contracts renew with the team providing the value. It is like the leasing model: you are in control of the purse strings, and it is yours to lose. You also have the ability to bundle additional services and products during the term, which gives you the ability to extend the contract.
- In order to provide maximum value as an MSP your customer expects you to have a real handle on their business. This client frame of mind opens the door for you to explore other business opportunities, possibly generating drag solution sales of various products and services you offer.
- If you match up with the right MSP vendor, whose solutions were built for the MSP market, you can leverage their brand and provide value to your customer. You become the trusted advisor, which is what all channel partners strive for.
Becoming a managed service provider
1: Is your company a good match for the MSP model?
2: What are the benefits of providing managed services?
3: What questions should you ask a potential MSP vendor?
4: How should you price MSP offerings?
5: How can you avoid failed MSP partnerships?
|About the author::|
Paul Myerson is a senior channel analyst for the Enterprise Strategy Group. Paul has core competency in direct and indirect sales model efficiency, channel program management and business strategy required for successful vendor/partner success. Myerson comes to ESG from EMC where he played a key role in developing the company's channel business. Prior to joining EMC's channel business, Myerson ran EMC's southeast region direct sales operations. Highlights of his 12-year career with EMC include signing and managing EMC's first resellers as well as the company's largest worldwide partners. In particular, he was recognized for his unique approach to channel management -- strength he now applies to the industry at large. Myerson's charter at ESG is to run the channel practice and to aid ESG clients with their channel initiatives.
Paul is also a featured speaker at the Storage Channel Reseller Seminar, just for VARs, resellers, systems integrators and consultants. This free one-day seminar is taking place in Chicago, Toronto, New York City and San Francisco. Take a minute today to apply for this free seminar admission by calling Delegate Recruitment representative John Smith at 508-621-5535 or applying online.Copyright 2007 TechTarget
This was first published in April 2007