Some people are quick to write off the Managed Service Provider (MSP) channel as dead (here is a link to a typical post making that argument – it's really a product pitch). However, I don’t think anyone serious about selling to the SMB market should ignore this vibrant and evolving segment of the IT reseller channel.
Naysayers have said that a shift to cloud computing will negate the need for MSPs, with companies purchasing SaaS solutions directly and having them hosted and managed in the cloud. I say they are looking at it from the technology or vendor perspective, not from that of the customer. SMBs will always want to outsource (or delay hiring of) non-core staff, and the MSP model (with “per user” or “per device” pricing) allows them to do that in a predictable way, regardless of whether applications and devices are on-premise or in the cloud.
Managed service providers are both consumers of technology and channels to their customers. They rely on technology for the remote monitoring and management of their customers’ devices and networks. Vendors such as Connectwise and Kaseya have built healthy businesses with technology to serve these needs. Other vendors have recognized that MSPs are a conduit to SMB and mid-market customers who have outsourced their IT needs. Datto is one example of a data protection company that recognized early on that their target market (SMBs) were relying on MSPs to make technology purchase decisions and manage their I.T. needs. By creating functionality that fit into the MSP’s environment as they manage a large number of customers’ devices and networks, these vendors have experienced strong growth while building a loyal channel. The question is if a move to the cloud and SaaS applications will drive growth or stall the MSP movement.
New data from the MSPmentor 501 shows that the MSP channel is indeed vibrant. Their survey of the top 501 MSPs globally found that as a group their revenues grew 26.5% in the last twelve months (to almost US$4 Billion). The average MSP today manages over 5,800 PCs and 1,800 servers and network devices on behalf of their customers.
Smart MSP vendors have extended their product portfolios by embracing the cloud (Datto’s recent acquisition of Backupify is an example of this strategy). Other vendors wanting to reach the SMB market should follow their lead by understanding the value chain that the MSPs represent and building loyalty in that channel. When it comes to the MSP channel opportunity, Mark Twain’s famous words - “The report of my death was an exaggeration” – certainly ring true.