From Reseller to MSP – A Complex, But Lucrative Business Transformation Journey

Business Transformation is Complex, but Manageable

Channel Partners selling technology solutions to small, mid, and large-sized businesses are having to transform their businesses to stay relevant as their clients move an ever-increasing number of business processes and workloads into the cloud.

This transformation requires carefully mapping the initial cloud and managed services portfolio against available customer base, internal technical and sales skills, service delivery tools, and available investment dollars. Further, modeling the total revenue and profitability impact of this transition is key to understanding the impact on cash flow, especially from smaller annuity streams, which need to be renewed annually.

How to plan and successfully execute the transition from being an on-premise services provider to delivering managed services and cloud solutions is where the channel ecosystem is expecting help from their vendor-partners.

Strong Revenue Upside to Business Transformation

From less than 50,000 in 2016, the number of managed services providers will grow to almost 75,000 worldwide in 2021. AMI-Partner’s tracking of these MSPs indicates most have yet to fully penetrate their existing customer base. On average, an MSPs has so far converted only 20% of their customers to managed services. Clearly, this opportunity remains untapped for the most part.

More significantly, by transforming themselves from a reseller to an MSP, one in two have acquired net new customers that were previously beyond their capacity to serve thus expanding their business in ways unforeseen.

Technology vendors can help accelerate this transformation within their partner ecosystem by setting up formalized advisory programs that impart strategic advice via workshops, as well track key metrics on a one-on-one partner basis.

The key is to uncover best practices used by channel partners that have successfully transformed their businesses and deconstruct and replicate their secret sauce across a broader network of partners.

~Deepinder Sahni, SVP

Leave the Security Nightmare to your Trusted Managed Security Service Provider

Adoption of new technologies like mobile, analytics and cloud are resulting in a diverse and complex IT environment unlike anything we have seen, spanning multiple delivery models, vendors, processes and data. Both the business and technological drivers are responsible for this level of complexities. The business drivers increase the communication and transaction, whereas the technological drivers represent the fast-paced growth. At the same time, vulnerabilities are growing fast, whereas the budget for the security group is flat and faces resource crunches. Managing such a complex environment can be challenging. As a result, organizations cannot do it alone and need to look for a trusted IT services provider to help them quickly respond to business demands, manage ICT complexities, support desired levels of availability and adopt technology innovation. Managed services span a range of capabilities, creating options for organizations looking to benefit from externally provided services that allow them to focus on more business-critical issues and strategic functions and activities.

As per AMI’s Global Market Model, 24% of the global small, medium and large businesses (SMLBs) ICT spending will be driven through Managed Service Providers (MSPs), during 2021 with a 17% CAGR growth over 5 years. The scenario is even more promising when it comes to APAC SMLB organizations with a CAGR growth of 20% on MSP business contributions by 2021. Be it small companies, mid-sized or large businesses, look to trusted managed services providers to address a range of the issues around cost, complexity, service quality and risk. With the increase of hybrid IT environments based on the workloads, cloud is the new normal and has become the mainstream for managed services delivery. Around 55% MSPs in APAC countries interviewed for AMI’s WW Managed Service Provider study, indicates using a Hybrid Cloud model to run their business.

With these increased complexities in the enterprise ICT infrastructure, security has become a much deeper executive discussion because of the modern diversity of channels through which businesses can be attacked. Mobility, bring your own device, virtualisation, the cloud, and social media have all opened new doors into the organization. Adding pressure to organizations is the fact that technologies, business models, regulatory environments, and the threat landscape are evolving continuously. So, security has become a broad discipline that affects the entire organization and calls for a range of highly specialized and dynamic skills and technologies that most businesses don’t currently have. Organizations need enough highly qualified engineers and security specialists to run the security systems 24/7, analyse the information continuously, and be able to respond immediately. This also needs continuous technology updates and the cumulative experience, insight, and knowledge of thousands of independent security experts globally to pre-empt attacks. This almost impossible mission must be achieved. Thus, giving thrust of managed security services adopted by businesses globally. Providing security services as part of the broader managed service offering was always a key offering from the leading managed service providers and will continue to be so. Around 80% of the MSPs interviewed in APAC highlighted managed security services as one of their key offering which is expected to contribute over a quarter of their overall managed service revenue annually.

The opportunity for partners offering managed security services will not go away any time soon. Driving that trend is the shortage of security talent to deliver the right service in-house. There is no shortage of tools to help secure networks and data. However, tools alone can’t prevent security breaches. Managed Security Services typically offer the security solutions like Managed Firewall, Managed Intrusion Detection and Prevention, Managed Email Gateway, Managed Web Gateway, Managed Web Application Firewall (WAF) and Monitored & managed integrated security appliance service. These services, for the most part, include 24/7 technical phone support, on-site consulting, around-the-clock security monitoring and maintenance, access to the client security portal and comprehensive reporting.

To maintain the SLA clauses in the managed services environment, it is critical for the organization and the services provider both to have a clear picture about the performance metrics, security tools and policies and resiliency level the organization requires. Balancing the performance and service-level requirements with the right cost is an important exercise. Nearly 35% of MSPs in the APAC region believe customers are likely to move to a lower-priced competitor, hence they look for better support from their respective partners to remain competitive in the market. MSPs in APAC budget roughly 7% of revenues to promote their managed services which indeed needs to get a boost, as the overall market potential for Managed Service business grows in this region.

~ Surjyadeb Goswami,  Regional VP APAC

Black Friday for Small Businesses? Why Not?

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Quick Trivia: A company in NYC with less than 10 employees is out of paper for printing. What would they do?

Contact a service provider sitting 5000 miles away who provides managed print services.

Walk across the street and buy a bundle from Staples.

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According to AMI’s Global Model, 30% of IT hardware procured by small businesses in the United States is through a retail channel such as Best Buy or directly from a vendor.

(Click here for an interactive demo of AMI’s Global Model)

Due to the lack of simple procurement solutions and the proliferation of e-commerce, small businesses continue to buy IT hardware through consumer-focused channels. The trend is likely to continue until we see a ground up change in the way Channel Partners target small businesses.

As the buying behavior of small businesses continue to align with consumers, companies can target small businesses using marketing strategies that are developed for consumer holiday seasons

Would it work for me?

Dell Inc. appears to have identified a market. The company has been putting out black Friday and holiday season ads specifically targeting small businesses.

Is Black Friday the only time?

For businesses, there could be many buying seasons like budgetary or quarterly cycles, conference seasons, industry events such as Google IO, Worldwide Developer Conference. But most companies attending industry events have small businesses at the tail end of their priority list. They generally market solutions for medium or large businesses.

Consumer focused events like Black Friday or Cyber Monday, provide an opportunity to tap into small businesses that have similar buying patterns to individual shoppers. Such businesses typically do not have the resources to contract with Channel Partners or sign long term agreements.

In Conclusion

A sale to small business is not always via a lengthy sales pitch and long-term contract. There is still quite a lot of interest in “Buy It Now” products, it’s only a matter of identifying these businesses.

Learn more

Ask us about small business buying patterns and behaviors. Find out the most preferred purchase channel for your product category. Email us at ask_ami@ami-partners.com

~Karthik Pannala, Associate

How are Regulated Industries using Managed Services?

Government is tightening rules and regulations on data storage and security especially in regulated industries such as healthcare, and financial services. These sectors include doctor’s offices, banks, and credit unions, where sensitive information is collected and stored. Firms in these industries are leveraging the expertise of Managed Service Providers (MSPs) to setup and manage compliant IT environments. Hence, these providers are on the front lines ensuring data security and navigating a myriad of laws and regulations on behalf of their clients.

According to AMI’s Global Model, SMBs across the world are spending almost $63B on remotely managed services, this spending is forecasted to grow at 15% CAGR by 2021. SMBs in regulated industries such as Banking/Finance and Healthcare account for nearly 20% of this spending and is forecast to grow at 12% CAGR by 2021. This represents overwhelming opportunities for MSPs in these industries especially in providing specialized managed services such as security, storage and networking to mention a few.

MSPs serving these industries are handling responsibilities above and beyond handling managed services. The focus is not only on keeping people and systems working, but also on making sure they work in a legally compliant manner. These MSPs typically have a dedicated compliance and security department that stays on top of regulations such as the Health Insurance Portability and Accountability Act (HIPAA), and the Payment Card Industry Data Security Standard (PCI DSS). In case of a successful hack, investigators determine whether the victim organization followed all laws, had appropriate policies and procedures in place, and if the IT department was properly designed and capable of handling the security needs. The aim is to examine if the IT department was susceptible to that breach or hack. MSPs serving these industries need to be diligent and take an active role in encouraging their clients to update their policies and meticulously follow procedures.

A recent study conducted by AMI shows that MSPs are increasingly focusing on these regulated industries to expand their portfolios and customer base. Larger MSPs with more than $10M in annual revenues are forming vendor partnerships with the needs of their regulated industry clients in mind. The top of mind concern for these MSPs while partnering with vendors, be it an Remote Monitoring & Management (RMM) vendor or a Professional Services Automation (PSA) vendor or a hosting platform provider, is to ensure that they carry relevant compliance certifications and audit credentials. In addition, serving regulated industries and demonstrating vertical industry specific expertise allows MSPs to stand out in a crowded, commoditized MSP market. AMI’s MSP Study shows that MSPs focus on services such as Disaster Recovery as a Service (DRaaS), and Archiving as a Service (AraaS) especially in regulated verticals. It is imperative to store/archive historical data as well as to have systems up and running all the time with fast up time in case of an outage.

The stakes are high for businesses as far as security and compliance are concerned. Businesses are looking for ways to offload these cumbersome tasks on experienced partners in order to focus on their core missions. So, MSPs are increasingly targeting these regulated industries that cannot afford to be lenient with their security standards.

~Kunika Sodhi, Associate

5 SMB Pros and Cons for the Cloud

You take the good, you take the bad, you take them both and there you have, the facts of life. The feeling of nostalgia for that staple of 1980s television The Facts of Life notwithstanding, the good and the bad can be applied to that ever-expanding network we call the Cloud. At an event hosted by Rackspace, your intrepid blogger was brought up to speed on recent developments and how the company is working toward its corporate goal of being “The preeminent IT services company in the world”.  The cloud is the primary focus of Rackspace and numerous competing companies all over the world. There are challenges to face but also opportunities to seize. Let’s look at the challenges that Rackspace identified with the cloud and then put an SMB focused lens on reasons for subscribing or not subscribing to cloud solutions.

All data equal?
SMBs are putting data on the cloud

Top Challenges

The topics on analyst day covered all facets of the Rackspace portfolio and numerous employees shared their subject matter expertise. Additionally, several customers shared stories about their transformation with Rackspace and how their business has changed over the years. The cloud presents both an opportunity to customers as well a challenge and we’ll see that difference in position can be a matter of perspective. Continue reading “5 SMB Pros and Cons for the Cloud”

MSPs to capture $1.0T in ICT spending by 2021

Large numbers have a certain aura to them. We almost disrespect these figures by using abbreviations. One trillion dollars written out looks like $1,000,000,000,000 and for those wondering, such a sum would weigh approximately 10,000 tons (9,071.85 short tons) when carried around in the largest denomination US currency currently in circulation, the ever popular $100 bill. To have such transportation and storage problems… For the sake of preserving the “0” key, we’ll stick to the $1.0T abbreviation for the rest of this piece, but there is no shortening the drive of MSPs to capture an increasing share of global information and communication technology (ICT) spending across the SMB and Large Enterprise space.

MSP spending capture growth
$1.0T in spending capture… that’s a spicy meatball

 

 

 

 

 

 

 

 

 

 

 

How are MSPs winning?

There are a host of factors contributing to the rise in MSP spending capture toward the $1.0T plateau. As with any business, Continue reading “MSPs to capture $1.0T in ICT spending by 2021”

SAP SAPPHIRE NOW – May 2017

SAP Leonardo Tackles Digital Transformation 

SAP has made digital transformation less amorphous by announcing Leonardo – a collection of tools, technologies, and methodologies branded under the “Leonardo” umbrella, that allow for structure in the way businesses can begin to envision and plan for being more digital.

With SAP S4/HANA at its core, Leonardo aggregates IoT, Machine Learning, AI, Design Thinking, Big Data, and Blockchain into a complete system with accelerators (pre-packaged frameworks) for various vertical industries.

Leonardo is clever packaging and branding of multiple technologies and solutions, which will allow businesses to envision and plan the nature of digital transformation they want to undertake and shape. It is an important first step in getting conversations started, and moving business executives away from a state of digital-confusion to structured digital-exploration and activation.

SAP’s Digital Boardroom solution encapsulates how a highly digitized business may work and make data driven decisions in real-time at the highest levels of management.

The go-to-market on Digital Transformation will entail Continue reading “SAP SAPPHIRE NOW – May 2017”

To Print, or not to Print?

Be honest: ever hit a printer, fax, or copier because it wasn’t working?

The decision to print at the typical SMB likely does not cause the mind to suffer. While a single printed sheet might not register on the balance sheet, numerous documents sent to print and equipment expenses can have a significant monetary impact on a small business. Managed Print Services (MPS) is a solution that some SMBs are adopting to better control printing expenses. The real question for SMBs then: To manage print, or not to manage print?

So, something else to buy…

Think of MPS as something else available to help address a lack of resources. An SMB has a limited headcount and must focus efforts on revenue generating paths. MPS is a suite of services offered by an outside party to administer a firm’s document output. The MPS provider Continue reading “To Print, or not to Print?”

SAP SME Summit: Highlights and Insights

SAP Provided its Annual SME Update on November 17, 2016 – Key Highlights Included the Following:

  • SAP now has over 250,000+ SME customers worldwide
  • 13,000 new SME were customers added in 1H2016, a 5%+ increase over 2015 installed base
  • 2015 cloud subscriptions and support grew by 82% to $2.3B (SME + other segments)
  • ByD positioning as SAP’s SME cloud offering is also tightly aligned with matching sales motion – partner + e-center led, and appropriately incentivized to focus on SMEs only
  • SME customers have a choice of consumption models – cloud vs. on-prem – between SAP’s portfolio of All-in-One (on-prem), ByD (Cloud), Business One (Cloud and on-prem), and Anywhere (cloud CRM, inventory, mobile, and e-commerce)
  • SAP Digital allows customers to buy online with SAP Anywhere being the key SME product in this category – this selling motion was launched in 2015 and continues to be fortified
  • Referral option added to PartnerEdge Cloud Choice program to expand SAP’s partner coverage

SME and SAP Performance During 2015-16

  • By most measures SAP is performing well in the SME space. A growth of 5% in the installed base within a 6-month period is impressive, given that our internal SME tracking models show the total SME ERP/CRM/HR installed base growing at about 5-6% Y/Y.
  • AMI typically defines SMEs as commercially located firms with 1-1000 employees. When defined as such, we estimate between 5.5 – 5.8 million firms were using ERP/CRM/HR in 2015. This is out of an estimated WW total of 75M SMEs. In other words, WW ERP/CRM/HR penetration is in the 7-8% range in the SME market.
  • When considering firms with 10-1,000 employees, that number drops to between 3-3.3 million firms – micro-businesses being a large chunk of all firms. Corresponding WW ERP/CRM/HR penetration rises to ~25% when micro-businesses are eliminated.
  • Depending on which of these definitions is selected, SAP’s share of the WW ERP/CRM/HR customer base may vary between 4%-8% at a WW level, using 250,000 as the base of SAP SME customers.

Key SME Trends and Concerns

SMEs are solving for 3 big business issues: Continue reading “SAP SME Summit: Highlights and Insights”

Social Media Marketing

AMI’s Global Forecast Model shows that social media marketing spending by the SMB space in the US will see a CAGR of 24% to 2020. This impressive growth is a clear sign that social media sites are being leveraged by SMBs to reach potential and existing customers. Who are the leaders in this field? Why are SMBs migrating to social sites?

According to Statista, an online statistics portal, 61% of marketers advertise at least monthly on Facebook. More than 20% of marketers advertise on Twitter, Instagram (owned by Facebook), and LinkedIn respectively with similar frequency. Pinterest and Snapchat both attract less than 10% of said marketers monthly. Let’s take a closer look at the market leader, Facebook, along with some aspects of social media marketing.

Daily Active Users

Facebook reported 1.04B daily active users (DAU) on average in December 2015. That is more than 3x the total estimated population of the United States. Of the 1 billion plus DAUs, some 934M accessed Facebook via a mobile device in the same time span. Clearly portable devices have surpassed the desktop computer as the preferred method of accessing social media. Figures were only reported for a combined US and Canadian market, but that number of DAUs stood at 169M in North America. These figures show Continue reading “Social Media Marketing”