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

SaaS – The New “Cash Cow”

The conversation about software as a service (SaaS) has been going on for a long time.  The evolution of hosted applications is pretty interesting. It all started back in the 1960s when IBM and other mainframe vendors offered computing power and database storage from their data centers to the financial industry and other large firms.  Fast forward to the 1990s when, with the proliferation of the internet, Application Service Providers (ASPs) began offering hosted business applications. According to Wikipedia, the acronym (SaaS) allegedly first appeared in an article published in February 2001 by the Software & Information Industry Association (SIIA).

Some may think SaaS is passé and has been talked about to death, but although SaaS can be considered a “mature” market there are some very good reasons to revisit cloud software:

  1. Industry analysts and mainstream media all cite SaaS as a technology with strong growth prospects for both adoption and spending. AMI estimates that worldwide, small, medium and large businesses (SMLBs) spent $62 billion on SaaS solutions in 2017 and that figure is projected to more than double by 2021.
  2. Globally, about 22 million firms are planning to allot more of their IT budgets for hosted/cloud solutions as opposed to on-premise IT products and services with the largest portion slotted for SaaS applications.
  3. SaaS solutions are major forces driving growth as industry mainstays, who were formerly strong on-premise vendors, shift emphasis to the cloud. For example, Oracle reported Q3’17 overall cloud revenue increased 51%, but SaaS revenues rose 62% and Microsoft reported strong increases across all of its cloud offerings and is now the leading cloud service provider (Office 365 revenues alone increased over 10%).

“SaaS” comprises a wide variety of different cloud-based applications, from the most basic e-mail to solutions tailored for very specific industries.  Spending in 2017 on prominent hosted applications was strong. Beyond email, other leading apps included hosted CRM, business intelligence, productivity and highly customized line of business software (vertical or industry specific software).

As SMLBs seek to leverage technology to help them reduce OPEX, improve efficiency and employee productivity and improve the customer experience, many are looking to the cloud as a solution. About one-third of firms we surveyed reported migrating more applications to cloud services was very important to their company’s continued success. Firms reported a variety of reasons for adopting cloud solutions, including cost savings, scalability and flexibility.  Many businesses feel SaaS solutions allow them access to technologies that might otherwise have been out of reach cost wise, while others utilize cloud services because it enables them to reduce system hardware by using cloud vendors’ servers to store data. In addition, SMLBs will increasingly look to bundle SaaS solutions when making new PC and device purchases.  Popular bundles include hosted productivity suites, security, data back-up/recovery, online data storage, and online document collaboration.

Overall, projected growth for SaaS apps is strong through 2021 (20% CAGR).  Fueling this growth will be solutions such as productivity, point of sales, business intelligence, email, quotes & invoicing and travel and expense solutions.

Software as a Service is a concept that will continue to evolve as it is a win-win for everyone.  SMLBs will benefit as they shift legacy on-premise solutions to seat-based models for cost savings, flexibility and scalability, as well as access to new technologies. Independent software vendors (ISVs) offering cloud solutions will be able to attract and engage firms that may not want to incur the large capital investments required for on-premise installations. Cloud hosters, such as AWS, Microsoft Azure, Google and IBM, will benefit as more ISVs shift their current on-premise solutions to the cloud.

~ Eileen Zimbler, VP

“Blockchain” and “Cryptocurrencies”: What do they mean for businesses?

Overview

Even if you are not up-to-date on the latest trends and technologies that are changing the world, you probably came across words like “Bitcoin”, “Cryptocurrency” or “Blockchain”. There are many strong opinions floating around on whether these are just digital world Ponzi-Schemes or game-changing technologies.

What is “Cryptocurrency”?

In simple terms, Cryptocurrency is a digital currency that is created and managed through computer programming rather than being printed by a government or agency.

The first breakthrough came in late 2008, when Satoshi Nakamoto released a paper on “Peer-to-Peer Electronic Cash System” and announced “Bitcoin”, the first cryptocurrency. Bitcoin is the most popular cryptocurrency. Litecoin, Ripple, Stellar and Etherium are few other cryptocurrencies that have gained popularity over the last few years.

Where does “Blockchain” come in?

The technology behind bitcoin and other cryptocurrencies is “Blockchain”. Blockchain is a digital platform/medium for storing value and compared to just information.

As such, blockchain technology is complex, but the underlying concept is quite simple. It is a public ledger or a distributed database running on millions of devices spread across the globe. It is open to anyone with the key here being, not only can information be stored but anything of “value” can be stored on the database. Money, contracts, music, intellectual property rights or anything that has an intrinsic value can be stored and move around securely.

Unlike traditional solutions, where an intermediary like a bank, government or a company establishes trust and security, with blockchain the trust is established through collaboration with millions of users across the globe and code that cannot be hacked. This makes the entire system difficult to manipulate and ensures integrity.

Until now, blockchain has made significant strides in the financial industry alone. The technology aims to reduce cost and complexity of financial transactions through a decentralized system that is faster, more secure and completely transparent.

As the technology matures and gains traction, other industries have started adopting and developing applications specific to their industry. The stakes are even bigger for industries such as supply chain, music and manufacturing where certain use cases make half the eco-system unnecessary.

Impact on Businesses/Adoption

Financial Services

Some of the well-known brands and financial institutions have adopted the technology to various extents. Major brands like Microsoft, Dell, and Expedia have started accepting bitcoin for purchases over their e-commerce platforms.

Payment solution providers, such as Square and Stripe, are also offering solutions that accept bitcoins either directly or by partnering with third-party providers such as CryptoPay.

MoneyGram has recently announced the use of “Ripple” another emerging cryptocurrency for international transfers.

Entertainment

Blockchain is expected to disrupt the music industry in a way that is sending music labels and global distribution firms into a frenzy.

Imogen Heap, a Grammy-winning artist started “Mycelia”, that develops songs with smart contracts built in. Smart contracts enable the automatic distribution of payments to all involved in making the song including the artist, musicians, recording studios or anyone else as soon as a purchase is made by a user. There are no licensing terms, contracts, exchange of money from user to distributer to artist. Everything happens instantaneously and everyone gets paid without any delay.

The use of blockchain technology to create and distribute songs will not only ease payment and copyright issues but could eliminate piracy as well.

Transportation & Logistics

IBM’s “Blockchain for Supply Chain” has already shown the advantages of using blockchain technology. The platform provides companies with greater transparency, visibility and efficiency across the entire supply chain.

One truth across the supply chain network

Traceability and transparency are some of the most important foundations of logistics. IBM Blockchain optimizes business transactions and trading relationships with robustly secure business networks on blockchain—both at scale and globally.

Blockchain offers a shared ledger that is updated and validated in real time with each network participant. It enables equal visibility of activities and reveals where an asset is at any point in time, who owns it and what condition it’s in.” – IBM

Walmart’s “Food Safety Solution” is a clear example of how this technology is here to stay and transform the business world.

Collaboration/Sharing Economy

Blockchain technology has penetrated areas that are quite niche as well and probably un-heard of. One such example is the “Brooklyn Microgrid”. The company aims to create a peer to peer energy trading be system built on block chain. The platform enables solar energy producers, be they home-based or industrial scale, to sell excess-electricity thereby minimizing the loss of energy and providing energy at low costs in the neighboring areas.

The Future

Blockchain technology still has a long way to go before it becomes mainstream. The adoption levels are quite low despite some big names in the ecosystem. As companies continue to develop and test new applications, confidence in the technology increases and further drives adoption.

Businesses will soon start to look beyond cryptocurrencies and focus on the underlying technology, the “Blockchain”. Irrespective of how we look at it today, the blockchain powered platforms will take over and the traditional systems will fade away. It’s only a matter of “How Soon”.

Food for thought: In the age of digital transformation where cloud presence, big data, and robotics are the buzz words and the focus of every business is on “Cloud Transformation”, blockchain might take over behind the scenes and re-write the digital landscape completely.

~ Karthik Pannala, Associate

Managed Security Market Gaining Strength by the Day

Many companies have been the victim of cyberattacks including Malware, Denial-of-Service(DoS) and Ransomware. A recent example being Equifax, where hackers were able to get personal and confidential details of approximately 143 million people. SMBs are more vulnerable to these attacks due to a lack of expertise and budget. Managed Service Providers (MSPs) are leveling the field for SMBs and LBs by providing these specialized security services. The Managed Security market is growing exponentially with the rise in cybercrimes and security threats. Business factors such as meeting the needs of compliance and data protection laws, budget constraints, lack of in-house expertise and increased adoption of cloud services are shaping the future of the Managed Security market.

According to AMI’s Global Model, SMBs around the world are spending approximately $11 Billion on Remotely Managed Security, which is expected to grow at a CAGR of 14% by 2021. The increasing demand from SMBs is the key driver for this growth. As the services offered by SMBs increase, the need for high-level security for sensitive and confidential information is also expected to increase. AMI’s MSP study shows that 22% of an MSP’s total revenue is generated by providing Managed Security Services to clients and it will continue to grow. This is a great opportunity for MSPs to expand their security offerings.

 Region wise, North America is expected to remain the largest market for Managed Security Services as most managed security service providers and technology vendors are based in the US. The U.S. is expected to account for 92% of the market by 2021 for Remotely Managed Security Services.

Challenges:

Data is the new currency in this era and that is the biggest challenge for Managed Security Providers. As the data increases, MSPs find it difficult to provide scalability due to the lack of integration between various security platforms and tools. There are no pre-packaged technologies that fit all the security needs of various types of businesses. These security needs are business specific and require considerable time, effort and monetary investment.

From a SMB’s perspective, there is always a risk involved with the handling of critical information through a third-party security provider, including the risk of sensitive information getting into the wrong hands. So, establishing trust with these businesses is a big challenge for MSPs. Additionally, according to the MSP study over 60% of Managed Security Service Providers find it challenging to maintain close relationship with vendors.

Expectations from Vendors:

MSP’s share in overall revenue for the vendor is growing quickly as SMBs shift their focus to core business offerings and outsource all other IT services required to run the business. Certainly, MSPs are expecting competitive prices and premium customer service from vendors. Additional selection criteria include:

  • Delivering technologically superior platforms and tools compared to other competitors in the market
  • Highly scalable and customizable technology solutions according to the customer’s needs
  • In addition to technology, vendors are expected to carry all the relevant certification and audit credentials to be compliant with the data privacy and security laws especially in regulated verticals such as Healthcare, Banking, etc.

These are a few of the many challenges and selection criteria uncovered in AMI’s MSP study. This research demonstrates that expansion of managed security offerings such as Endpoint Security and Remote Monitoring and Management (RMM) could be a major contributing factor in the growth of the managed security market. MSPs should pay attention to several growth factors such as flexibility for changing requirements, high level of automation, regular security testing, quick customer support and the ability to provide end-to-end security solutions. Taking steps in these directions will help MSPs to stay on top in this competitive market.

~Ankit Mehta, 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

HP: Focused on Form and Function

We had the opportunity to attend HP’s pre-launch event where the company unveiled a series of new laptops and workstations to meet the needs of all market segments. HP has shifted its focus to an “Office of the Future” concept with the launch of 13-inch Spectre x360 convertible business notebook. This year, the x360’s fingerprint reader comes embedded on the side of the laptop to provide easy access when in tablet mode. AMI’s Global Model predicts that, within the SMB Market, 2-in-1 PCs will surpass growth of Desktop PC and Notebook PC spending achieving a CAGR of 22% by 2021. SMBs are quickly adapting new technologies and spending towards multi-functional devices and certainly Notebook and Desktop PCs are no exception.

The second generation Spectre 13 is a design marvel and as HP claims it is the world’s thinnest touchscreen laptop with an optional 4K display. The all new “Ceramic white” finish looks great, which is made from aluminum that has been treated with a smooth white coating. Spectre 13 ships with eighth-generation Intel processors and HP is promising up to 11 hours of use. HP is positioning the Spectre 13 amongst high-end laptops with cutting edge technology and even better design than many of its competitors.

In the desktop series, HP launched the EliteOne 1000, a new all-in-one PC. Most parts are hidden in its wedge-shaped base that can be opened to access its storage, RAM, processor and even display which is upgradeable. There are three displays to choose from- 23.8”, 27” and 34” which is a diagonal curved display that provides an immersive and engaging visual experience. This modular design and easily upgradable parts will provide significant benefits to Managed Service Providers(MSPs) as the idea of Desktop as a Service(DaaS) becomes increasingly popular among SMBs. According to a recent MSP research study by AMI, spending is expected to reach $3.4 Billion by 2021.

 

Another new feature HP launched this year is the ability to add HP’s “Sure View” tech which works as a privacy guard to make the screen harder to read by prying eyes. This feature is especially useful for travelling professionals that want to protect their privacy while on the go. Although this feature drains more battery, it can be switched on and off with ease and it works as intended. In the quest of workplace centric design, HP also introduced PhoneWise; an application targeted at business users that provides smartphone notifications on workstations/laptops so you are always connected to your mobile device even when it’s out of reach.

All the user-friendly design changes are part of HP’s new strategy of giving customers exactly what they want. Company is putting lot of efforts into Data collection, Machine Learning and AI to research the web for product reviews, and its regularly conducting surveys to find out what customers want and eliminating red flags by making design changes. Gone are the days of bulky laptops and workstations with multiple components and thick designs. HP is trying to replace the workplace products by bringing beautiful consumer centric designs to the workplace. According to AMI’s Global Model , worldwide spending on Notebooks and Desktop PCs within the SMB segment is expected to reach $71 billion by 2021. Clearly, HP is aiming to win over the business segment with the launch of these flashy laptops and workstations. It is safe to say that with these new features and designs, HP is investing time and money in the right direction.

~Ankit Mehta, Associate

Got MSP?

Managed Service Providers (MSPs) are upping the stakes in the current cloud land grab. By rapidly expanding their portfolio of service offerings they expect to capture larger share of wallet. Their customers are aligned with this approach as they seek out full-service providers able to meet all their technology needs.

A Growing Market

By 2021 MSPs will deliver close to 25% of all technology products and services globally, up from 18% today. This is an impressive business transformation story – thousands of IT resellers and systems integrators (most of them small companies with less than $10M in revenues) have displayed a clear vision and competent leadership in enhancing their organizations’ capabilities and infrastructure to keep revenues growing in this challenging business climate.

The number of MSPs worldwide will grow from 50,000 to 75,000 between 2016-2021, with the total IT products/services they deliver growing from $500 billion to over $1 trillion during the same time.

Their services portfolios, which initially included pure infrastructure services such as storage, security essentials, compute power, web hosting, and application hosting, have now grown to include value add and higher margin services such as disaster recover/business continuity, e-discovery, vulnerability assessment, compliance management, application management, SaaS, and mobile device management among others.

Business Challenges

Despite being in a high growth business, MSPs face tough challenges which require constant attention and fine tuning of their business models. Some of the top challenges are:

  • Differentiating their services from those of other MSPs is a top priority to counter margin erosion and hyper-competition.
  • Absorbing newer technologies, tools, and solutions, packaging them for client consumption, and providing follow up services requires a constant learning and training.
  • Investing in datacenters is yet another critical challenge, which is often detrimental to smaller MSPs.

How Technology Vendors Can Help

Technology solution vendors that are supplying to MSPs can often play a big role in helping MSPs address these challenges. By fully understanding the nature of MSPs operational and business needs, vendors can design their products and programs to enable their MSP customers to win in the market-place.

Key features can be built into products and programs to make them a nuts-to-bolts solution, or packaged to work with other third-party solutions typically used by MSPs. Examples of the types of features that MSPs would like vendors to include in their solutions are:

  • Automation of overall solutions architecture.
  • Automation of customer on-boarding and migration processes.
  • Dynamic and predictive throughput/capability scaling.
  • Performance monitoring and predictive dashboards and controls.
  • Vertical industry-specific sales, marketing, and technical know how.
  • Vertical industry-specific compliance and reporting features.
  • Online university – modular online training videos and certification.

These are some of the insights we have uncovered in our tracking of the worldwide MSP segment. For additional insights and a detailed description of our MSP tracking service and various deliverables click here.

Alternatively, please email John Rezac (jrezac@ami-partners.com) for more details or to schedule a webinar that will walk you through our MSP coverage and insights.

~Deepinder Sahni, SVP

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”

5 Questions & Answers for my new PC

Your intrepid blogger and few other AMI colleagues (not pictured, nor am I) were issued new PCs this week. While it will be difficult to give up the Osborne 1 that was handed out last year, this new notebook appears to be an upgrade. The complete tech specs are available here. There are many, many features that are yet to be discovered (and may never be fully utilized), but here are five answers to five pressing questions about my HP ProBook 440 G4 that I have unofficially named Norrin.

Q.1) What’s in the computer, besides the files?

A.1) Intel Core i7-7500U CPU @ 2.70GHz 2.90 GHz | 16GB of RAM | 64-bit OS | Windows 10 Pro

Norrin has the power and speed to accomplish anything I foresee throwing at it. There are people at AMI who use their computers to run complex simulations and crunch enormous amounts of data. Those devices are customized to handle what those users need to do. While still in its infancy, Norrin appears to be a good match.  When it comes to purchasing computers, the SMB space needs to consider Continue reading “5 Questions & Answers for my new PC”