The MSP Business Is Evolving, And That Means Nothing But Opportunities

The opportunities for the managed service provider business are about to boom, particularly in the SMB market, and those MSPs able to transform to meet some new key business trends will be best poised for success.

That's the word from Michael DePalma, channel development manager for Datto, who was speaking Tuesday before an audience of MSPs attending this week's XChange 2019 event in Las Vegas.

DePalma said spending on services in the managed service provider business is set to become a huge opportunity, growing 71 percent from $42 billion in 2018 to $72 billion in 2022. "These are big numbers," he said. “You may be thinking, OK, maybe my business will grow 71 percent in the next four years."

[Related: Datto, Autotask Execs On Why The Two Companies Can Combine And Create More Opportunities For MSPs]

A big part of that opportunity is in the SMB market where customers traditionally shunned outsourcing of IT because they had been doing it on their own for years, DePalma said. Those SMBs have also feared regulatory and security issues.

"But more and more we're not seeing this hurdle. … You come to these events to find the right solutions," he said. "In-house IT guys aren't going to be here. They're looking for the cheapest solutions."

DePalma told MSPs there are five new opportunities that will impact how they do business going forward.

The first future opportunity is to take advantage of analytics to not only solve business problems but also generate new business.

Customers will have issues, but traditionally it takes time for them to bubble up to the point where they contact their solution providers, he said. "By the time it gets to you, it's all hands on deck," he said.

Instead, MSPs should be looking at technology that provides predictive analytics that can allow them to be more proactive, DePalma said. For example, if an analytics application sees someone rebooting their PC four times in a row, that may be an indication that there is a problem, he said.

He said that as predictive analytics starts to mitigate customer issues, the value of the MSP in customers' eyes could fade away since the customer is not seeing issues, but that can be turned around to become a new business opportunity, DePalma said.

"You can print out the [quarterly issues] report, walk into the QBR [quarterly business review] meeting, and show them everything you did," he said.

The second new opportunity comes from shadow IT, which is when end users order SaaS applications directly without going through their company, leading to multiple applications being run without the IT department's knowledge.

MSPs can work with customers to set up procedures and technologies for deploying and managing SaaS applications per company policies, DePalma said. "You can include this in your managed services bundle," he said.

The third new opportunity is working with customers' increasing number of home office or remote office employees. DePalma said many SMBs are hesitant to have remote workers because they cannot be sure remote workers are actually working, or they are not part of the business' managed security.

To ease SMB owners' minds about remote workers, MSPs should package everything those workers require as a managed services offering, DePalma said. "Make sure they have the same user experience workers in the office have," he said. "Let them know they are covered."

The fourth new opportunity revolves around physical security, particularly around such issues as who has authority to enter a premises and seeing who has actually accessed a protected area, DePalma said. This, he said, is a natural add-on to clients who already trust the MSP for help with IT security.

"Margins are shrinking," he said. "The only way to grow is to think about new value-added services you can add. … And your customers want more security."

The fifth is to offer data protection on a per-user basis rather than on an infrastructure basis. DePalma said that the importance of protecting data has not changed, but how it needs to be done has changed given that user data sits not just on a server but also on users' desktops, laptops, mobile devices and the cloud.

"This is an outside-the-box look at backups," he said.

MSPs also need to look at other ways for them to change to meet future requirements, DePalma said.

A big part of that is to spend time with vendors understanding the trends they see and ideas they have for future business opportunities, DePalma said. "Some won't work, but others will," he said.

DePalma also said that many newer vendors in the market started out as MSPs who often have a clear understanding of the issues MSPs face. "They saw a problem as an MSP and found a way to solve it," he said. "Maybe some of you will be a vendor in a couple of years."

For Chris Collins, chief sales and marketing officer at MCS, a Tampa, Fla.-based solution provider, DePalma's advice on where the managed service provider business is going was consistent with the messages from a wide range of presenters at the XChange 2019 conference.

MCS is a traditional infrastructure solution provider with a focus on cable infrastructure combined with unified communications, and a strong federal practice, and is developing its own managed services practice, Collins told CRN.

Companies like Datto, Pax8 and Intermedia are showing new ways to add services to MCS' business, and understanding future trends for MSPs is vital, Collins said.

"We want to get to 10, 15, 20 percent of revenue being recurring revenue in the next few years," he said. "Everything they said resonates with me."