Managed Service Providers: drivers for competitive advantages? Part 1

As mentioned in my previous blog post, the market of IT services delivered by Managed Service Providers (MSPs) is expected to grow by almost 80% by 2018, compared to 2013.

Now, what effects will this growth have on the MSP market? Here are a few:

√     Number of MSPs will increase. This will happen as current ‘box movers’ will start more and more to enter the services area,

√     Prices will go down as commoditization will increase. Commoditization in MSP-type of services (help desk, security management, hosting) will increase much faster than in other types of services (e.g. application management for core functionalities), and

√     Margins will be smaller and smaller

All in all, competition will become fiercer and fiercer.

If we accept this outlook for the MSP market, the immediate question that comes to mind is: What are the sources of differentiation that MSPs should use? Of course, there will be differentiators derived from technological advantages. But, business models in the current IT era are based on the very high speed of wide adoption of new technologies, and we can no longer expect technological advantages to hold much against competitors, at least not for long. This is even more the situation for MSPs who do not typically develop their own customer-facing technologies; MSPs are a channel for technology vendors to achieve fast, wide adoption.

So, coming back to the question of other sources of differentiators; where should managed service providers look for different positioning versus their competitors? Today, I want to suggest ways for differentiation on the business side, including from a marketing perspective, a sales perspective, and a strategic perspective. This is focused on business strategy, rather than technology. As every MSP recognizes, having a more efficient approach in a margin and revenue - risk sensitive business can mean the difference between continued success, and failure.

 

MARKETING

Marketing has to take be more accountable for generating sales contacts, which is traditionally the role of marketing, but it doesn’t have to stop at passing contacts to sales. Marketing should also be responsible for coordinating the process by which contacts become leads, leads are transformed into opportunities, and finally converting leads into revenue.

Why is it very important for marketing to coordinate the leads management process? The main advantage is that marketing can collect first-hand information on each stage (contacts to leads, leads to opportunities, opportunities to revenue), focusing on analyzing the success rate, conditions of success or failure, at each stage. With this information, marketing closes the circle of leads management, and thus can adapt future contact and lead generation campaigns, as well as developing metric-based plans for converting leads into, ultimately, revenue.

Marketing should also take-on a more central role in partnership development, especially in technology-driven partnerships. Joint-marketing actions targeting both partner-internal audience and external audience will have a glue-effect on top of the technology agreement, giving it better chances for a long-term, mutually-beneficial partnership. In every way, success in technology partnerships is like the partnership between in-house marketing and in-house sales; partners truly are an extension of the vendor sales team.

Therefore, embracing this methodology of metrics-based intelligence is equally applicable. If a vendor can industrialize lead management in a way that shows measurable results, working the strategies and tactics into partner sales, wherever possible (and perhaps it’s a measure of “fit” in vendor-partner relationships), will, by definition, result in better revenue for both the partner and vendor.

In conclusion, marketing should have a leading role in defining new services portfolio or new product development. This can be the case only when marketing demonstrates a clear and in-depth understanding of the market the MSP operates in. It would be totally wrong to expect a leading role from marketing in service/product development, if marketing is not given the necessary support (especially, financial and board position) to build its market understanding.

The Sales and Strategic perspectives is published in the Part 2 of this article.

{{cta('facb91ce-fba7-4d6a-bd35-9c76dbf38025','justifycenter')}}