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Moving Toward Growth: Overcoming the Barriers to MSP Profitability

Article Written by Curt Mark, Director of Partner Development and Sales, Intermedia

The cloud has opened up a wide range of opportunities for today's resellers. As the cloud market continues to grow, resellers are evolving from a transactional value-added reseller (VAR) to a longer-term managed service provider (MSP) model to forge tighter client relationships and take advantage of a continuous revenue stream.

It's not hard to see why. With high demand for managed services across every industry vertical market, the MSP market is poised to reach $193 billion by 2019, according to research from MarketsandMarkets.

Unfortunately, many VARs struggle to make the transition.

Three common barriers that stand in the way of growth

The key to success as an MSP lies in providing the right set of value-added services, while having the operational capabilities to deliver them to clients cost-effectively.

This can be challenging from a cash-flow perspective. Take for instance, Google resellers. Some Google resellers are now taking two-year loans from Google at 5 percent interest just to manage their costs.

Aside from licensing and upfront service costs, there are additional barriers that stand in the way of MSP profitability. Here are three to consider:

Managing old servers and legacy systems

One of the biggest underlying causes of lost profitability is aging client equipment. Many businesses continue to maintain dusty closets filled with file servers, legacy PBX systems, web servers and other archaic hardware that are prone to failure, damage and sabotage.

Old servers and aging equipment can cause recurring issues that eat up support resources. This requires a great deal of time and upkeep for MSPs, who may be forced to put in place plans to upgrade this outdated equipment.

The failure to shift server data to the cloud can have huge implications on an MSP's bottom line. For MSPs, the high cost of dealing with break-fix issues cuts into revenue-generating operations and further impacts their ability to retain business. Additionally, repairing and replacing faulty drives, appropriating adequate storage space for corporate data and managing VPN capabilities are pricey examples of the issues that plague MSPs managing legacy equipment.

Pure cloud-based solutions bypass these issues by creating a scalable solution that lowers costs, increases reliability and reduces troubleshooting time - ultimately creating a steady revenue stream for MSPs. Additionally, if a customer moves their core IT infrastructure to the cloud, they'll receive the added security and safety benefits of an enterprise-grade hosted cloud provider.

Mobile device management

The growth in the use of employee-owned devices (such as smartphones and tablets) in the workplace, commonly termed BYOD, introduces a new set of challenges for MSPs to manage.

A recent survey from Tech Pro Research found that 74 percent of organizations either allow or plan to allow employees to bring their own devices to work.

The perception with BYOD is that everyone wins. Businesses benefit from the policy because they don't have to provide these devices to employees, while employees benefit from not having to carry multiple devices.

However, if you're an MSP, there are a host of ancillary issues that arise as a result on these BYOD policies. From back-end hardware to end-user support, the pressing demand for mobility makes MSPs the go-to resource for BYOD implementation.

On the back-end, if you're an MSP who is burdened by file servers or similar legacy technology, you can run into numerous issues syncing these technologies with users' various devices.

From an end-user perspective, MSPs must ensure users maintain access to the applications and services they need - from managing VPN capabilities to syncing applications across various mobile devices.  Security is also an issue. Data breaches can be costly time sinks for MSPs.  A recent Osterman Research report found that 89 percent of ex-employees retained access to sensitive corporate applications such as Dropbox, PayPal and Salesforce.

Leveraging flexible, cloud-based solutions that work across all devices can help mitigate these issues.  These solutions often include security mechanisms that ensure MSPs maintain control over mobile devices, from managing access permissions, to backups and remote wipe capabilities. This ensures that company data is secure and passwords remain in the proper hands.

Customer service and support

Many businesses look outside their organization for their IT services and support needs. 

When companies are focused on improving their product or service to keep their customers satisfied, important infrastructure challenges such as server upgrades and unified communication systems often gets outsourced to MSPs, which can be costly and resource-intensive.

Offering customers support across all of their key technology challenges - from end-user hardware problems, to version issues, etc. - requires a great deal of time and manpower from VARs and MSPs.

Deploying a faulty solution, on-premises or otherwise, is asking for trouble.  MSPs can avoid high volume tech support calls by working with a partner that proactively evaluates and tests solutions before deploying them. And ideally, that cloud provider should also be the first line of support for service issues. In this way, customers receive satisfactory support and MSPs can devote their time to installations and other consultative services that are of additional value to the customer.

Maximizing MSP profitability in the cloud

In a world of tight margins and rising customer churn, MSPs can drastically improve their bottom line by offering scalable cloud solutions.

With no hardware to buy or software to purchase, MSPs can avoid capital expenditure and break free from the upgrade cycle.  This enables customers to stay on the leading edge with real-time updates, while offering MSPs better opportunities for profit.

Furthermore, cloud solutions centralize and automate management tasks to make administration seamless, eliminating the influx of technology support and troubleshooting requests from customers. MSPs have the benefit of using these services on an as needed basis, reducing overhead and increasing margins.

The benefits of a more cost-effective, scalable cloud solution backed by the personal attention of an expert provider, goes a long way in building customer satisfaction, furthering business development and ultimately increasing the bottom line.

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About the Author

Curt Mark has successfully created and expanded the company's channel network to over 5,500 active channel partners. He has led Intermedia's sales growth to become the industry leader in the business communication space by formulating and implementing innovative strategies as well as tactical sales and business development plans.

About Intermedia

Intermedia is a one-stop shop for cloud business applications. Its Office in the CloudTM suite integrates the essential IT services that small and medium-sized businesses (SMBs) need to do business, including email, voice, file syncing and sharing, conferencing, instant messaging, identity and access management, mobility, security and archiving.
Published Tuesday, April 28, 2015 6:26 AM by David Marshall
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