Thursday, July 17, 2008

Life after Managed Services

Many Computer Troubleshooters have heard me tell the story about how, when I first got into this business almost 20 years ago, everyone used to think my business was destined to be a huge success. And I would disagree, becuase (as I often told them) most of my work was in helping small businesses install and troubleshoot hardware and software, and since hardware and software were getting easier to install and more reliable I probably wouldn't have a business for long. I usually predicted 5 years, which since I got started in 1989 probably means I would have closed somewhere around 1994.

Fortunately, everyone else was right and I was wrong. What I didn't realize then was that no matter how much technology changes, businesses still need someone to be their liaison to the world of IT. Originally it was installing and troubleshooting, later it was networking, then setting up internet & email & websites, then defending from spam & spyware & viruses. Today the popular trend is so-called "managed services", which is sill the hottest buzzword in the IT press. Managed services is so hot that an entire industry has sprung up around it: companies like
Mobilize SMB and MSPU help independent companies learn how to structure managed services plans, Robin Robins will help you market them, Matt Makowicz will help you sell them, Ingram Micro will help you with the software. And when Dell got involved by buying Silverback last year, the industry got a little nervous wondering if big companies might start to push us little guys out of business. In fact there's so much news on managed services that I've set as my home page just to keep up with it all!

So the biggest managed services news lately has been the prediction by Akash Saraf, the CEO of Zenith Infotech (one of the largest providers of managed services tools & infrastructure and a very popular vendor partner of Computer Troubleshooters) that managed services has a limited lifespan. Akash is considered extremely prescient in the IT community, and has made some truly brilliant moves in the way he's developed Zenith's product offerings and especially it's revolutionary BDR device (which btw is EXTREMELY popular with CT's small business clients). So when so much of the SMB IT industry considers "managed services" as the way of the future, it's remarkable when someone of Akash's stature reminds us of the truest maxim in all of IT: things change.

It shouldn't be a surprise really. Looking back on our business it seems that if you pick any 5-year period our business in the 5th year is very different than our business in the 1st year. And things that are bleeding-edge today will be tomorrow's bread & butter. We've been hearing about cloud computing and virtual environments for years now, and we're finally at the stage where some companies like ExternalIT are offering legitimate hosted desktop/server environments using traditional Microsoft Windows & Office environments. We're also seeing some organizations, especially in the developing world, choose to build their entire IT infrastructures around hosted environments like Google Apps or SugarCRM.

If the whole premise of "managed services" is to help clients better manage their IT infrastructure, how does that happen when there isn't a local IT infrastructure anymore? That's the point that Akash and others are raising.

Not to worry. When CT launched our BEST program back in 2006 (our flavor of "managed services"), we future-proofed it by incorporating a concept we call "enhanced vendors". These are technologies that can help our small business clients take their businesses to the next level, and this year we've really been ramping up our training for those technologies. IP Telephony, Document Management, CRM solutions, and Search Engine Marketing are just some examples of the "enhanced vendor" programs we've been developing.

But I'm also reminded of the Gartner study in late 2005 which warned that service providers who didn't adopt a managed services model by 2007 would be out of business. Much of our industry is still using the older break/fix model but is still in business, although there are certainly many indications (inside and outside of CT) that those who are focusing on managed services are seeing higher revenues and lower workloads).

IT will always change - that's inevitable. But as long as small businesses depend on technology, Computer Troubleshooter's role is to be the ones helping our clients make the most effective and efficient use of their technology. Or as one CT put it this week, "to be the glue between the service and the serviced". For the next few years that means saving our clients money & frustration through managed services. After that it'll be supporting hosted environments and coordinating enhanced vendors. And after that? We'll just have to wait and see.


Ramsey said...

Chip, I just read your post and your right Akash has been instrumental in providing products and services that the SMB market can really sell and deliver.

Since 1999, I have been preaching a utility based service for the SMB market (HaaS). Hardware and Support go hand in hand and if you can find a way to bridge the two seamlessly, you can create stickiness within your client relationship to create long term profit.

I am probably biased but to me it appears hosting, cloud, ASP, etc. are just forms of a payment based delivery model (SaaS/HaaS) in a different way and unless the reseller, no matter how large or small they are, creates a way to control the delivery method to his/her client, they will likely fall to these types of offerings.

Then you have the issue of business models now shifting profit from month-to-month to a longterm contract. In essence you are financning your profit over 2-3years when you are used to getting it with in 30 days. That works for Services but not too good on HW/SW....

I seem to use the website a lot as well.

Ramsey Dellinger
MSP On Demand, LLC

John said...

Chip, I somewhat agree with your assessment along with Akash's. However as things change, I believe that the coined term "managed services" will change in it's deliverables. Cloud computing is coming - no doubt - and we're already participating in large virtualized COLO infrastructure for clients. Learning to position yourself as a large solution provider for these technologies, and then having a "Managed Services" offering to support them is key. Just think of IP-Telephony and it's managed services capability... Cisco is now releasing their second edition of their managed services software for the SMB IP-Telephony solution.

We're currently striving for a hefty margin on our Managed Services because as you know, it's a race to the bottom somewhere down the road. You have to get in early and keep the client to be a productive MSP years from now.

Peter Sandiford has a great article I read the other day that probably somewhat agrees with Akash as well:

As far as MSP Mentor - I'm the same as you; That webpage is my homepage as well.

Anonymous said...

Chip, first of all an excellent post. Second - thanks for your kind words about me :)

I agree with John that managed services will change. Where I do see a problem is that most of us i.e. our partners and Zenith are too focused on managing the "infrastructure stack". Thats going to be under huge attack with the advent of SaaS as well as larger vendors "bundling" managed services with their main product line. (A Dell server with 6 months of monitoring ??). Unfortunately infrastructure services can be mass produced, commoditized or moved into the cloud.

The key to success is IT service providers to become business technology integrators. By training CT members on SEO, CRM implementation, you are taking the right steps. Helping customers get business value from IT is something that cannot be mass produced, customized or moved into "the cloud".

In short after two years we must be business-technology integrators instead of MSPs.


Will Scott said...

I am with Cisco and we consult and work with MSPs regularly. The questions we get asked all the time (and hopefully answer) is "What Managed Services should I build ? That is the million dollar question and, clearly, there are a lot of variables in getting to the answer.

We see that, in most cases, the demand for managed services around a particular technology lags the underpinning demand for the technology itself and this is reflective of the IT strategies of the kinds of companies demanding the technologies and where they fall on the market adoption curve.

Early adopters of new technology, classically, are also the kind of folks with very innovative and resourceful IT departments and so therefore usually more likely to managed the technology themselves. As the technology matures and is adopted by main street (to use Geoffrey Moores model) then those companies have a different attitude towards IT costs and focus and are more likely to consume the technology via a managed service and this is turn drives the supply side.

Take a look at the web. In the beginning it was the early adopters that were taking advantage of this technology, putting iPlanet (remember them) web services up in their IT rooms and running T1s into the building. Take a look at the same industry today - web hosting is massively commoditized and the vast majority out-task this function to the web hosting experts. There are always technologies and companies that buck this trend ... but in general I think we can expect other technologies to follow suit.

Will Scott

petertparker said...

Hi Nice BLog Search engine optimization (seo training) is the process of optimizing a website through an extensive mixture of tasks that help improve a website’s presence on the search engines.A person using a search engine will specify criteria (keywords/phrases) about something they are interested in.

John said...

Never forget that Gartner was a year late picking the Internet as a factor in business... ;-)

I am very pleased that CT is thriving and still hope to join your DFW area team one day!!

Alex S said...
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