A recent Facebook post by Len Srinivasan, a vice president of channel partner development at backup vendor Vembu, pretty much sums up what many people are thinking about managed services: Are MSPs part of the channel or are they customers?
“The market dynamics are changing so much and we see the trend where MSPs are behaving like customers. In a typical channel model, the vendor will have visibility in terms of who their customers are, but when they go through MSPs – that visibility is lost since MSPs are offering the software/application as a service to their customers directly. Please shed some light on this. — feeling meh,” he wrote.
Managed services have always been part of the channel. Some solution providers say they’ve offered some form of managed services long before they became vogue. What made managed services popular in the early 2000s was a combination of persistent and affordable Internet connections that made remote monitoring and management practical; as well as the rapid commoditization of staple channel products, such as servers and PCs. Simply put, the average VAR needed a new value-add to sustain revenue and profitability.
But did consuming managed services technology ever make MSPs “partners”?
Managed Services Business Model a Godsend
From a revenue perspective, the managed services model is a godsend. By charging a recurring service fee, MSPs can accurately predict their gross revenue, cash flow and profitability. This is a far cry from product sales, where every quarter is subject to market and customer vagaries that cause sales to rise and fall without reason.
An emerging class of vendors — including Level Platforms (now owned by AVG Technologies), N-able (now owned by SolarWinds) and Kaseya — jumped on the opportunity with tools and resources. They provide the software that enables solution providers to easily and effectively deliver remote management of network devices, storage, servers and endpoints.
Larger equipment vendors, such as Cisco Systems Inc., Juniper Networks and Hewlett-Packard Co., jumped on the bandwagon by giving solution providers price protection for their hardware used in managed services infrastructure. Through price protection, MSPs could more easily budget for infrastructure expansion, and it too provided vendors with a semi-predictable source of revenue.
And software vendors, especially security specialists such as Symantec and Sophos, offered consumption-based licensing for their applications. MSPs wouldn’t have to pay hefty upfront licensing fees for unused capacity; they could buy more seats based on their utilization rate. This made software delivered as a managed service more affordable.
All the way, every vendor from RMM to networking hardware called MSPs a “partner.” Level Platforms even formed a community called MSP Partners (now part of CompTIA) that provided solution providers with materials on how to build better, profitable managed services packages. The reality, as Srinivasan points out, is MSPs are and never were partners in the traditional sense of the channel. They are customers.
Think of it this way, a MSP may work with Continuum for hosted managed services or buy software from LabTech Software, but their customer will never know the technology source. The value is in the service delivered by the MSP.
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