Published on February 9, 2024
For Managed Service Providers (MSPs) there’s a constant need to evolve and offer innovative services to meet demand and entice new customers. However, when you’re juggling obstacles such as cybersecurity threats, a talent shortage and increased competition in an already crowded space, it’s difficult to differentiate yourself and stay ahead of the game. At POPX, we don’t always see challenges as a bad thing. To us, they provide a motivation for tech service providers to think strategically and extract the maximum potential from their many talents and operating models. It is a call to arms for innovation and growth, enabling businesses to thrive.
Here, we look at some of the main challenges MSPs face in the year ahead and offer some guidance on how growing service providers can use them to their advantage and attract new business in 2024.
- Expanding Service Catalogue
There is constant pressure on MSPs to expand their portfolio of services and it’s always easier to offer new services than end-of-life old ones. We have seen a big focus on Cybersecurity as businesses rely more and more on MSPs to run systems, handle data and protect their digital estate and users. In addition, high-growth MSPs differentiate themselves by getting closer to their customers and building knowledge about their industry.
This means they can better package more complex solutions to meet the specific needs of their clients, delivering more value while fostering closer long-term relationships. Bundled with this is the increasing opportunity for consultancy and professional services, as businesses look to MSPs to help reduce their resource burden and gain access to expensive technical skills that are in short supply. - Operating Model Analysis
Increasing the number of services can lead to growing pains through added complexity. To address these issues, many MSPs are conducting deep-dive reviews of their operating models to better understand costs, pain points and how to improve the customer experience.
For example, there has been a push to adopt more advanced service management techniques, such as service automation. These initiatives will no doubt accelerate in the coming months as MSPs cannot risk getting left behind in the rush to improve service delivery. It is every MSP’s imperative to improve the customer experience and reduce costs. This can be done through better self-service customer portals, elimination of errors - mitigating the need for reworking - and the eradication of duplicate and repetitive manual tasks through integration and automation. - Working in Harmony
The operating model of most MSPs brings significant challenges through its inherent complexity. Trying to make disparate IT systems and solutions work together cohesively, that is seamless to the customer, is not as simple as it sounds. Having the right operating model that combines people, process and technology, ensuring all are working together in harmony is by far the biggest operational challenge. Getting this right will smooth the pathway to success while getting it wrong could hold your business back.
For example, having a great sales and marketing engine driving new business is not going to help you if the provisioning team cannot onboard new clients efficiently and without making errors. An efficient and scalable operating model means better visibility and control of the ‘cost to serve’, ensuring margins and profitability are optimised. Bringing all the key components together to refine and improve the operating model must be treated as an ongoing transformation initiative for every service provider. - Reseller into MSP
The transition from reseller to service provider seems to be a popular pathway, at least in theory, but shouldn’t be taken for granted as the two business models are quite different. The operating model for the efficient and reliable delivery of managed services cannot be compared to that of a reseller. Examples of new managed services that could align with a reseller business may be security, connectivity, unified comms or cloud applications, but where to begin?
The ideal launchpad is to start small and adopt a focused product set aligned to an existing competency that affords instant credibility with prospects. Best not to jump straight into a new space where you have no experience or customer success stories. The important thing then is to gradually build upon robust and reliable services with a strong support capability, before adding new services to the portfolio. Smaller MSPs usually compensate for their lack of size and product spread by over-servicing the client. This helps ensure an excellent customer experience and differentiates them against bigger, more accomplished competitors.
- Future-proofing
If an MSP can get the balance right between having a compelling services portfolio combined with the right operating model to back it up, it stands a good chance of success. In addition, MSPs need a proactive sales and marketing function, as winning new business is not getting any easier, and the cost of customer acquisition reflects this.
Despite the challenges, MSPs remain well placed to act as the bridge between technology and the desired business outcomes required by the customer, which puts them in a very strong position. By owning the customer relationship, service providers can shape the technology journey of their clients for many years to come. However, they must invest in the right areas and develop organisational capabilities that support accuracy, reliability and growth. Recognising the need to fund each stage of development of an MSP may mean talking to investors, as funding will be key to sustained long-term success. - Consult the Experts
By partnering with an experienced specialist, MSPs can accelerate the transformation of their operating model, ensuring it is fit for purpose and optimised to efficiently support growth as well as integrate acquisitions. Embracing both market and operational challenges with modernisation initiatives will open the door to new business opportunities throughout the next decade. Contact us to find out more about how POPX can support your MSP.
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