When the Economic Chips Are Down, MSPs Thrive

A poor economy presents an opportunity for channel partners to explore managed services with existing clients, according to AMI-Partners' Senior Analyst Avinash Arun.

By Cecilia Galvin

This year, there's more of an opportunity for channel partners to explore managed services opportunities with existing clients, according to Avinash Arun, senior analyst at AMI-Partners. And while that may not surprise managed services providers, it may raise some eyebrows with more traditional VARs. But with the current state of the economy, said Arun in a conversation with Executive Editor Cecilia Galvin, even systems builders are getting into the act.

ChannelPro-SMB: Can you provide some background on this change in business models?
Arun: Every year we survey channel partners and ask basic questions about their revenue, growth, verticals they're serving, vendor partners, and so on. We also ask about their business models, and what we found was that they are shifting toward services. Even traditional VARs that focused on hardware and building systems have gotten more service-oriented. They start off providing high-value services to clients and then try to transition some of those clients to managed services.

This is a great time for that. SMBs want to save costs, and IT is one area where they can try to reduce capital expenditures and staff. In that environment, managed services plays right into their hands. They don't have to make large capital expenditures and they can still have their infrastructure working efficiently.

Another thing is that many partners moving to managed services want to offer these services from their own infrastructure and data centers, compared with a couple of years ago when they just resold services offered by larger vendors or other managed services providers. But there are two big challenges to that: high cost and not being able to realize economies of scale. It's a large investment, and they need a lot of customers very quickly. Still, partners are moving in that direction and are willing to invest the money because they bet there will be growth and opportunities for them in the next few years.

ChannelPro-SMB: What types of managed services are they offering?
Arun: There isn't a specific type of managed service dominating the market. Network administration and management is at the top, but it's just slightly higher than desktop management, voice services, storage, disaster recovery services, and security services. And one of the reasons is that once partners make the investment, they try to bundle a lot of additional services together and sell them as a package. For example, if a small business client wants managed desktops, partners try to bundle security or storage along with it because it's more efficient and makes the application more robust.

There is a big push in security. A couple of years ago partners were offering more basic security, such as firewalls and VPNs. Now customers are adopting intrusion detection and prevention and unified security management--more high-end security appliances to complement the basic anti-virus and anti-spam they already have. Storage is another area for growth.

ChannelPro-SMB: Were there other surprises from the survey?
Arun: Partners' top challenges have shifted, which also has a lot to do with the economy. The top challenge reported by partners before was finding new customers. And while that's still a challenge, things like pricing pressure, insufficient cash flow, and the uncertain economic environment are really top of mind. So they used to be concerned with more growth-oriented challenges, and that has shifted to making their work more efficient and saving money.