Expand Your MSP Edge: perform for today & transform for tomorrow

On Thursday 30 July, Dicker Data hosted the Managed Service Provider (MSP) Profitability Clinic webinar, facilitated by Andrew Cameron, Business Manager of Cisco Volume at Dicker Data. The industry exclusive webinar examined the current MSP landscape, fluctuating profitability, avenues for MSPs to explore, how scaling an MSP practice can help drive predictable revenue streams, and solutions to thrive post-COVID-19.

Keynote speakers included: 

• Mark Iles, Executive Consultant and Industry Analyst, Tech Research Asia
• Luke Power, Director, Partner Organisation Australia and New Zealand, Cisco
• Nick Paddon-Row, Solutions Engineer, Pure Storage
• David Kosman, Head of Global Cloud Services Providers, Cohesity

Opening the session, Mark Iles spoke about the current market, including external pressures facing Australia’s IT sector, emerging trends, industry changes and challenges, and opportunities to reinvent and thrive in a post-pandemic era. He highlighted MSPs needs to meet what customers are looking for at speed and address current profitably constraints identifying that there’s not enough resilience in managing the cost base.

Cisco’s Luke Power identified the overarching mandate is to ‘perform’ and ‘transform’. Cisco is driving this strategy encouraging a bimodal view, that is, perform now but with consideration of the future. Transformation will require solution-based models to offer new scalable programs, with a focus on profitability strategies and commitment to maximising customer experiences.

A glance at the industry

The global pandemic has been challenging for many businesses, especially with the pressure of accelerating digital transformation initiatives to enable business continuity. It has also forced a reassessment of business-critical priorities and made business resilience front of mind

Despite economic instability, Australia’s Information and Communications Technology (ICT) spend is heading to $100 billion in 2020, spurred by the surge in demand created by COVID-19.

Recent data captured from 250+ Chief Information Officers (CIOs) and IT decision makers, highlight the shift in customer demands over a four-year period. Notably, current investment priorities fall within digital transformation, customer experience, security, and application modernisation categories.

Pandemic impact

Taking a macro view, 20 percent of the global workforce was operating remotely pre-COVID-19. By March 2020, this surged to 80 percent. As a result, the IT industry experienced an uptick in revenue by the tail end of Q1 as the need to reassess, reinvent and bolster innovative ways to work was at the top of the business continuity agenda.

Mark Iles explained the landing point of the global remote workforce will be around 40 percent (double the 20 percent baseline). This next phase will continue to experience an increase in spend, but only in areas that are critical and strategic for modernisation. Marks Iles said, “This lens is paramount to the technology industry clearly identifying areas of growth and allowing the industry to tap into key areas of opportunity.”

As we face the likelihood of ongoing disruption in the wake of a second wave, Mark Iles advocated the importance for MSPs to incorporate innovative emerging technologies, as well as looking to focus on annuity revenue opportunities and customer retention.

Luke Power said the best way MSPs can capitalise now and expand their edge, is to perform for today and be prepared to transform for tomorrow. They should look to provide an integrated approach beyond providing tech solutions. It will be paramount to delve deeper into enhanced customer experiences, new buying centres and platform-enabled outcomes.

To support partners with this transition Dicker Data and Cisco have launched the Cloud & Managed Services Program (CMSP). The integrated program offers go-to-market resources and cloud/managed services to accelerate the role of MSPs and improve speed, quality and profitability, across all market segments.

Challenges and the profitability crisis

The top challenges impacting Australian MSPs include, unpredictable revenue, payment issues, low profitability, operational changes, cash flow pressures and workforce rebalancing. Despite strong revenue growth, the industry’s profitability weakness poses the biggest risk to surviving this wave of disruption and navigate operational efficiency.

Mark Iles said, “Revenue is vanity, profit is sanity and cash flow is reality.” He believes MSPs need to focus on balance sheet management, driving cost saving solutions and improving offerings through initiatives like partnerships and strategic mergers and acquisitions.

Workforce rebalancing is another focus area for MSPs, requiring the reassessment of industry talent, upskilling professionals for the future and retraining lower cost jobs to technical support, consulting, or management roles.

Tapping into the opportunities with a customer centric approach

MSPs need to re-strategise their approach and adapt to the fast-changing environment and respond to new consumer buying behaviours. Sales approaches must become annuity and retention focused.

Ongoing farming, retaining and upselling existing multi-layered contracts and continuously acquiring new clients is essential to build the core annuity pipeline. Mark Iles suggested, “The watermark for partners is, 40 percent of revenue as annuity will guarantee revenue stream, improve profitability and drive business resilience.”

Value-added services are a moving target. COVID-19 presents opportunity to reexamine and digitally reinvent the service offerings. The modern customer desires transformation, looking to incorporate immerging technologies to drive innovation, business outcomes and competitive advantage.

In line with Cisco’s mandate, it’s about “disruptive managed services”, speed, enhanced user experiences and offering services that maximise ROI and improve performance. The market is ripe for as-a-Service offerings, because they are not only scalable but can be purchased on a monthly basis.

The MSP's role from a consumer lens

With expedited transformation, security remains a key priority, likely to surge beyond 2020 as global spend currently tracks at $35 billion with expectations it will grow by 17 percent year-on-year. In a world of scarce security resources, more than 50 percent of enterprises are looking to outsource security partners in the next 12 months.

Businesses are moving to an application driven world, intensifying security pressures, requiring networks to extend from various end points. Application implementation, development and infrastructure are business critical areas and nine in ten CIO’s believe modernising apps is a business priority, with 80 percent supporting hybrid private and public cloud environments to navigate flexible business operations in the future.

With business continuity front of mind and pressures from the evolving environment, MSPs are encouraged to rethink their business model, reevaluate unique market offerings and address the needs of today’s customers with speed, quality and fostering the “perform and transform” strategy.

In part two of this series, Dicker Data will share more about solution offerings from Cisco, Pure Storage and Cohesity that help MSPs grow, honing in on the market opportunities, the power of differentiation and opportunities to leverage value from service offerings.

To learn more about the evolving MSP landscape and how you can best position your services to transform and perform in the future, you can watch the full webinar here.

*Note you will need to enter the following password to listen to the webinar: 9rMt3FZJ