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5 BUSINESS TRENDS SHAKING UP THE MANAGED SERVICES PRICING MODEL IN 2021
Posted by Kevin Clune | Feb 15, 2021
While the “work-from-home” transition seemed to hog all the spotlight during the 2020 pandemic, there were numerous other trends taking shape in the small-medium business world. Many of these pivots (some more subtle than others) have occured over time and have been accelerated by our change in workflow and the digital transformation that came with it.
Here are few of these trends that will ultimately change the way MSPs price and package their services now and in the future:
With larger organizations suddenly going remote, many have found themselves with a de-facto remote (in-house) IT team keeping them afloat. As this became status quo and physical presence has shrunk in demand, it has appeared that many larger organizations are growing more comfortable with the idea of outsourcing a portion of their IT department to MSPs or staffing organizations. This is because bolting Co-Managed IT services onto an existing technical team has proven to add flexibility, scalability and profitability to an otherwise costly situation
As more larger organizations grow comfortable with Co-Managed IT, we can expect to see MSPs adapt as a result. Why wouldn’t they alter their business model to accommodate new high-value opportunities? For many, this will mean throwing out their typical all-or-nothing bundles and going to market with a menu of services that can fit whatever unique needs the customer may have. Afterall, these are premium customers and with luxury comes accommodation.
GROWING SECURITY NEEDS
In my peak as an MSP I can honestly say that we were not a security-first organization. Yes, we fielded tickets related to security incidents on a daily basis and provided some preventative software and support as part of our bundles, but this was not always at the forefront of our customers needs. Many veterans in the industry will have a similar story, as the priorities have been gradually shifting toward a security-centric offering and this has now become a primary driver of new business.
MSPs re-evaluating their pricing and packaging strategies will have to take a long look at both their capabilities and the needs of their customers to make sure that these are constantly in alignment. In many cases, MSPs will discover the need for outsourced network and security operation centers to increase their talent-pool and availability. Those who prefer to go “all-in” on security may even cross over from MSP to MSSP where they will be able to command higher rates and take a more consultative approach.
EXPANDING ACTIVE HOURS
One of most symbolic traditions to be impacted as of late is the “9-5” workday. With offices and schools closed, many businesses have been forced to offer their workers a more flexible work schedule. It is to be determined whether this trend will continue when the ability to maintain a routine becomes easier, but until that time there will certainly be an increased need for Help Desk support outside of normal office hours.
Several MSPs that I have spoken to are reacting to this situation by engaging with third-party Help Desk services to route tickets through when their technicians are unavailable. The MSPs that have been hurt the most by this change are those who included 24/7 support in their standard MSA. Until recently, this was likely a benefit that was under-utilized and may have been used as a sales tool to differentiate from the “9-5” competitors. Nevertheless, just about every MSP is re-evaluating their needs in terms of active hours and are considering the costs and benefits associated with taking the “always on” approach.
ENDPOINT AUDIO/VISUAL USAGE
The popularity of video meetings, content creation / podcasts, and virtual events has created a frenzy that boosted the sale of webcams, microphones, ring lights and other A/V technology in a way that the industry has never seen. While everyone rushed to purchase the “best available” device on Amazon, it has left MSPs with one glaring problem to deal with; the complete lack of standardization. The real question is, who is responsible for supporting these devices and how will affect the relationship as a result?
Thanks to Microsoft Teams and Google Meet, MSPs now have some value in the growing collaboration market, but it is to be determined whether this makes its way down to the bottom line as well. Nevertheless, MSPs will have to get creative to standardize endpoint level A/V hardware and support new collaboration software at a profit, without this just becoming a nagging drain on their resources. This may result in new collaboration-as-a-service hardware / software bundles, an expansion of T&M exclusions, or simply an increase in rate to account for this growing category of support incidents.
The best thing about being an MSP is that customers rarely leave. Or at least that was the case for the majority of the last decade when getting your customer to sign a 3-5 year contract was no sweat and retention during this period was almost implied. What I learned by observation over the past 6 months was that if customers want out of a contract, they will get out, and that many business owners are coming to the realization that the transition from one MSP to another is hardly the traumatic experience they feared it would be.
I have yet to come across any hard data that would indicate that the desired contract length for SMBs is shrinking or that average rate of retention has gotten shorter, however logic would tell me that both of these would likely be true if surveyed today. For MSPs, this means that you can no longer make your profit on the back-end of a contract and profitability must be accounted for from day one. This may also lead to the implementation of onboarding fees, billable projects, and other charges that may have been previously swept under the rug as the cost of doing business.