For IT businesses that operate mostly as break-fix providers or VARs, introducing or expanding a managed services offering presents a path to business growth that is hard to deny. On the hunt for increased monthly recurring revenue and profitability, IT solution providers are finding the managed services market to be ripe with opportunity.
According to a study by Market and Markets, the managed service market will be worth $282 billion by 2023. Further, in a report from the 2112 Group and Barracuda MSP, 64 of channel partners said that services sold on a recurring revenue basis are their best growth drivers.
And it’s not just about established MSPs selling more managed services. It’s also about a shift in the way solutions are delivered to the customer.
In fact, 89 percent of those who identified themselves as a VAR or as a Hybrid MSP and VAR mix, indicated that they want to grow their managed services offering within the next 12 months.
Benefits of managed services
There are several reasons that VARs are looking to managed services as their next play for business growth.
- Predictable monthly income
As a managed service provider, you know what your business will be month-to-month (barring new customers or ones that move on from your service). You don’t need to wonder when you’ll be sending your next invoice to a customer.
With this kind of predictable income, it’s easier for you to plan for the future. Forecasting your own costs, as well as your customers’ costs, becomes much simpler.
- Fewer fire drills
If you’re a break-fix service provider or a VAR, customers come to you when they’re looking for a new solution or when their current one needs to be repaired. Once the solution is implemented or prepared, your job ends. Your work load is unpredictable, and you never know what is going to come your way.
However, as you begin offering managed services, you can stay on top of the solutions and systems that your customers use, and make sure that things are in good working condition, are running up-to-date versions, and that they are secure and backed up. More time prescribing and selling up front, and then providing proactive service means and less time fixing later on. This model is more profitable and is a significant motivating factor.
- Increased control
As a managed service provider, you’ll find that you have more control over which solutions clients implement in their environments — and more importantly when they move off outdated legacy products.
By focusing on a handful of products that you manage, you make it possible for your technicians to learn the ins and outs of the solutions so they can better serve customers and use their time more efficiently.
- More financial freedom
Many times, VARs find themselves at the mercy of the vendors they work with when it comes to pricing. They usually need to keep margins low in order to remain competitive, so, when prices change, it can cause major headaches. In a worst-case scenario, the VAR can even end up incurring a loss.
When you are offering a service, you can sell based on the value you’re adding providing, rather than trying to explain your markup on a solution you’re simply reselling.
Where to begin
Changing the way you do business can sound a little daunting, but don’t let it deter you from taking advantage of the managed services opportunity down the line. Transitioning to managed services doesn’t have to happen overnight. Begin with one service first, learn how it works, and then you will start seeing the results.
If you’re looking to begin your journey to managed services success, or even to jump-start your managed services growth in the new year, check out Ready, Set, Managed! This helpful how-to program provides exclusive educational material, quizzes, and a discussion forum where you can network with your peers and connect with experienced MSPs.
Photo: PanyaStudio / Shutterstock.