The Evolving MSP

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What To Give Away for Free: Nothing

It's no secret that your experience, your skills, your expertise are valuable -- very valuable. They're the result of big investments. The mystery is why you'd ever give away any of the service value those investments have created. Yet MSPs often offer up their capabilities at no charge.

Learn how to leverage the art of assumptive selling to always receive the fees you've earned. What do you sell? There are so many ways to answer that simple question, and the way you choose to answer it says a lot about who you are, where you're at and what you should be thinking about next.

Are You a VAR?
No matter what you may think, the answer to "Are you a VAR?" is "No." It has been impossible or at least unwise to be a VAR for about 35 years now.

The description "value-added reseller" emerged from what I often refer to as "The Time of Becoming Really Stupid" for the young channel. IBM first called us resellers in August 1981 because "nobody but IBM can sell IBM." As ridiculous as that sounded to us, IBM did give us 41 percent margins at least on most IBM PC products, and everything was selling at list. Try to imagine that. Stop shaking.

It wasn't long before Compaq, Toshiba, RadioShack and others joined in. Realizing that customers could buy these products at list price from anyone, the first question we asked was, "What can we do to convince customers to buy from us instead of our competitors?"

We "cleverly" came up with the idea of giving away services along with the purchase of computer hardware. We would assemble, configure, burn-in, test and prepare systems. We would install them onsite. We'd load software. We would do whatever we could to beat what our competitors -- who had come up with the same ideas -- could do.

These were the short-lived VARs. We added value to the purchase to compete.

The Death Spiral
I was working at The Computer Factory at that time. It may very well be that we were the first -- or at least among the first -- to discount products. The death spiral began immediately and it didn't take long until we all found ourselves with margins of 1 percent or less.

If you were thinking about it, you realized you couldn't afford to give away services anymore if you didn't have the big margin to fund it. Some of us thought faster than others. Those who didn't went out of business pretty quickly.

Within maybe two years, the age of the VAR had come and gone.

The Rise of the Solution Provider
Yeah, that's my Luke Skywalker moment, and now it's over. This brings us back to the question of what it is you sell. If your answer is "Computers," good luck to you. You now know how long it's been since that made anyone any money.

If instead your answer is that you sell what you do well, you're on the right track, so full steam ahead. We're living in the age of the service provider. Maybe someday that will morph into "technologist" or something more akin to "doctor" or "lawyer" than "repair guy." For now, though, those who are making money identify themselves clearly as service providers. They sell the services they've become good at providing. Some examples:

  • You're good at selecting, combining, provisioning, configuring and managing cloud services, You're a cloud service provider (CSP).
  • You're good at data and network security. You're a managed security services provider (MSSP).
  • You're good at monitoring and managing customer networks and remotely resolving anything that goes wrong. You're a managed services provider (MSP) along with almost everybody else and their brother-in-law.

Behold the xSP: The Service Provider of Tomorrow
One thing all successful service providers have in common is they give away nothing for free ("free" is, indeed, a four-letter word). They know there's real value to what they do and they look to be compensated for providing that value. That's professionalism.

I earlier alluded to one of the biggest problems they face. There are simply tons of MSPs who transitioned away from being resellers. Not all of them have that one thing in common that we just identified. They give services away -- sometimes for low, low rates and sometimes for f-f-free. Whether they charge for it or not, they're not very good at providing services. They would have been better off opening up a pizza place (people gotta eat).

Market forces will eventually filter out the wheat from the chaff -- the great MSPs from the other kind -- but there will still be a large crowd of MSPs to compete with.

Over the next several months we're going to explore answers to where great MSPs can go from here -- how they can differentiate themselves, find their niche, specialize in something and be well-known for it. How they can define their space, occupy it and make bundles of money.

Here are some of the future possibilities that await innovative, enterprising MSPs looking to rise:

  • The cloud services provider (CSP)
  • The data scientist service provider (DSSP)
  • The software-defined services provider (SDSP)
  • The automation services provider (AuSP)
  • The artificial intelligence services provider (AISP)
  • The Internet of Things service provider (IoTSP)
  • The universal communications service provider (UCSP)
  • The vertical services provider (VSP) -- many flavors!

Some of you may have already figured out that this is where we started with this column, "The Evolving Channel." That which does not evolve simply dies. I wanted to talk about the future, the possibilities, where today's MSPs can focus on going to next. Hope you'll join this journey and get some great ideas along the way. I look forward to hearing about the new, innovative practices and services you're creating, and the ideas you'd like to see this column explore.

Posted by Howard M. Cohen on November 12, 2020