In the age of digital transformation and cloud proliferation, managed service providers (MSPs) face an entirely reshaped IT software industry. Years of change have occurred in a matter of months—from the exponential growth of subscription-based models to the shift in B2B buyer expectations—and MSPs are being forced to evolve faster than ever before.
Far beyond the break-fix model of yesterday, today’s providers must base their success on customer experiences and new consumption expectations. As a result, MSPs will continue to evolve from “IT guys” to specialized and strategic partners going forward.
Evolving beyond break-fix
Over the past two decades, IT has gradually evolved from the break-fix, transaction-based service model to a managed service model. Today, IT service providers take on a more active role in their customers’ success with subscriptions and services at the center of demand.
As the name suggests, the break-fix model is project-based and only requires the providers attention when something is broken. Using this method, an IT solutions provider performs services as needed and bills the customer only for the work done.
While this model can work for some, it’s increasingly out of step with the demands of the modern market. IT service providers under this model often face unpredictable revenue, complicated billing and an overreliance on the client to assign and approve work. Moreover, trying to “do it all” can lead to staff that are generalists and not specialists, resulting in difficulty to build a differentiated brand.
In today’s rapidly changing channel, MSPs must be much more than IT specialists. Instead, customers want true partners who deliver outcomes.
The shift to subscriptions
If the break-fix model focuses on fixing problems, the modern managed service model instead delivers holistic solutions. This model doesn’t hone in on a single issue in the IT infrastructure but rather the IT infrastructure as a whole. Moreover, instead of one-time fixes and one-time payments, managed services are increasingly sold via recurring subscriptions.
Subscriptions are ubiquitous in everyday life as customers routinely prefer to make small, regular payments instead of large, infrequent ones. This logic translates to the channel, marking a boon for providers who can leverage their customer relationships and the power of cloud to intelligently bundle multiple solutions together. For example, IDG and GTDC report that a typical customer counts seven cloud subscriptions and that each $1 of cloud spend creates $5 of service revenue. This presents a huge opportunity for MSPs.
Consumption in this way enables providers to work closely with customers, identify their challenges and proactively solve them. For providers with visibility of their customers’ usage, not only can they bill them accordingly, but they can also anticipate their future needs and cross- and up-sell other solutions.
Rather than merely providing adequate IT services upon request and putting out fires when they arise, providers today take on a far more active role in their customers’ success and enjoy larger profit margins as a result. However, it must be said that merely selling subscription solutions is not enough. The changing landscape for managed services demands that providers are agile enough to capture this once-in-a-lifetime shift.
The mark of modern MSPs
There is an immense opportunity for providers to become channel-first experience builders and ecosystem drivers in this era of super-charged digital transformation. In leveraging their position as strategic customer partners, providers must be able to work with new vendors, maintain an ever-changing product catalog and track usage and billing for complex bundles.
Rising to this challenge depends upon comprehensive digitalization. Namely, optimization and automation will be key for providers to free up time, facilitate partnerships and scale their services businesses more easily.
In the race to recurring revenue, these skills are business critical. The more efficiently that providers can lean upon customer partnerships to expand their product or service offerings—from cybersecurity to cloud infrastructure, application development to the digital workplace—the more opportunities they have to increase annual recurring revenue per customer and their lifetime value in turn.
Other hallmarks of the modern MSP include full visibility of their business, unified systems and streamlined processes for increased efficiency, optimized productivity and enhanced awareness to support decision making, saving time, reducing costs and ultimately driving more revenue.
Rising to the challenge with CloudBlue PSA
Transforming operations, centralizing processes and applying automation to keep up with product demand and service delivery is no easy feat. As the next-generation professional services automation software specifically built for MSPs operating in or moving to the cloud, CloudBlue PSA enables MSPs to modernize their businesses.
For example, CloudBlue PSA can contribute to a better customer experience through advanced finance automation capabilities that simplify product and service billing reconciliation. The platform offers MSPs deeply configurable service desk automation, fully integrated CRM and quotes, and automated invoicing, collections and supplier payments.
Amid today’s reshaped landscape, the new market leaders will be those who eliminate customer hassle and proactively offer creative solutions. It’s up to these trusted advisors—the MSPs of the future—to transform today’s limitations into tomorrow’s opportunities. To learn more about CloudBlue PSA, contact us at PSA@CloudBlue.com.
