Many MSPs are in this profession by choice. But as the technology and the channel evolve, non-MSPs have no choice but to consider moving into managed services.

VARs in particular are in the hot seat. With a major focus on hardware, albeit buttressed by vertical market software or other specialization, and installation and set up, VARs are easy pickings for large vendors looking to broaden their direct base. VARs increasingly walk into a client only to find that HP or Dell were just there.

Moore’s Law also plays a role. The law by a former Intel computer scientist posits that processor density will double every 18 months, which means speed increases by that same multiple. This is precisely what has turned computer hardware into an ever cheaper commodity relative to power. The same dynamic is pushing storage prices down and capacity up with similar vigor. The point is, it is exceeding difficult to make money on hardware – unless you are Dell or HP and even then it is difficult.

Then There’s the Cloud

If hardware pricing pressures weren’t bad enough, how about that cloud? A huge swath of IT computing has and is moving from on-premises to the cloud. Ironically this move is being made despite the fact that the price of on-premises gear has been plummeting for years. But those prices aren’t the issue. It costs far more to manage hardware than it does to buy it.

With the cloud, much of that burden is lifted. And that leaves hardware-centric VARs in the lurch.

Time to Stop Holding Onto the Past

Commodity hardware and the cloud are a double whammy, clobbering the old-style VAR business model.

Times are a changing. The way forward isn’t just the vast expanse of the cloud, but offering services that meet IT demands with precision and utterly lift the burden of dealing with minutia. That way forward is managed services.

The Way Forward

VARs don't have to shift their entire business model to managed services. The trick is the blend the best of the current value added reselling with what fits your business and goals as far as managed services.

The move isn't just based on shifting technology. There is a shifting market as well and MSPs are on the move.

In 2011, there were 84,000 MSPs around the world, representing a market worth of (US) $75 billion. By last year that grew to 134,000 MSPs and a market round about (US) $144 billion. Meanwhile MSP organizations themselves grew, from an average number of employees in 2001 of 4.7 to 16.2 last year. Not too shabby.

This is a great place for an IT solution provider to be.

More MSP Advantages

The MSP model is quite different from the VAR model, and at the same time utterly complimentary. You could look at MSP as being the natural evolution of a VAR. The beauty is if you migrate from a VAR to an MSP, you'll make more money from managing what you or others helped install. This could include hundreds of end points, dozens of servers, the internal network and the WAN, and even a SAN. And since you are deeply trusted, you'll be the one to move this infrastructure forward.

Recurring revenue versus constant on-offs: Because most MSP businesses are based on services, however, there is a shift to recurring revenue, which safeguards your business and gives you confidence that money will keep rolling in. Once you are offering clients services, and they are satisfied and trust you, they will be interested in new services. In fact, in 2001 MSPs offered each client on average 1.5 services. By last year that more than doubled to 3.7.

Better margins: Margins on hardware are razor thin. In contrast, services are based on software and the cloud. At the core of most services is a Remote Monitoring and Management (RMM) solution such as that offered by Pulseway. This solution lets a single technician monitor, control, manage and fix dozens and dozens of end points per day. This is a highly efficient way to conduct the business of IT. Some experts believe gross margins can increase some 70% with a successful move to managed services.

From a central point an RMM can update systems, install patches, insure anti-malware is up to date, and proactively find problems and fix them before they become critical issues.

In the case of Pulseway, all this is done from a mobile platform, be it a smart phone or tablet. This greatly increases admin/technician efficiency and boosts margins.

Making the MSP Move

Moving to managed services is a complex but worthwhile endeavor. First, or course, you have to want to do it first. Next you have to rejigger four elements:

• Technology
• Business model
• Sales
• Personnel

Let's take one at a time.

Technology: An MSP uses specialized solutions to serve multiple clients simultaneously. We already mention the RMM being the core technology. That and other solutions must offer automation so your technicians don't have to perform every procedure manually. This automation is what makes managed services possible and efficient enough to support high profitability.

Business model: VARs are driven by large infrequent payments. Land a great deal, get the job done, and the money rolls in. The majority of MSP income is recurring revenue and the top metric here is Monthly Recurring Revenue (MRR). The more of this you have, the better off you are. And the more clients there are in the mix, the more you are protected from losing a handful of key clients. Sales: Just the business model changes, so must your sales organization, training and compensation plan. Under the new order there aren't as many large bonuses based upon those frequent deals but smaller commissions based upon smaller but far more regular revenue streams.

And your sales force has to evangelize services over products. This sell is all about long term value, not a short term infrastructure revamp.

Let Pulseway be your Technology Guide to MSP Stardom

The Pulseway RMM is a comprehensive multi-platform tool that supports Windows, Mac and Linux – plus applications that use the monitoring API.

With Pulseway, you can get network performance, system resources real time status, logged in users, and get Windows updates. You can restart systems and services, control running processes, and apply patches and critical updates. Patch management also includes support for Windows Server Update Services (WSS) so you can patch servers from your mobile device.

With Pulseway, admins will be the first to know of problems because their watch, phone or tablet will tell them. This way alerts that indicate a possible system failure can be dealt with immediately. Users can also access the Remote Desktop to control and fix machines from afar.

For auditing, such as in the case of compliance, you can run forensics and keep complete audit trails.

Meanwhile you can manage passwords such as resetting passwords for groups of users, or disable accounts.

Find out more about Mobile RMM here.