MSPs: Change the Economics, Change the Game

MSPs: Change the Economics, Change the Game

By Arti Loftus

How MSPs are Going to Market Faster with Cloud Services by Leveraging Global Cloud Marketplaces

As we head into the last quarter of 2022, MSPs are exploring their growth options, evaluating “everything as a service” (XaaS) and selecting cloud-based solutions they can bring to their existing customer base, while at the same time attracting new customers as the economy begins to recover.

Historically, it has been difficult, risky, and complicated for MSPs to add new services, when they had to decide what new categories to go after, then study vendor alternatives, model the true costs to deliver all the elements including hardware, software, middleware, enterprise licenses, and more – while also studying what their competitors are offering and at what prices and probable margins.

“The role of Product Line Management is continuing to change dramatically,” said Amanda Lee, CVP of Communications and Strategy for Pax8, a pure cloud marketplace valued at over $1 billion. “Building out comprehensive and successful offerings for IT organizations of varying sizes has been expensive for MSPs, who prefer to lead with competitive customer experiences and white glove service”.

“Cloud offerings, often from the same vendors who used to sell equipment and now sell almost everything as a service, enable MSPs to eliminate up-front capex and benefit from the natural flexibility the cloud delivers,” explained Lee, who has been a leader in channel evolution and marketplace dynamics for over a decade. “That said, the transition from traditional ways of developing and rolling out new offers to modern ways, for example white labeling and adding value to XaaS solutions, can be tricky without the right approach and partners.”

Forrester Consulting earlier this year published a Total Economic Impact study (commissioned by Pax8), which examined ways partners are leveraging the cost savings and business benefits enabled by cloud technology. Among its key findings were cost avoidance and higher productivity through unified support and technology automation as part of the “digital transformation” of MSPs and their journey into full cloud offerings, even as those same MSPs were being tapped by their customers to modernize and improve their businesses.

“The pandemic accelerated the digital transformation globally, and end-user spending on public cloud services is expected to exceed $411 billion in 2022,” Lee said. “Pax8 continued to grow at unprecedented rates during this complicated time as we helped our MSP partners immediately respond to new challenges, including supporting remote workers. We learned just how important it is for those partners to capitalize on moving everything to the cloud quickly and re-thinking the operations behind new offerings in ways that simplify how they do business.”

The study took more than six months to conduct and included in-depth interviews with partner organizations spanning from $80 million to $3 million in revenue. Additional findings included a 249% ROI over a three-year period when switching to Pax8’s marketplace plus ops efficiency platform which automates substantial back-office activities.

“The more cloud-based services we added to our marketplace, the easier it was for our MSP partners to package and promote them, all within the context of PSA integration,” Lee said. “This eliminated long and often painful traditional offer development and go-to-market planning and budgeting – suddenly MSPs could discover, procure, and deliver cyber security solutions within days for example, not weeks or months or even years. MSPs who sold no cyber security solutions could instantly add those into their portfolios and go after new business or deepen existing relationships overnight.”

Lee said MSP leaders grasped the concept very quickly and were excited about the potential to reduce costs and risks usually associated with rolling out new offerings, and immediately learned the economic value of operational innovation, with everything from automation in ticket creation to simplification of billing using their own, extended “e-commerce” approach. Meanwhile, Pax8 has expanded its Pax8 Academy offerings, with on-demand learning, instructor-led courses, coaching and peer groups, providing high-quality education and enablement to MSPs.

“The Forrester TEI study quantified the potential savings and value our people, technology, and operations have created in our partners’ businesses and for their end user clients,” Lee said, adding that Pax8 has never been busier meeting with MSP partners to plan for growth in 2023 and beyond.
“With the help of Billy Beane and Jay McBain at Forrester, we were able to quantify and validate the game-changing aspects of our marketplace and platform. We knew we were growing much faster because of the pandemic and need for speed, but this study helped us understand the current challenges MSPs were facing, and why some were succeeding more than others when they leveraged automation and analytics.”

Across productivity, infrastructure, continuity, security, networking, communications, and operational tools, it’s impossible for any one person to be an expert on all the services MSPs must now provide if they wish to build long-lasting relationships with their customers.

“There are many IT partner marketplaces, consoles, and platforms available today, but none are working to connect the customer to the partner to the vendor to the distributor and connect all the business players in the ecosystem the way Pax8 is,” Lee said. “What we learned from the Forrester study, and what we learn every day from interacting with our MSP partners, along with the data our global platform generates is ‘less is more’ – meaning even more value can be created, through lower costs and more efficient operations, when MSPs have a single robust marketplace enhanced with back-office automation and a single-pane-of-glass for reporting, analytics, and business insights.”

With its recent infusion of capital, Pax8 is investing in enriching its platform and monetizing the data created using AI, machine learning and analytics, which Lee says impacts every step of the journey.

“Because we know what MSPs are searching for on our marketplace, we have unique visibility into trends, and can help our partners with that data by saying, for example, cloud contact center solutions are trending with thousands of visitors searching specifically for customer sentiment analysis and robotic process automation’,” Lee said. “We are finding and passing along real-time correlations in a dynamically shifting data set, and those insights will create a continual competitive advantage for MSP leaders who no longer need to guess what the market wants.”

According to MarketandMarkets, the market is projected to grow at a Compound Annual Growth Rate (CAGR) of 7.9% to reach US $354.8 billion by 2026, up from US $42.9 billion in 2021. Why is the managed services market overall growing so quickly?

“Major factors that are expected to drive the growth of the managed services market include lack of skilled IT professionals, rise in demand for secure IT infrastructure during the COVID-19 pandemic, cost and risk reduction, and requirements for regulatory compliance and security,” the analyst firm said.

“There is no question that MSPs have never been in a better position to break all their MRR records,” Lee said. “The real question is how they do that more profitably than ever. Being able to source new services and solutions on a marketplace and immediately bring them to market, with automatic integration into their PSA systems, simply means more services to sell with less guesswork and risk, and the ability to start selling and billing for those services overnight. Rarely in the business world are we given the gift of new business approaches that reduce time to market and risk, lowering costs while generating new revenue streams. Top line and bottom-line growth – substantial growth – is not only possible today, but already happening for tens of thousands of Pax8’s community.”

Arti Loftus is an experienced Information Technology specialist with a demonstrated history of working in the research, writing, and editing industry with many published articles under her belt.

Edited by Erik Linask
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