In 2000, managed services was introduced to the small and medium business (SMB) solution provider community and has since seen increasing adoption as a means to increase profitability, revenue, cashfl
April 3, 2007 (Press Release) --
An Alternative to “Do-it-Yourself” Managed Services
In 2000, managed services was introduced to the small and medium business (SMB) solution provider community and has since seen increasing adoption as a means to increase profitability, revenue, cashflow and ultimately business value. As easy as this statement is to make, achieving on the promises of managed services has been much more elusive.
Fast forward to 2007, and much of what has been recently discussed as new to managed services by the various vendors, consultants and now even distributors is in fact variations of the old, “Do-it-Yourself” programs that have been in practice for several years. Even the latest trend of providing better means to consume MSP technology, like software-as-a-service, basically reduces the impacts of failure, but does nothing to increase the probability of success.
A critical oversight by many small solution providers (under $2M in revenue) embarking on managed services is the realization that this represents a start-up business initiative. How many times have you heard a technician state they can build a NOC or salesperson say they can sell managed services?
If it was only that easy! First, they need to understand that the average rate of start-up business success is less then 20%, which would be a reasonable estimate of the MSP market today. Secondly the fact that the SMB market (5-100 users) is the most difficult segment to target; requiring a sophisticated business plan, particularly in light of the emerging utility service model to address technology over-spending and under-utilization by businesses today.
So, if 8 in 10 MSPs are failing and there are no new channel initiatives or models to spark any improvement to this rate of success, what are the alternatives?
One new alternative for solution providers is the affiliate franchising model. Affiliate franchising occurs when an existing business decides to partner with a franchised business to take advantage of the brand and proven operating system to offer a complimentary, more complex set of services. Jeff Elgin’s recent article in Entrepreneur.com entitled “Adding a Franchise to Your Existing Business” discusses the rising trend of affiliate franchising. He cites Radio Shack® as an example of this model, whereby business owners are recruited on the idea of synergistic expansion within a current successful retail operation.
What are some of the key components of the affiliate franchise model for managed services versus the traditional view of IT service franchises by the channel?
• Branding – Critically important to the channel, the affiliate model provides the best of both worlds with both the existing and franchised business brands co-existing. This is not unlike how solution providers have been traditionally associated with a key vendor’s brand.
• Territory – Exclusive market with all marketing and sales activities (local and national) driven to the territory ow
In 2000, managed services was introduced to the small and medium business (SMB) solution provider community and has since seen increasing adoption as a means to increase profitability, revenue, cashflow and ultimately business value. As easy as this statement is to make, achieving on the promises of managed services has been much more elusive.
Fast forward to 2007, and much of what has been recently discussed as new to managed services by the various vendors, consultants and now even distributors is in fact variations of the old, “Do-it-Yourself” programs that have been in practice for several years. Even the latest trend of providing better means to consume MSP technology, like software-as-a-service, basically reduces the impacts of failure, but does nothing to increase the probability of success.
A critical oversight by many small solution providers (under $2M in revenue) embarking on managed services is the realization that this represents a start-up business initiative. How many times have you heard a technician state they can build a NOC or salesperson say they can sell managed services?
If it was only that easy! First, they need to understand that the average rate of start-up business success is less then 20%, which would be a reasonable estimate of the MSP market today. Secondly the fact that the SMB market (5-100 users) is the most difficult segment to target; requiring a sophisticated business plan, particularly in light of the emerging utility service model to address technology over-spending and under-utilization by businesses today.
So, if 8 in 10 MSPs are failing and there are no new channel initiatives or models to spark any improvement to this rate of success, what are the alternatives?
One new alternative for solution providers is the affiliate franchising model. Affiliate franchising occurs when an existing business decides to partner with a franchised business to take advantage of the brand and proven operating system to offer a complimentary, more complex set of services. Jeff Elgin’s recent article in Entrepreneur.com entitled “Adding a Franchise to Your Existing Business” discusses the rising trend of affiliate franchising. He cites Radio Shack® as an example of this model, whereby business owners are recruited on the idea of synergistic expansion within a current successful retail operation.
What are some of the key components of the affiliate franchise model for managed services versus the traditional view of IT service franchises by the channel?
• Branding – Critically important to the channel, the affiliate model provides the best of both worlds with both the existing and franchised business brands co-existing. This is not unlike how solution providers have been traditionally associated with a key vendor’s brand.
• Territory – Exclusive market with all marketing and sales activities (local and national) driven to the territory ow
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