Managed Services for SMBs a greenfield opportunity

Montreal – Until recently, N-able Technologies Inc. founder and president Gavin Garbutt said in his opening address to the company’s Partner Summit Thursday, selling managed services to small and medium businesses has been “a missionary sell.” But that has begun to change. Only 10 to 20 per cent of SMBs are using managed services today, he said, but their interest is growing and for the first time they are approaching resellers asking for managed services.That represents a huge opportunity, Garbutt told CDN, since 52 per cent of all IT spending comes from SMBs, and of the 5.6 million businesses in North America, only 8,700 have more than 1,000 employees.

BSC Solutions Group Ltd., a Toronto-area MSP and N-able partner, has wooed the small business market more actively in the last few years. Bill Boisvenue, BSC’s president, told CDN he once saw businesses with a handful of two computers as too small for his company to serve effectively. But by offering different bundles of services, BSC can now go after those customers, he says – and the company actively pitches to small businesses its ability to give them a competitive boost by providing them the sort of managed services that larger competitors use.

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There is a potential pitfall, though. “Unfortunately,” according to Garbutt, “every VAR says they’re a managed service provider.” In reality, many are primarily just reselling hardware and software and doing none of the monitoring and reporting on their customers’ systems that should be part of true managed services.

If small businesses flock to managed services only to encounter service providers who are mostly talk, CDN asked Garbutt, isn’t there a risk of a backlash when those customers don’t get what they expect? He agreed there is. SMBs need to do their due diligence by checking references and looking for certifications such as those that the MSP Alliance and the Computer Technology Industry Association (CompTIA) provide, he said.

But over time, Garbutt said, a high level of mergers and acquisitions in the MSP business means true MSPs who have well defined, documented management processes and therefore can scale their businesses will snap up the less well-run businesses that, because they have not built reliable services revenue streams, are going cheap.

Garbutt said one of N-able’s partners is aiming for 50 acquisitions this year, and many others have more modest acquisition strategies. The trend has been visible for some months, and “I think it’ll most probably accelerate over the next couple of years,” he said.

During the closing session of the N-able Partner Summit, representatives of N-able partners from four continents painted a generally rosy picture of the business climate facing MSPs.

“We’ve seen phenomenal sales growth in the last year or so,” said Louwki Coetsee, support manager at IT support company Netsurit in South Africa.

Chris Tate, technical director for the British IT support firm Orchid Information Technology, said companies looking to downsize in a tough economy are looking to outsource IT functions to firms like his.

Cutting jobs doesn’t appeal to all customers, though – in fact Bruce Kennedy, founder and managing director of Australian MSP ESP-IT, said it sometimes leads to resistance. “Generally we’ll take on their staff if we need to,” Kennedy said.

Tate said Orchid has found new hires from internal IT departments rarely last because they find it hard to adjust to working with multiple networks, though, so Orchid prefers to hire from competitors.

All the panelists said finding the right people – which means not just technical skills but other qualifications as well – is an ongoing challenge. It’s not always possible to find people with the exact skills you need, said Jim Lippie, president of Thrive Networks, a Lawrence, Mass.-based unit of Staples that provides IT services and consulting, so he prefers to look for “attitude and aptitude.”

Lippie said another concern is increased competition, often from partners seeking to take customers previously served through MSPs and make them direct customers. “Today we have competitors that used to be our partners,” he said. “I think the channel’s getting squeezed.”

In his opening remarks to the summit, Garbutt said two key trends for MSPs are virtualization and the cloud. When he asked his audience how many were doing something with virtualization, almost everyone in the room put up their hands. At the closing panel, Lippie said about 70 per cent of the prospects his company talks to are looking at some sort of cloud offering.

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