An MSP can be “up and running” 24×7 with a very small funding committment and have very cost-effective staff available to support their operations exclusively. This options creates a “win-win” for both parties.

Jim

And your points about additional costs — people, training, loss of clients who don’t make the transition — are key considerations I didn’t mention in my original blog post.

We’re always glad when people like you — a truly successful MSP — offer your real-world experiences. As a journalist, I can only write about what I see and hear. But as an MSP, you do a great job of telling our readers what you’ve actually experienced.

Thanks again.

I think the key point here is: There’s more than one way to get into the MSP market … And I don’t want to suggest that any one path is best. Rather, consider all the possible paths before making a move.

1. Ask vendors for trial software that you can test for a few months;
2. Check in with multiple master MSPs to see what platforms they host, how their branding works (and how you can re-brand), what it costs, how you can potentially generate margin, etc.
3. Weigh the master MSP model vs. owning the software and NOC yourself. Do you really have the financial pockets, time and staff to build/manage/maintain a NOC?
4. Partner up with a neighboring MSP. Most of the major platform providers, especially professional services automation software (Autotask, ConnectWise, etc.), are introducing new ways to help MSPs and VARs coordinate outsourcing arrangements among themselves
5. Don’t get locked into ONE mindset. My suggestions above are only a few of the paths you can select.

Becoming an MSP is similar to deciding what type of home or apartment you want: You can rent, you can buy, you can sublease, you can pay all cash, you can find financing.

Don’t let anyone tell you that one model is best. Each MSP/VAR has their own business, finance and tech considerations to weigh.

However, the $100K in question does not necessarily equate to an investment in infrastructure. It could be additional labor and expertise necessary to create a service desk environment. It could be recruiting expenses for the typical high turnover of staff transitioning from a T+M basis to Managed Services. It could also be the loss in revenue from abandoning clients that do not fit your new service model.

The fact is unless your starting a new business, the transition from a traditional T+M line of business to Managed Services (speaking about support and management, not monthly “patching and monitoring”) is going to require a significant capital, management, time, and resource expense. This expense can easily reach over $100K when you factor everything into the equation.

Is it worth it? Absolutely!! Why? Because you wont have a customer base to sell to in a few years if you don’t make the transition. Im sure the fabled buggy whip manufactures were nervous about making the investment needed to change their line of business, I would bet the ones who did survived longer than the ones who didn’t.

Whether working with an Master MSP or other outsourced provider makes sense is dependant on a large number of variables including your long term business plans. size of your customer base, your service model delivery methods, market pricing conditions, etc. If you are not ready to make the transition on your own, then working with a Master MSP maybe the right choice.

We’ve found for our business that when you scale to a certain size it becomes more economical and beneficial for a business to retain its own support staff and delivery of services. If you do choose to go the outsourcing route you can create significant barriers from leaving that model.

What happens to your business when you have 100 clients and you’ve outsourced your service desk? How do you build the expertise internally to deliver the services on your own? How do you wean your business off the provider’s services?

Again, there are many providers that offer excellent solutions to MSPs. I only advise that MSPs think long term about where they want to be and how they will scale their business.

Thanks for keeping a great discussion going Joe! We’re looking forward to the next exchange.

Master MSP’s, like Ingram Micro Seismic, allow VARs to make huge margins while investing very little upfront. Many of the services are “pay-as-you-go” in nature requiring no upfront or forward expenditures.

Anybody arguing that vars should build their own infrastructure and spend hundreds of thousands of dollars are simply not being logical. I completely disagree that the margin opportunity is signficantly larger to build it yourself – the data simply does not exist to support this argument. Furthermore, the expense and potential difficulties to build and maintain individual infrastructures are going to wipe out any theoretical margin advantage anyway.

The fact is, the gear and infrastructure are NOT where the margin is. The margin is in the brand of the VAR and the value-added services and customer support that a VAR can deliver. The total solution that the var can deliver is where they differentiate themselves, keep customers happy, and make their profits.

Name a single efficient market that does not rely on shared infrastructure – telecom, airlines, product distribution, the list goes on. The reason? These markets have figured out that building and duplicating infrastructure is not advantageous and that the margin and differentiation come from a companies brand promise, service quality, and customer experience.

This is a great conversation.

I don’t think there is any question that there are a number of models out there to allow people to “get started” with managed services without having to lay down a significant chunk of change out of the box. As the article very accurately points out, the major issue tends to be on the business side rather than the technical. That is, how do you align your organization behind the new model, and how do you position, price, market and sell your offering. This is the big nut to crack.

Those looking to become MSP’s need to ensure that whatever option they choose, they get the necessary business and technical support — you will need both to succeed.

You may find that the best option is to go with with someone who has a comprehensive business support option, and who offers low entry points via SaaS software soltuions. This provies the critical business support out of the box, the power of a mainstream MSP platform, and the option to upgrade or exit depending on your success.

Aside from the costs savings, the true value proposition from a Master MSP to an MSP is exactly the same as the one for an MSP to an end customer.

“Leverage your internal IT resources (billable engineers) to focus on your business and let us (the MSP or Master MSP) take care of the rest.”

This really comes down to time and focus. If your engineers are focused on supporting your internal infrastructure your customer service will suffer. If they are focused on your customers your infrastructure will suffer.

There are alternatives to spending $100K, such as Master MSPs but you sacrifice gross margins. If you after capturing as much of the revenue stream for yourself as possible then upfront capital is going to be required and depending on the size of your customer base it can hit $100K and higher.

A strategy for some MSPs maybe to start in flexible Master MSP agreements to introduce the service to their base and learn proper service delivery methods and then begin building out their own infrastructure client by client through cash flow investments.