So-called Master MSPs now represent nearly 20 percent of the managed service provider market, according to the ongoing MSPmentor 100 survey. Still, thriving as a Master MSP isn’t easy. Here’s why.
First, a little background. Master MSPs are service providers that host applications for other service providers. I first heard the term about a year ago when I started blogging about Do IT Smarter, a Master MSP in San Diego, Calif.
In many cases, Master MSPs serve small VARs that don’t have the budget, time or training to deploy managed services platforms on their own. But in a growing number of cases, established MSPs round out their product portfolios and leverage point services (such as hosted Exchange Server) from Master MSPs.
Growing Trend, Crowded Market
Roughly 19.4 percent of managed service providers say they are now Master MSPs, according to our ongoing MSPmentor 100 survey.
Admittedly that figure seems a bit inflated to me. Perhaps Master MSPs are more inclined to fill out the survey, since they’ve essentially bet their business on this market and need to get the word out to peer MSPs about their services.
Despite the influx of Master MSPs, I believe their business model faces some challenges:
- Head-to-head Competition: Master MSPs are increasingly competing with one another to find VARs that want hosted services. The cost-per-lead to find those VARs and convert them into customers continues to climb, according to my conversations with two Master MSPs. The recruitment efforts include online marketing, face to face events, online events and extensive travel — all of which demand deep financial pockets.
- Platform Provider Competition: Increasingly, MSP software providers such as N-able and Zenith Infotech offer hosted versions of their applications directly to MSPs, and customers seem quite pleased with that approach.
- Distributor and Vendor Competition: Ingram Micro Seismic, which offers a range of hosted managed services to VARs, has signed up more than 750 partners to leverage Seismic services. And Dell is balancing partner engagements with its own direct MSP sales strategy in Texas and New York.
Despite all the competition, successful MSPs continue to leap into the Master MSP market. The latest example is Network Depot LLC, ranked No. 75 on last year’s MSPmentor 100 list. The company in mid-October told me about their strategy to host Kaseya for other MSPs.
Is there more room for Master MSPs in the market? Or is a shake-out coming as more MSPs jump on the bandwagon? I welcome your thoughts.
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Posted In: Platforms | Software as a Service and Hardware as a Service
Tags: Do IT Smarter | Hosted Managed Services | Ingram Micro Seismic | Master MSP | MSPmentor 100 | Network Depot
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The market is certainly getting crowded for Master MSPs. When we started I knew that we would soon see the distributors competing with us however I have to admit that I was suprised to see the vendors jumping in too. Not so much in offering their soutions as a SaaS model (this is a natural move for them) but more the NOC and Help Desk focused offerings.
I think that the true differentiator of the Master MSP is twofold, 1st off we are MSP’s so we are reselling what we do best, managed services. To contrast a software vendor is best at developing software, not managed services. 2nd is the fact that we are selling OUR solutions not just rebranding someone elses. Again we are reselling what we do best, managed services, not what someone else does best.
Another benefit is the fact that we were once a reseller and made the transition to MSP (before the term MSP was even coined). As such we are uniquely positioned to help new MSP’s develop their solutions. Which is where our true value add comes in.
That being said, there is plenty of room in the market for these different service models. Resellers can now choose from many different offerings and costs structures and determine which best fits what they are trying to accomplish.
Lane: No doubt your real-world experience as a VAR that moved to managed services differentiates your company from many Master MSPs. But I also think we’ll see clearer differentiation between the distributor models, etc. Some are only reselling tools. Others are actually hosting and customizing the tools.
I look forward to hearing more about Do IT Smarter’s ongoing strategy.
20 percent of MSPs may aspire to be Master MSPs. But I bet only about 5 percent or fewer of those companies actually deliver managed services to other VARs.
Lane,
I think you have hit the nail on the head although I would take the liberty to further distinguish what I feel “Master” MSP means especially in contrast to a software vendor. For us, being an MSP is about processes, procedures, audit, change control and delivering Industry focused services. These are not things you will find in any tool. I also believe it will be quite a challenge to take a horizontal approach to building a Master MSP business because it is largely being commoditized, i.e.: who can tell me my disk is full for the lowest price? That’s a game we never intend to play. Even as we approach the Master MSP concept, we know to retain value above the cheapest player we will have to stay focused on industry specific services for our market(s). I’m not sure if there exist a granular definition of a “Master” MSP but if the only requirement is delivering service to other vendors/integrators then it most certainly needs to evolve. I too find 20% of the industry being “Masters” unfathomable? Of the tool sets we use we are the vendors largest customers (top 2 or 3 anyway) and I do not consider us a “Master” yet.
Ralph, Lane: I realize Master MSP doesn’t have a set definition. This industry is a work in progress. But I would add that Master MSPs typically offer a range of customized, hosted services to other VARs.
Are Master MSPs really 20 percent of the MSP market? Perhaps not, especially since sooooo many companies are jumping on the bandwagon and trying to position as MSPs and Master MSPs.
But the “pretenders” will go away as they fail to differentiate.
Joe,
Well said and I agree. To be perfectly fair I’m very tainted to the SMB world so I sort of discount the large “masters” such as Dell, Ingram, etc… I feel they are the commoditized version of a master MSP and make it quite challenging for the VAR to differentiate their services. It will be an interesting year…
Hi Ralph,
You were right on when you stated, “being an MSP is about processes, procedures, audit, change control and delivering Industry focused services. These are not things you will find in any tool.” Over the last few years as my company transitioned into what is now called “Master MSP” this is exactly what our partners were looking for. They were, and still are looking for a Road Map in executing on the Managed Services Business Model which is more about the process, procedure and ability to scale than it is about the particular tools.
When we started, we standardized on a few tools. Now we’ve developed the platform internally to be “vendor agnostic” which allows us to work with any MSP regardless of the tools they’ve chosen. The true “secret sauce” of the Master MSP is the ability to deliver that Road Map to profitability. Profits in Managed Services are in internal efficiency, and that internal efficiency is not gained by any particular tool.
Amy Luby
CEO, MSP Services Network
aluby at mspsn dot com
http://www.mspsn.com