Over the last two months, I’ve had the opportunity to interview a plethora of managed service providers (MSPs) and MSP platform vendors across the US, Europe, and Asia. The experience has provided me with an inside view into the fastest-growing technology channel today, but it has also provided me with a clear understanding of the evolutionary path MSPs must take as they attempt to reach a new level of maturity (and profitability).
For those tech vendors hoping to cash in on the budding billion-dollar managed service opportunity, it is critical to first understand where the movement began in order to understand where it is headed. The figure below (from my most recent report, Managed Service Providers, Part 1) highlights the three unique stages of MSP development:
Past (pre-1997): solution provider model. Up until the end of the 1990s, SMBs employed their own internal IT systems, supported by a small IT staff or local consultant. They purchased from and had their IT systems installed by VARs, and got their phone systems from telecommunications providers. An IT solution provider (most often the VAR or consultant) provided reactive break-fix support and maintenance for their hardware and software. For SMBs, this model represented a heavy capital investment (capex) for their IT systems and a heavy operating expense (opex) for labor, all executed on-site.
It seems that during every major shift in the telecommunications, service provider or hosting market there is a string of moves like these as players attempt to capitalize on the change to gain greater market position. And there are plenty of investors caught up in the opportunity who are willing to lend a few bucks. In the dot.com period, through 2000s, we saw major shifts in the service provider landscape as colo/hosting giants were created such as Cable & Wireless and Equinix.
But what does this mean for infrastructure & operations professionals looking to select a hosting or Infrastructure as a Service (IaaS) cloud provider? The key is in determining if 1 + 1 actually equals anything greater than 2.