Channel Asia and Cisco outline how partners can evolve from resellers into MSPs.
The number of managed service providers (MSPs) in Asia is exploding, as the channel chases new revenue streams through subscription dollars.
So much so that IT services ranks as the leading priority for local partners in 2019, in a channel crammed with competition.
Going forward, partners must adhere to the three core rules of customer engagement to succeed: deep expertise; solutions delivered as-a-service and ease of doing business with.
“Demand for managed services in Asia is high,” observed Clarence Barboza, director of channel sales and partner enablement at Cisco. “Customers are seeking better returns and one way is by not having ownership of technology and leveraging a utility-based model.”
In assessing the regional market, Barboza likened technology consumption to that of utilities such as water, gas and electricity, which operate on a pay-per-use model.
“A few years ago, customers started to recognise that shift with IT consumption,” he explained. “They realised that they don’t have to spend a lot of capital expenditure up-front which has led to customers exploring managed services. We’re seeing demand increase rapidly across the market.”
In echoing Barboza’s observations, Chong-Win Lee – CEO of Asia at Logicalis – acknowledged that enterprise customers are beginning to subscribe to the notion of managed services, albeit under a different guise.
“Perhaps they just don’t know it yet,” said Lee, who was appointed to head regional operations at the technology provider in November 2017. “One good example is in the printing space, managed print services have been in the market for a long time.
“Customers are charged through a consumption model which is usually based on a number of cents per paper, and an engineer comes in to fix any issues. That type of business offering is already in play across Asia which means the concept of managed services has been well accepted.”
Drawing on the evolution of printing as an example, Lee said other areas of technology are also developing into as-a-service offerings, in response to increased adoption from end-users.
“Other technologies are becoming exposed to the same concept,” Lee added. “Customers are starting to look at managed security services, managed network services and desktop-as-a-service.
“We’re seeing a degree of acceptance from customers, backed by an openness to subscription models and managed services. But this is largely a top down decision so it can still depend on whether the leader is well-versed in as-a-service type consumption models.”
According to findings from Gartner, global IT spending is expected to total US$3.76 trillion in 2019, representing an increase of 3.2 per cent from 2018.
Of note to the channel however, IT and communications services will collectively account for US$2.44 trillion of the dollars spent during the next 12 months, signifying a significant shift to on-demand technology purchases.
Specific to managed services, the global market is forecast to reach US$282 billion by 2023, increasing by more than 9.3 per cent from US$180.5 billion in 2018.
Major growth drivers include the need for cloud-based managed services, alongside the “increasing dependence” of organisations on IT assets to enhance business productivity.
Delving deeper, this is backed up by the availability of specialised MSPs who can offer “cost-effective managed services”, while “proactively monitoring IT resources”.
“I see two separate customers,” said Roger Siow, CEO of Syner-G Technologies. “The experienced customers operating at an enterprise level, and then the small to medium business [SMB] customers.
“My main focus is in the SMB space, and most of my customers don’t have the resources to house internal IT staff or departments. They do not even have IT managers in charge of managing the technology systems, which means that we are that go to person.”
Within this market, Siow said the rise of next-generation leaders – brought up on a subscription-based lifestyle – are helping force the issue of change among SMBs, overhauling consumption models in the process.
“Younger people are taking over businesses and they have grown up using a subscription model, therefore they will purchase technology through the same method,” Siow added. “This model makes sense because they will not pay for something to own it, they are comfortable renting that service or technology.
“Of course, the older generation still view this method as more expensive which requires a mindset shift for some areas of the market.
“But overall the trend is clear, customers are definitely looking towards MSPs to build a subscription base, they no longer want to pay for technology up-front.”
According to Phua Chai Chung – deputy director of corporate sales and solutions at M1 – customers are familiar with managed services, but seek increased differentiation from an expanding ecosystem of technology providers available in the market.
“Customers can buy technology direct in some cases, and they can also buy from the competition,” Phua said. “They will compare prices but the conversation is about vale, what value can you provide to your customer today?
“Cisco is leading the charge from a technology perspective, which is great for the overall market, but resellers and system integrators must assess the value they can provide as an MSP.”
Taking the conversation further, Paul Lee – head of sales at Cavu – said a clear distinction must be made between whether customers are buying products or services.
“The key is how you position yourself to the customer,” Lee added. “Customers need to see what you stand for in the market and the offerings you can provide.
“In Singapore especially, CIOs and IT managers have different priorities so it’s crucial to ensure you are aligned to the needs of the customer.”
As traditional box-shifting models erode over time, resellers are finding motivation in building an MSP business.
But for those operating with a blank canvas, in the form of born-in-the-cloud start-ups, an easier transition path awaits.
“When we set up the company, the business was built around recurring revenue,” recalled Andy Waroma, founder of Cloud Comrade, recently acquired by ST Telemedia. “From day one, we decided that we were going to offer managed services.”
Founded in 2014, Cloud Comrade specialises in the delivery of cloud IT services, spanning strategy and design, to deployment, migration and management of IT infrastructure.
Within this environment, the start-up also offers 24/7 monitoring, maintenance, back-up and recovery solutions.
“Now, we didn’t necessarily know what type of managed services we would offer at that point in time, but we knew where the market was heading,” Waroma added. “Our model was around the rule of 78s, in which you receive one dollar in January, two dollars in February and so on, that’s how you build it.”
Having previously worked for multi-national technology vendors and providers, in the form of SAP, Logicalis and Capgemini, Waroma acknowledged the “quarter to quarter” pressure associated with large-scale technology deployments.
“When we set up our own company, we wanted to remove the quarterly pressure so that when the year starts over in January, you already have some money in the bank,” he explained.
“We’ve also differentiated ourselves in the market by building managed services around SAP technology, which has enabled us to chase new types of customers.”
For Sreedhar Kakade – sales director of Asia Pacific at Nimbus Services – key challenges exist from an internal perspective, specifically in the balancing act of automation tools vs. manual processes.
“For example, if you run a secure code review, this can be done manually as well as by using automation tools,” Kakade said. “But again, it depends on the size of the tools.
“Sometimes, we run a combination of manual and automation projects, but this is down to the scope of the project. Automation provides faster results, but manual processes can provide deeper coverage so it’s a balancing act.”
Such a balancing act remains a key source of concern for MSPs, as the channel continues to juggle spiralling internal costs, with flat-lining customer purchases.
As revealed during EDGE 2018 research – delivered by Channel Asia sister publications ARN and Reseller News – to maximise end-user appetite for innovation – and crucially, differentiation – the channel must look from within to instigate change.
In short, partners must specialise at the front-end and automate at the back-end.
“Automation at the back-end has to also be in play for this entire model to work,” said Mark Iles, executive analyst at Tech Research Asia, during EDGE 2018. “Automating processes is key because every customer a partner acquires, should now be seen as a customer for life.
Article from: Channel Asia