How To Navigate The New MSP Landscape

With Dell's acquisition of SilverBack Technologies and Insight Enterprises' purchase of Calence, two massive, multibillion-dollar competitors have entered the MSP space. Each brings marketing resources, customer reach and vendor influence many smaller channel companies that have bet their businesses on the MSP model simply can't touch.

It's a scenario that the smaller MSPs say they have no choice but to adjust to because the days of making good margins on simple monitoring and patch-management services are over. The introduction of new, large competitors is bound to lead to the commoditization of some services that have been their lifeblood.

"We sit around the table and ask what can we do to keep our services from being commodities," said Wes Herschberger, CEO of MapleTronics Computers, a Goshen, Ind.-based MSP.

The Lay Of The Land
In some respects, MSPs have had a greenfield for offering managed services for the past couple of years. There have been challenges getting customers to buy into the model, but the market itself was fragmented enough that small, nimble players could gain first-mover advantage. There simply weren't many companies offering managed services on a national level and the small guy prevailed.

Today, there still aren't many national players, but the investments that Dell, Insight (Tempe, Ariz.), and others are now making indicate that those companies will be in the business for the long haul and small MSPs have a clear choice in front of them: adapt or die.

Both Dell and Insight have spent the past few months formulating their go-to-market strategies, keeping details--and pricing--close to their vests.

What we do know is that Calence has made millions of dollars in investments in systems, processes and compliance. And now, with access to Insight's 30,000 customers, "The sky's the limit," said Mike Fong, CEO of the $300 million networking specialist. The plan, said Fong, is to be the No. 1 global pure networking VAR with a managed services practice.

Initially, an Insight-Calence merger has only been able to offer networked managed services. But both Fong and Insight CEO Rich Fennessy have said they plan to expand their services. "We have to be rigorous about the best opportunities and go after them," Fong said.

Fennessy said Calence, Tempe, Ariz., has about 120 employees focused on managed services and that Insight can now provide those services to its existing base of 30,000 customers. Calence has 1,500 clients, Fennessy said. He could not say how many clients Calence provides managed services for, but he said the company manages 25,000 nodes.

Insight isn't all that small MSPs have to worry about. Dell is now looking to integrate its varied offerings into a unified managed services strategy after making three acquisitions in three months: Everdream, Fremont, Calif., SilverBack and MessageOne Inc., Austin, Texas. If history holds true, it appears Dell will be as competitive in services as it has been in products.

"I would tell you that our value proposition is going to get more aggressive," said Raj Kushwaha, vice president of services at Dell. Kushwaha offered a glimpse of how Dell's services initiative may look: Staying true to its heritage of letting customers build their own PCs, Dell plans to let customers pick and choose which services they want, he said.

"They will be able to pick from a menu of offerings. If I want antivirus and I want the technology to monitor printers and cartridges, and e-mail continuity, but those are the only three things I want, I can do that. The platform will be integrated as a configurable set of SaaS services that customers and partners can choose from," he said.

The Round Rock, Texas-based company's acquisitions have been tactical in targeting the SMB market where VARs play, wrote Lindy Hanson, senior analyst at Technology Business Research Inc., Hampton, N.H., in an e-mail. "Dell has an advantage in serving the SMB space vs. its numerous services competitors, including Accenture, HP Services and IBM Global Services, who tend to focus on larger engagements," Hanson wrote. "Once Dell has built out its portfolio and successfully penetrated the SMB market, we expect it to move up the value chain to offer similar services to its installed base of enterprise clients."

Small VARs and MSPs will face additional challenges competing with larger companies broadening their portfolios with new technologies and new services, Fong said, adding that he expects more managed services acquisitions from larger companies, because it's difficult to build the business from scratch.

"Managed services matters," he said. "You better get in quickly because there's going to be more competition from the Big Boys."

Next: Pick Your Path