MSP industry trends that will change your business in 2021
Peter Savereux | 19/01/2021
2020 has been a disruptive year. But change always presents opportunities, and 2021 will be the year where more sustainable foundations are built on the back of these changes. For MSPs, the economy-wide embrace of remote working is a positive shift. It places the smooth operation of network services at the centre of business success, and creates opportunities for MSPs to build closer relationships with their customers.
But many of the changes wrought by 2020 are really the culmination of far longer-term processes — COVID simply accelerated ongoing trends by disrupting the market. Creating more productive customer relationships and selling differentiated and outcome-orientated services are top of the list for 2021 MSP industry trends. However, it should have been a priority all along.
In this post, we are going to take a top-down look at building a more effective plan for the coming year, and suggest some long-term solutions that will set you on the right course for years to come.
Suggested reading: If you want to learn more about commoditisation and the need for differentiation, check out our article Can Connectivity Grow Margin in 2021?
Trend #1: Industry consolidation and commoditisation
The managed services market is expected to reach $329.1 billion by 2025. While the opportunity for growth is huge, the industry is also consolidating. In 2019, more than two-thirds of MSPs were considering being acquired, and nearly 20% were considering making a purchase — pressure from COVID hasn’t changed this trajectory.
Consolidation within a mature market is nothing new, and is part of the overarching commoditisation of networks and connectivity. PwC research suggests that wireless services have become commoditised in 93% of the 50+ markets they studied. Commoditisation increased by 10% between 2006 and 2017, while the North American market experienced an commoditisation increase of 29% within the same period.
What this means for customers is wider and more flexible access to network and cloud services at lower prices. But the result for MSPs is reduced margins — a challenging and ongoing trend that 2021 is a great year to resolve.
How you should respond:
Just because a market is consolidating and commoditised doesn’t mean it’s impossible to differentiate yourself within that context. Differentiating a commodity product can be seen in industries as wide-ranging as smartphones to automobiles.
Creating differentiation requires selling something more than (and in addition to) a commodity. For MSPs, that realistically means focusing on the customer experience and selling an outcome rather than a “box of bits”.
Even if the switches, routers and basic infrastructure you provide are not differentiated from the competition, how you deliver that as a package can be. If you look at this from a broader market perspective, 86% of customers are willing to pay more for a better customer experience — it’s important for MSPs to capture that desire within a B2B context.
You can differentiate your service offerings through:
- Provide customer-facing tools: Give your customers access to user-friendly tools that improve their experience engaging with services, and differentiate the entire process of being your customer — not just the outcomes they are receiving.
- Better communication: Use those customer-facing tools to show your customers that you understand their problems, demonstrate great responsiveness, and update them on the actions you take and the outcomes you help achieve.
- Effective utilisation of insights to add value to customer engagements: Focus conversations around identifying issues and suggesting solutions instead of merely discussing price points. Showing prospects and customers that you care about their business will set you apart from other providers.
You might think you have these tools and processes in place, but make 2021 the year you check whether they’re actually delivering — whether your staff and customers actually use the tools, and whether ‘better communication’ goes beyond a quarterly “How’s things?” phone call.
Pro tip: Standard monitoring tools provide some of the communication and customer-facing capabilities described here, but often fail to deliver the non-technical interface required by business-level staff and customer stakeholders. Keep reading to learn more.
Trend #2: Blurred lines between in-house IT and service providers
The difference between service providers and their customers’ in-house IT is far less distinct than it has been in the past. Internal teams are expected to deliver services onwards within their organisation while being held to account against SLAs and budgetary constraints. In turn, this has motivated closer relationships between in-house IT and service providers, in order to provide the visibility and assurances required to meet those internal expectations.
The worldwide shift to remote work has accelerated the digitalisation of processes and further reduced the need for on-site interventions, as well as increasing the need for network services. On top of that, businesses are continuing to confront an IT skills shortage — another ongoing trend.
Fundamentally, businesses require closer collaboration between service providers and their in-house IT in order to deliver the kind of seamless and cost-effective outcomes they need.
How you should respond:
The need for greater cooperation between in-house IT and service providers is an opportunity. It ties directly into the outcome-orientated approach that you should take in order to combat commoditisation and create a differentiated service. And the customer-facing tools you can deploy to deliver that differentiation will also help you work more closely with in-house teams.
It’s possible to operate as an extension of your customer’s in-house IT team – monitoring their infrastructure and troubleshooting issues before they develop, provided you have collaborative and customer-facing tools that enable:
- Simple monitoring, alerting and reporting
- Shared displays that keep you on the same page
- Price controls and intuitive communication tools
- Transparent and accurate information
- Delivery of non-technical insights
Full disclosure: We’ve spent the last 20+ years at Highlight working with service providers to develop technology able to deliver these types of collaborative outcomes. Highlight provides a single-pane-of-glass that allows both your team and your customer’s IT team to easily view any relevant information and derive valuable insights. Check out the benefits for yourself if you want to learn more.
Trend #3: Commercially-focused insights and upselling
“Big Data” has driven information trends for more than a decade. We’ve all heard quotes like “90% of data has been created in the last two years”. But the future of data analysis won’t be defined by the volumes of data, but by how it’s used.
On its own, data isn’t that valuable. And many people mix up definitions that make it clear why this is. Simply put:
- Data is the information you collect
- Analytics is the uncovering of patterns and trends from data
- Insight is interpreting said patterns and trends to suggest solutions to problems
Fundamentally, the problem that service providers face when using data is the interpretation of data and analytics. Contextualising and understanding that information in order to take action requires knowledge and experience that service providers typically can’t afford in their customers-facing staff — if, indeed, those people even exist. The technical complexity of standard monitoring tools generally aggravates this situation, rather than providing the clarity needed to improve commercial outcomes.
MSPs that are able to harness data as insights will be better placed to use that information to create real outcomes. MSPs that can present those insights in ways that can be understood by business-level staff will be able to use data to drive commercially relevant outcomes in 2021. New data analysis tools will make this outcome increasingly possible for MSPs of all kinds.
How you should respond:
Non-technical insights are key to sales conversations because they are accessible and useful to the people actually having those conversations. They pinpoint inefficiencies and reveal opportunities, paving the way for upselling and cross-selling more services. MSPs that can use insights to drive sales conversations will go on to achieve commercial growth in 2021, and can create a competitive advantage.
A critical component of this is your ability to upsell. MSPs collect huge amounts of information about customers, and making that data available to commercial teams (in a way that they can understand) will illuminate network gaps, opportunities for growth, and deliver the value-added insights required to engage in consultative sales conversations that benefit both you and your customers.
The reality is that commercially-focused insights are a critical part of fighting commoditisation and creating positive customer experiences that differentiate your services. Again, this is something we are passionate about helping service providers deliver, and Highlight is fundamentally built around delivering insights that provide value to both commercial and technical staff.
Pro tip: On average, acquiring a new customer costs five times as much as keeping an existing one, and the chance of closing a deal with an existing customer is significantly higher.
2021 will be defined by using information more effectively
The future of the industry is all about using information effectively. While competitors struggle with commoditisation, you can overcome it by creating a differentiated customer experience, acting as a trustworthy extension of your customers’ IT teams, providing commercially-focused insights, and using the right tools to make big data accessible.
Taking advantage of these MSP industry trends will help you create an outstanding customer journey, from sales and onboarding to service and support – thus setting yourself up for commercial success.
The improved use of information by MSPs to drive more effective customer relationships is close to our heart. We’ve been working with MSPs for more than 20 years to help them win and serve customers better. Our tools help you provide shared visibility, relevant insights, and an overall differentiated customer experience so you can achieve commercial growth in 2021 and beyond. Get in touch if you want help planning a sustainable and differentiated future.