Revenues drop for VARs turned MSPs

Increasing numbers of value-added resellers were shifting from break-fix to managed service provider (MSP) models but saw their revenues drop in the process, said ManageProtect managing director Andrew Johnson (pictured). “Everybody says it’s a hit,” he said.  

Some resellers had managed the transition by moving customers to annuity contracts before others. “A lot of them have done it by not going to 100 percent MSP straight away. They run two approaches at the same time,” Johnson said.

Other resellers had dropped the break-fix model in one go. “They definitely take a hit but they are generally better prepared,” Johnson said.  They are better off psychologically because sales only have one thing to sell. And you can argue you’re doing what your customers want.”

MSPs were not looking to SaaS vendors for their revenue, Johnson said. Instead vendors provided local support and training, quality service and removed the need to go on site, which made the product easier to sell.

“What we are selling is making it easier for them,” Johnson said. ManageProtect sold white-label SaaS services through resellers and MSPs, however Johnson said MSPs were making their margins on customer service.

“I don’t know how many of our partners see us as a significant revenue source. That’s where we struggle with mindshare because we will only ever be a single digit source of revenue,” he said. “They make money on MSP agreements and upgrades.”

However they arrived, MSPs took the perspective that the business had to be built to scale, Johnson said. The model was based on a service desk that minimised calls through automation and a focus on the relationship with the customer. “The more successful MSPs are totally trusted by customers to take care of IT,” he said.

MSPs were filling a role that integrators had provided to enterprise for a long time – giving strategic advice on IT investments, Johnson said.

IT used to be just a cost centre but now it’s a differentiator for big business. MSPs do the same for SMBs. They turn IT from a cost centre into a competitive advantage.”