It’s All About Packaging

By Al Brisard

Managed service providers have been diversifying over the last several years as their legacy business of IT equipment sales and support has become commoditized and revenues and margins have declined. To counter this trend, MSPs have begun providing localized high quality cloud services such as security, storage, disaster recovery and application management to their enterprise customers. But rather than going into partnership with a telecommunications carrier and providing their customers a package of both the network and cloud services, MSPs, in general, have chosen to avoid dealing with the carriers whom they often regard as too difficult to deal with. Instead, MSPs currently enable access to their cloud services at customer locations over the customer’s existing high speed network provided by a carrier.

This approach has worked fairly well up until now, but that is changing and MSPs are increasingly being shut out of IT services opportunities. The reason: recent carrier initiatives.

Not unlike the MSP legacy business, carrier legacy business of wireline services has declined significantly over the last couple of years with the decline in POTs lines and traditional trunking. In order to replace their lost wireline revenues, carriers have turned to the cloud, and are building out large data centers and offering cloud services such as business continuity, disaster recovery, storage, application management, and more – services similar to those offered by the MSPs but packaged with the carriers’ own high speed networks.

There are several advantages to the carrier packages for end customers. The carrier has more capital than the average MSP and is in an excellent position to build out robust data centers in scale. Cloud services will be optimized to run over the carrier’s network and customers can be assured of “five-nines” reliability of the network. By bundling cloud services with their networks, carriers can afford to offer attractive pricing options and single source billing. And carrier sales representatives can address all these points to the customer at the time of initial purchase or renewal, effectively doing an end run around any embedded MSP representative.

Clearly an overlap is occurring with MSPs creating cloud services to be run over customer high speed networks and carriers building out their own MSP services. However, with carriers starting to build the cloud and offering IT cloud services, they are definitely becoming a force to contend with in the MSP market. And if MSPs remain reluctant to package the network service as part of their packages to enterprise customers, their customer base will become highly vulnerable to the carriers who come with turnkey alternatives.

The enterprise customer is best served when they have choices from both MSPs and carriers.   Then it comes down to price which is where packaging becomes so critical. Carriers have been masters of this over the past several years, and it is time for MSPs to meet the needs of the market and include the network service elements as part of their packages. I am sure the wholesale divisions of the carriers would be happy to take their call.

Al Brisard is vice president of marketing and business development at Vertek Corp., a leading provider of end-to-end business process outsourcing, business consulting and managed business assurance offerings that allow communication providers to reduce costs, improve customer experiences, grow revenue and ultimately improve profitability. Contact him at: abrisard@vertek.com .