The managed services profession will not succeed or fail in 2020 based on demand for managed services. Instead, MSPs that adjust their client base in several vital ways will survive the pandemic; they will prosper far into the future as well.
Several periods of "adjustment" have occurred in the professional history of managed services. Y2K, the dot-com bust, September 11 and the 2008-2009 economic crisis all presented unique periods of challenge and, ultimately, opportunity for MSPs. Today is no different.
MSPs in 2020 are experiencing unique challenges globally. Many industries face these challenges, but the opportunities are somewhat distinctive to MSPs if they are willing to adapt and act upon them.
MSPs must pivot in many aspects of their business models. MSPs have three general areas where they can maximize their ability to remain valuable and influential partners for their clients.
MSPs must look for sustainable clients
It is no secret that many business sectors are hurting right now. Travel, hospitality, restaurants and retail are just a few examples. But many business sectors are doing quite well during the pandemic, including healthcare, pharmaceuticals and e-commerce, to name a few.
Reports from many MSPs across the globe indicate that they had a record 2019 and first quarter of 2020. MSPs can still have a very successful 2020 if they adjust their client mixture to include more sustainable customers. In this context, sustainable customers are those organizations that the pandemic has not affected significantly, with their business operations continuing despite the widespread quarantine orders.
Regulated and insulated industries such as healthcare, transportation, government, banking, finance, insurance, legal and pharmaceutical all face ongoing operational status for the time being. These industries have significant IT management and security needs. If the pandemic has negatively affected your MSP practice, start looking at your existing client mixture and begin developing a plan. Many viable industries out there still need outsourced IT management.
Start using risk-based pricing
MSPs take on risk in a variety of ways. One of the ways MSPs are exposed to risk is through their clients. Confused? Don't be.
Clients, particularly small organizations without stable IT networks or effective cyberhygiene practices, contact MSPs to increase their overall security and data privacy practices. This is a good thing.
However, many other organizations do not listen to their MSPs; they continue to practice poor cyberhygiene and do not implement effective IT management policies. Besides the revenue MSPs generate from these types of clients, there can be significant risks associated with managing these environments. The risks coming from clients not abiding by safe cyberhygiene can no longer be ignored. MSPs must adjust their pricing accordingly to encourage safe cyberconduct and minimize risk.
MSPs should expect to demonstrate compliance
It is not enough to be compliant; MSPs need to be able to show compliance. It is no longer enough for MSPs to complete RFPs and other client-provided questionnaires. MSPs are now being asked to demonstrate competency in a number of ways through certifications, examinations and external reviews of their service delivery.
From GDPR, CCPA, cybersecurity maturity model certification (CMMC), data breach notification laws, NIST, ISO and a variety of other standards and regulatory requirements, MSPs are being asked to demonstrate how they deliver their services, not just explain it. While direct regulation of MSPs has not happened and is unlikely (at least in the foreseeable future), MSPs are vital components to many organizations, both in the public and private sector.
Whether it is obtaining a SOC 2 report for U.S. banks, mastering NIST for U.S. federal government contracts, or achieving ISO 27001 for GDPR in Europe, MSPs must proactively demonstrate their competency; it is no longer assumed.
Adaptable MSPs will more easily ride out 2020
2020 will be a transitional year for many organizations, including MSPs. IT service providers that see the changes coming and can adapt their business models will be in an excellent position to thrive throughout the rest of the year and into 2021.
Key takeaways for MSPs
- Seek out customers in verticals least affected by the pandemic. 2020 could be the year to adjust your client mixture.
- Adjust your pricing scheme to accommodate potentially risky client activities. Don't let your existing pricing methodology get you into trouble.
- Prove your cyberhygiene. It's not enough to have it; MSPs need to demonstrate their security methodologies to clients and prospects.
About the author
Charles Weaver is the CEO and co-founder of the International Association of Managed Service Providers (MSPAlliance). Since its inception in 2000, the organization has grown to more than 30,000 members worldwide. Under Weaver's management, MSPAlliance has expanded its reach and influence to include education, standards of conduct and certifications for managed services professionals and companies. Author of the book The Art of Managed Services, Weaver writes and speaks extensively about the managed services industry.