HOW TO DEAL WITH A PERFECT

STORM OF DISRUPTION IN THE

MANAGED SERVICES BUSINESS

A personal perspective on the challenges facing the Managed

Services industry and the strategies you can use now to survive
and thrive transformational change
By Mike Cullen, VP Sales, N-able Technologies

ARE YOU READY?

As the Vice President of Sales for SolarWinds N-able,
I travel extensively regularly visiting our Partners and
other Managed Service Providers in major cities across
the US, Canada, UK, Europe, Australia, and New Zealand.
Something Ive noted recently is a growing chorus of
concern. Its not that our Partners are filled with doomand-gloom. Rather, theres a shared feeling that weve
reached a major inflection point in the MSP industry
one characterized by an unusual number of change
agents that will ensure the immediate future is unlikely
to resemble the past. If youre a MSP or IT service
provider, and youre not concerned you probably should
be. Heres why.
Right now, were bracing for more change in the next
two years than the industry has seen in the past
15. Drivers that are creating a perfect storm of
disruption include new competitors, converging
technologies, and IT everywhere.

Change on the scale were anticipating always brings

explosive opportunities and challenges. Whether
you emerge a winner or loser will be defined by how you
respond to both. Thats my purpose in writing this paper:
to share candid insights on the big trends
were seeing.
More importantly, I want to give you the strategies and
action steps SolarWinds N-able is recommending to
ensure our global Partners stay on top of change and
remain the most successful MSPs in the World.
Everything in this paper is based on my direct
experience working our base of 2,500+ global Partners
and an analysis by SolarWinds N-ables senior
management team. This paper will be invaluable if not
essential reading if youre a MSP or IT service provider
targeting SMBs or mid-market customers.
The insights will equip you with practical strategies for
sailing with greater confidence through a perfect storm
of disruption.
Are you ready? Its going to be a wild ride.
So buckle-up and lets get started.

DO YOU HAVE STRATEGIES FOR DEALING

WITH THE TOP DRIVERS OF CHANGE?
In this white paper, I will provide you with insight to the key
drivers impacting Managed Services and give you concrete
strategies for:

Dealing with a new breed of competitor

The way managed services must be delivered

How to attract and sell to new customers

Pricing strategies and negotiable transaction points

Achieving new operational efficiencies

And others

THE BIG DRIVERS OF CHANGE

What are the big trends driving massive change in the
MSP industry? Its an important question.
We always expect change. When we see the following,
we quickly realize that rear view vision will be less and
less useful for predicting the road ahead. Here are the
five big change agents were actively tracking and creating
strategies for:
1. New Competitors and Convergence
2. Commoditization driving price wars
3. Mobility and mobile computing
4. IT Anywhere and on any device
5. The Cloud a new reality in Managed Services
You may think #4, 5, and 6 are one and the same.
Theyre certainly interrelated. In our opinion each is a
separate driver that will likely have a slightly different
impact on how you price your Managed Services, sell to
SMB customers, and deal with new competitors.
Lets tackle each one to create the right context for the
strategies we are recommending to our global Partners
and that you may want to adopt too.

MANAGED SERVICES IS A LOGICAL EXTENSION

FOR MANY COMPANIES WITH DIGITAL
PRODUCTS.
These companies want to leverage their IT expertise
and extend customer relationships to generate
recurring revenue. This convergence has created
a new breed of competitor:
Copier printer companies

Driver #1: New Competitors

& Convergence
Every company in these sectors has a Managed Services
initiative at the Manufacturer or Reseller level.
Heres a startling fact for many individuals outside
the Managed Services industry: top tier MSPs
put between 20 percent and 30 percent operating
income to their bottom line. Thats a good news
bad news story.
The good news is that Managed Services is an incredibly
lucrative, high-margin business characterized by sticky
customer relationships.
The bad news? Not surprisingly, high-margins and
profitability are attracting a lot of attention. Any company
with an installed client base, a digital product line and
any IT savvy is eying Managed Services as a logical
extension of their core business.
Thats why Managed Services has experienced a record
number of mergers and acquisitions over the past
couple of years. And it has attracted a lot of new
competitors from non-traditional areas.
Some are calling this trend convergence: the entry of
companies with digital products in sun set industries
that are looking to extend their relationship with
customers. Managed Services is a logical extension
because many have already invested in IT expertise to
manage their digital products.
As a result, big, well-resourced companies are wading
into the Managed Services space:
More Telcos like British Telecom in the UK
Photocopier companies like Ricoh, Canon, OKI,
Konica, Minolta and many others.

Audio visual companies

Software giants like Microsoft, CA and Dell

Telephony companies

The bottom line: whether you think of this as

convergence or a new breed of competitors, youre
staring at the same thing. More big digital companies
with IT expertise are entering Managed Services. Like
you, theyre attracted by the opportunity to generate
recurring revenue and at great margins. Theyre all
hungrily eyeing your SMB and mid-market customers.
Are you ready?

Every company in these sectors has a Managed

Services initiative at the Manufacturer or Reseller level.

Driver #2: Commoditization

The IT industry is the worst for commoditization.
Managed Services is reaching that stage now driven in
large part by the entry of aggressive new companies that
are productizing their services. Once IT companies start
productizing they commoditize.
That means youll see competitors who will stop selling
on value and start selling on price. How are you going to
justify a fixed fee, managed desktop service at $60 when
a bigger, aggressive competitor offers to provide the
same service for $50 per desktop?
This is the new reality: and the reality is Managed
Services is going to commoditize. For many it already
has. We have seen desktops fall from $60 to $30 Euros
per month in some European marketplaces.

AS AN INDUSTRY PRODUCTIZES
IT COMMODITIZES
Price not value becomes the primary consideration
when choosing a MSP

In many respects its just like the car industry. Do you

remember how every neighborhood once had a corner
garage that did repairs and sold gas? Those garages
would seldom tell you how much a job would cost they
would quote you an hourly rate and you took your
chances with their estimate.
Along came the dealers who saw service as an important
way to extend their customer relationships and add an
important new, ongoing revenue stream to their
business. Sound familiar? Dealers leveraged operational
efficiencies and productized their automotive services.
That led to fixed price, commoditized services for
standard repairs. Customers loved it. They knew
exactly how much their brake job or muffler repair was
going to cost.

How may corner garages do you see these days? Not too
many. Most were crushed because they couldnt compete
with the operational efficiencies offered by dealers. The
same writing is on the wall for Managed Services.
What this means: if you are going to thrive against a
new breed of competitor and the inevitable
commoditization of Managed Services you will need
a strategy for achieving new levels of operational
efficiency.

Driver #3: Mobility

and mobile computing
According to Ciscos Visual Networking Index Global
Mobile Data Traffic Forecast Update1, global mobile
traffic will increase 13-fold by 2017, with more than 10
billion mobile connected devices. Mobile devices are
expected to outnumber people on the planet by the end
of the year. And Wireless data traffic is expected to grow
66 percent a year for the next five years. Those stats
reinforce what you already know. Mobile adoption
continues to grow globally and rapidly.
That growth has created a rare greenfield opportunity
for Managed Services. More and more, smart phones
and tablets are included as part of an overall Managed
Services Agreement. If these devices, often loaded with
sensitive corporate data, are not properly managed and
secured, they pose significant risks to the SMB.
Fortunately recent advancements in RMM technology
have allowed MSPs to extend their Managed Services
contracts to their SMB and mid-market customers. This
could be in support of a COPE strategy Corporate
Owned, Personally Enabled or BYOD Bring Your Own
Device approach.
Whether COPE or BYOD, explosive growth in mobile
means you need to have a competitive and efficient
Mobile Device Management Strategy.
I would take this one step further.

The Cisco Visual Networking Index (VNI) Global Mobile Data Traffic Forecast Update, February 6, 2013
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.html

The future of Managed Service is about mobile

computing management. Managed Services contracts
must extend to include whatever devices people are
using to compute on a laptop, tablet, smart phone,
whatever.
Weve reached a point where the MSP has to stop
thinking about managing the device. Instead, theyre
managing the ability for the end user to compute on any
device of their choice with all the different points of
potential failure in between.
If you think device and application management, you will
be reducing your service to a point solution
a commodity trap. You have to think bigger. You have to
think mobile computing management. That means
monitoring and managing the whole environment.
Today that environment likely includes Office 365, the
Internet, the router, the firewall, the switches in your
SMBs organization. You are monitoring and managing
every single point of contact right up to the mobile
device that the end customer is holding to access their
email, the cloud, the Internet, and various applications.
Its all about seamless mobile computing on a laptop, a
smartphone, a tablet with zero distinction between
these devices. Forget device management. Think
mobile computing to differentiate your services.

Driver #4: IT anywhere

It all started with BYOD and the movement has been
turbo charged by the adoption of one device in
particular: tablets.
In fact, according to Morgan Stanley Research, tablets
are the fastest ramping mobile device in history:
Cumulative tablet shipments in 2010 and 2011 were more
than double the cumulative shipments of any other mobile
device in its first two years2.
Thats an impressive feat when you consider the tablet
category was only just created by Apple in early 2010.
By December 2011, Apple had shipped more iPads than
any single PC vendor.

GONE ARE THE DAYS THAT THE INTERNAL

IT DEPARTMENT OR SERVICE PROVIDER
CAN DICTATE PRODUCT CHOICE
Executives and employees expect or demand choice

Those impressive adoption stats underscore that tablets

have entered the workplace with record breaking speed.
In so doing they have helped accelerate IT anywhere
effectively transforming the Managed Services business.
What does that mean? Gone are the days when the
internal IT department or Service Provider can dictate
product choice. In exchange for working long and often
grueling hours like responding to emails from dawn to
the wee hours of the night everyone is demanding lots
of choice.
Executives and employees alike expect to move
seamlessly from one device to the next from PC to
laptop to smartphone to tablet. MSPs are now
confronted with greater device complexity, more
applications, AND an increasingly empowered workforce
that expects or demands choice: the option to work
on any device, where and when they want.
The new reality is IT anywhere. While this is a direct
extension of mobility, it means Managed Services
contracts need to be more flexible and include more
devices and applications than ever before while
delivering 24/7 Help Desk Support to ensure their
customers end users have the professional assistance
they need, when they need it.

Driver #5: Cloud

The big players are driving everything to the Cloud with
Microsoft leading the charge. Google and Amazon are
right alongside.
The first step by Microsoft was termination of Windows
Small Business Server. With that news, we saw some
MSPs pre-buying Small Business Server or they started
looking for alternatives.

Source: Morgan Stanley Research, Blue Paper, Tablet Landscape Evolution, May 31, 2012

In our view, a locally hosted solution is a dead-end

strategy unless:
A customer cant get a high-speed connection at their
location (cloud based applications demand
a fast connection)
Business critical application software doesnt have
a cloud based option
If you need to maintain ultra-strict control over the
customers data files or adhere to stringent compliance
requirements that a cloud-based solution wont support

STRATEGIES FOR CHANGE

Collectively the five drivers of change are creating a
perfect storm of disruption for MSPs. If you are thinking
its going to be business as usual; you are likely in for
a big surprise.

Implications for your MSP business

We think there are many implications for MSPs including
the following:
MSPs must adapt AND adopt to stay relevant with
these changes

Otherwise, cloud-based solutions are where we are

headed and fast.

MSPs need a cloud and mobile practice to meet new

Uptake on Microsoft Office 365 is massive. According to

some sources, the Home Premium edition of Office 365,
launched in January 2013, signed-up a million customers
within three and a half months faster than many online
services including Facebook.

MSPs will need to automate to establish leverage

This is how Microsoft is taking the industry to the Cloud.

They want all customers adopting cloud computing. And
theyve done a very good end run by educating your SMB
and mid-market customers directly about the price
savings and efficiencies they can realize by adopting a
cloud solution that will cost $5 per employee every
month. Those efficiencies cannot be denied or hidden.
The new reality we face as MSPs is this: cloud-based
solutions are already being aggressively marketed to end
customers. And, every single end user 100 percent of
your customer base is probably already comfortable
with the cloud. Theyve embraced the cloud on a
personal level with applications like iCloud, Dropbox,
Ubuntu, IDrive, SugarSync, Amazon CloudDrive ,
ZipCloud to name a few.
With personal adoption so prevalent and big companies
like Microsoft, Google and Amazon trumpeting the
efficiencies of cloud-based solutions, MSPs need to
quickly follow suit and join the chorus.

technologies and platforms

and scale their business to meet the challenge of
commoditization
MSPs will need leverage these efficiencies to combat
their new competitors

Automation the #1 Key Success Factor

The biggest recommendation we make to our Partners
is automate everything they can as quickly as
they can.

BIG BENEFITS OF AUTOMATION

Scale your business and establish leverage
Increase productivity/employee
Standardize service delivery across the NOC and
Help Desk
Reduce the human factor
Deliver higher and more consistent level of service to
customers
Align support with sales programs
Ensures mundane preventative maintenance occurs

Automation is the use of control systems and information

technologies to reduce operational costs and increase
staff efficiencies in the delivery of IT services.
You need to be a leaner meaner machine to stay in
the Managed Services business. Automation is hands
down the fastest and easiest way to achieve that and
indeed embrace the changes that are transforming the
Managed Services industry.

Fight commoditization
Commoditization is the biggest threat and
challenge faced by traditional, pure-play MSPs. This is
the change driver that is keeping our Partners up at night.
In an ultra-competitive marketplace thats rapidly being
productized by new, bigger, well-resourced competitors,
automation is your secret weapon for guaranteeing
the efficiencies you need to maintain your profitability.
This is particularly true as prices get driven down, as we
fully expect in an increasingly commoditized marketplace.
The only way to compete when your customers demand
lower prices is the ability to deliver your services more
quickly and efficiently.
When you are more efficient, you also gain a significant
other benefit from automation: scalability. You are able
to ramp up the number of devices supported by a
Support Desk employee. Your business may grow but
your headcount stays. Automation drives-up the
productivity and efficiency of each of your technicians
and Help Desk employees; which also drives-up your
revenue per employee.

Demonstrate value to all types of customers

Automation is also the key to profitably addressing the
needs of SMB customers who are operating reactively at
the break-fix, chaotic stage of the market. Automation
allows you to demonstrate value and transition these
customers into proactive, fixed fee contracts.
Automation equips you with a commodity fighting,
fixed-fee at a lower price value proposition.

Automation extends to management

of the cloud
Automation also enables you to deal with the threat of
cloud. Heres why.
Your customers are being told that migrating to cloudbased solutions is easy. Its not. Interfacing with the
cloud requires complex technologies like PowerShell,
Citrix VMWare, HyperV and others. What you need is a
strategy for inoculating your business from these
complex cloud interfaces while delivering to your end
customers the management capability of the cloud.
Again, automation can help.
An automation solution that provides you with preautomated policies based on best IT practices is the
ultimate answer and solution for dealing efficiently with
the complex cloud technologies. Policies are basically
pre-written scripts that perform tasks seamlessly in the
background.
So you dont need to know PowerShell or VMWare or
how to write complicated and usually expensive custom
scripts. All you need to know is the workflow for your
customers then you select a policy and let it run.
Another important consideration when dealing with the
challenge of the cloud is this: your customer will actually
have more points of failure that need to be monitored
and managed in the cloud. In this respect, cloud adds
complexity and drives demand for a trusted MSP.
For example, at the top of the stack you have Office 365,
which needs to be managed or administered: adding,
deleting, changing users. This is complex to do; and no
end user is going to do it on their own. You also have all
the points of failure that sit below this: the Internet, the
firewall, the router, the desktop, etc.
All of that complexity still needs to be managed. But you
are not delivering the capability of interfacing with the
cloud you are delivering the management capability of
the cloud. And with that management comes a much
bigger opportunity to leverage the relationship you
have with your customers and become a Trusted Advisor.

THE N-ABLE AUTOMATION SOLUTION

SolarWinds N-able is delivering the critical automation
features and functionality needed most by MSPs today
with Automation Manager. This is a true efficiency
and productivity enabling breakthrough that automates
over 95 percent of standard IT tasks.

Automation Manager is a proven solution for enabling

you to rapidly scale without adding to your IT infrastructure
and profitably grow your business. Pre-written, bestin-industry policies guarantee that your IT services are
delivered to a consistent service standard and in the
most cost-efficient way possible.
Choose from over 300 pre-built pre-scripted MSP
automation objects

MSP Automation Object Library

Technicians can choose from 100s of prewritten, ready to use Objects to automate
tasks that support IT services in this
example, Systems Management.

Automation Manager:
Is the industrys first and only codeless and
completely customizable automation engine
Ships with a library of over 300 ready to use, prebuilt automation objects and policies that are
uniquely based on best IT practices
Provides a visual drag and drop GUI interface to
create automated workflows that map to your IT
processes without any prior scripting knowledge
Reduces technical complexity, enabling you to
leapfrog technical challenges and easily extend your
managed services to the cloud and mobile users
quickly and efficiently
No need to know granular details about Virtualization
technologies and Cloud services platforms

All objects are based on documented best practices and

can be used to define an automation policy using a
simplified, visual drag-and-drop graphical interface. Each
of these objects takes seconds to select as opposed to
the hours required to write a script for each task. Imagine
how much time your technicians will save and how much
more scalable and profitable your business will become with
this kind of powerful, standards based Automation Engine.

Ships with N-central #1 Rated RMM & MSP

Service Automation Platform
Automation Manager is fully integrated with N-central,
the industrys most flexible and customizable RMM &
MSP Service Automation Platform for delivering profitable,
standards-based Managed Services.

N-central provides MSPs with an award-winning RMM

automation platform for remotely monitoring, managing
and automating the broadest range of IT tasks for any
type of device and delivering managed services to
SMBs in the most scalable and cost effective way
possible. N-central is distinguished by:
A centralized management console single pane of
glass for quick command and control of any device
on premise, mobile or in the cloud
Backed by SolarWinds N-ables industry leading
business support services, including a dedicated
Partner Development Specialist, for enabling an MSP to
ramp-up and go-to-market in the fastest time possible
with new revenue generating services
Includes the industrys only hybrid licensing model
with FREE Essential licenses for demonstrating quick
value to customers and fuelling rapid growth

Commoditization is the net result of new, larger

competitors who are looking to Managed Services as a
way to extend their customer relationships, take
advantage of the meteoric growth in mobile and the
cloud. To do this, these larger well-resourced
competitors are beginning to productize their services
for all channels of delivery and devices and in so
doing rapidly commoditizing Managed Services.
We can see that in near future, if not right now,
Managed Services contracts will be won and lost on the
basis of price, not value.
This is why Automation Manager is a major
breakthrough for the Managed Services industry. For the
first time, MSPs can ensure all technicians deliver
scalable, repeatable IT services to a consistent standard.
Specifically, Automation Manager provides MSPs with
out-of-the-box expertise that enables them to:

Includes optional a-la-carte modules for maximum

flexibility to meet the needs of all types of SMB
customers and achieving 100% market coverage:

Easily automate routine and repetitive IT tasks

Patch Manager (NEW), Mobile Manager, Report

Manager, Remote Control Manager Attended,
Audit Manager, NetFlow Manager, Security
Manager, and Back-Up Manager

Use standardized and documented best processes

Take action now

More than anything, Automation Manager is your secret

weapon in a fight against commoditization. It is a proven
strategy for delivering Managed Services in the most
cost optimized and profitable way possible.

In this paper Ive highlighted five big drivers of global

change in the Managed Services space:
1. New Competitors and Convergence
2. Commoditization driving price wars
3. Mobility and mobile computing
4. IT Anywhere
5. The Cloud a new reality in Managed Services
Individually, each of these drivers poses serious
challenges and opportunities to any MSP. Collectively,
they are a perfect storm of disruption. Of these,
commoditization is arguably the most serious.

Eliminate error prone manual tasks

Free-up technicians for higher value tasks
Deliver industry compliant and consistent results
Achieve faster service delivery across physical and
virtual environments

Automation Manager comes standard with N-central, an

award-winning RMM Automation solution from
SolarWinds N-able. N-central is available as an onpremise software solution or as a hosted subscription
based service from SolarWinds N-able Certified
Resellers.
To learn more about SolarWinds N-able and the game
changing, breakthrough productivity gains that are
being realized by SolarWinds N-able Partners around
the world, visit www.n-able.com.

ABOUT SOLARWINDS N-ABLE

SolarWinds N-able is the global leading provider of complete IT management,
Automation, and MSP business transformation solutions. N-ables awardwinning N-central is the industrys #1 RMM and MSP Service Automation
Platform. N-able has a proven track record of helping MSPs standardize
and automate the setup and delivery of IT services in order to achieve
true scalability. N-central is backed by the most comprehensive business

enablement support services available today and the industrys only

Freemium licensing model. Thousands of MSPs use N-able solutions to
deliver scalable, flexible, profitable managed services to over 100,000 SMBs
worldwide. With offices in North America, the Netherlands and Australia,
N-able is 100% channel-friendly and maintains strategic partnerships with
Microsoft, Intel, IBM, CA, and Cisco among others.

Corporate Headquarters
SolarWinds N-able
450 March Road, 4th Floor
Ottawa, Ontario
K2K 3K2 Canada
Tel: +1 (613) 592-6676
Toll Free: 1-877-655-4689
Fax: +1 (613) 592-224

Australia
Level 9
15 Blue Street
North Sydney
Sydney, New South Wales
2060 Australia
Tel: +61 (0) 2 8412 4905

The Netherlands
Koningin Wilhelminalaan 3
527 LA, Utrecht
Tel: +31 (0) 30 298 5285

Copyright 2015 N-able Technologies Inc.. All rights reserved. This document contains information intended for theexclusive use of N-able Technologies personnel, partners and potential partners.
The information herein is restricted in use and is strictly confidential and subject to change without notice. No part of this document may be altered, reproduced, or transmitted in any form or by any means,
electronic or mechanical, for any purpose, without the express written permission of N-able Technologies.Copyright protection includes, but is not limited to, program code, program documentation, and
material generated from the software product displayed on the screen, such as graphics, icons, screen displays, screen layouts, and buttons. N-able Technologies, N-central and Monitor Manage Optimize
are trademarks or registered trademarks of N-able Technologies International Inc., licensed for use by N-able Technologies, Inc. All other names and trademarks are the property of their respective holders.

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