“Arguably, wherever economic downturn or recession, more money than average is spent on technology to accelerate businesses through this recession. And when we look back at previous recessions, IT has always been one of the strongest sectors to really weather a storm.”
A few years ago, the MSP (Managed Service Provider) market was highly fragmented, with many small and mid-sized providers serving local markets. The market was rapidly growing due to the increasing demand for technology services and the rise of cloud computing, but it was also becoming more competitive as larger providers like Amazon Web Services and Microsoft Azure began to offer more comprehensive solutions. Many MSPs were struggling to keep up with the pace of technological change, leading to consolidation in the market as smaller providers were acquired by larger ones.
Today, the MSP market is still highly competitive, but it is also more consolidated than before, with fewer but larger providers dominating the market. This consolidation has been driven by the increasing demand for more comprehensive solutions to address a broader range of client needs. The market has also become more sophisticated, with MSPs offering a wider range of services and technologies, such as managed security and AI-enabled automation.
One of the biggest differences between the MSP market a few years ago and today is the impact of the COVID-19 pandemic. The pandemic has accelerated the adoption of cloud technologies and remote work solutions, leading to increased demand for MSP services. This has created new opportunities for MSPs that are able to adapt to the changing needs of clients and offer innovative solutions that can help clients navigate the new business environment. As the MSP market continues to shift towards cloud-centric services, many MSPs have had to revisit their business models and pricing structures to remain competitive. This has led to the adoption of more flexible and outcome-based pricing models, such as pay-as-you-go or consumption-based pricing, as well as the introduction of managed services for specific cloud platforms. This requirement demands organizational agility to sense and anticipate market changes and be able to seize these opportunities with solutions like Configure, Price, Quote (CPQ) to quickly configure new product offerings and get them to market before your competitors.
The MSP market therefore today is more competitive, sophisticated, and consolidated than it was a few years ago, with new opportunities and challenges for MSPs to succeed in a rapidly evolving market.
While there is no comprehensive list of MSPs that have gone out of business, there have been several high-profile cases in recent years where MSPs have failed. Examples include:
- Nirvanix: Nirvanix was a cloud storage provider that went out of business in 2013. The company had raised over $70 million in funding, but was unable to compete with larger cloud storage providers like Amazon Web Services and Microsoft Azure. Nirvanix’s customers were given only a few weeks to migrate their data to other providers, which caused significant disruption for some customers.
- Data Resolution: Data Resolution was a managed hosting provider that went out of business in 2019. The company had been in business for over 20 years, but was unable to compete with larger cloud providers like Amazon Web Services and Microsoft Azure. Data Resolution’s customers were given only a few days to migrate their data to other providers, which caused significant disruption for some customers.
In each of these cases, the MSPs struggled to compete in a rapidly changing market, which led to declining revenues and ultimately, their demise. Additionally, in some cases, the MSPs may have failed to adequately plan for the possibility of going out of business, which caused significant disruption for their customers.
Other factors that may have contributed to the failure of these companies include:
- Poor Financial Management: MSPs that fail to manage their finances properly may struggle to maintain cash flow, pay their bills, or invest in new technologies. This can lead to bankruptcy or closure.
- Inability to Scale: MSPs that cannot scale their services to meet the growing needs of their clients may lose business to competitors who can provide more comprehensive solutions.
- Lack of Differentiation: MSPs that cannot differentiate themselves from competitors may struggle to attract new clients or retain existing ones.
- Failure to Adapt: MSPs that do not keep up with the latest technological trends or adapt to changing market conditions may become obsolete and lose clients to more innovative competitors.
- Security Breaches: MSPs that fail to prioritize security may experience data breaches that erode client trust and lead to lost business.
- Poor Customer Service: MSPs that do not provide responsive, high-quality customer service may lose clients to competitors who can offer better support.
It’s important to note that these factors are not unique to MSPs and can affect businesses in any industry. However, the nature of MSPs’ services and the importance of security and technical expertise make these factors particularly relevant for MSPs.
CPQ solutions can help MSPs avoid some of the common pitfalls that lead to failure:
- Better Financial Management: CPQ solutions can help MSPs manage their finances more effectively by automating pricing and quoting processes, reducing errors, and providing valuable data insights that can inform pricing strategies and profitability analysis.
- Scalability: CPQ solutions can help MSPs scale their services more easily by enabling complex product and service configurations that can be tailored to meet the specific needs of individual clients.
- Differentiation: CPQ solutions can help MSPs differentiate themselves from competitors by offering unique, customized solutions that cannot be easily replicated by others.
- Adaptation: CPQ solutions can help MSPs keep up with the latest technological trends and adapt to changing market conditions by providing a centralized repository for product and pricing information, enabling quick updates and revisions to service offerings.
- Security: CPQ solutions can help MSPs prioritize security by providing tools for secure data storage and management, as well as enabling quick and accurate pricing and configuration of security-related services.
- Customer Service: CPQ solutions can help MSPs provide better customer service by automating routine tasks, enabling faster response times, and ensuring accurate configurations that meet customers’ needs and expectations.
CPQ solutions like servicePath CPQ+ can help MSPs avoid common pitfalls that lead to failure. It does this by streamlining sales processes, improving operational efficiency, enhancing customer experience, increasing agility, and enabling data-driven decision-making. By implementing servicePath CPQ+, TSPs and MSPs can improve their chances of success and growth in the highly competitive technology services market.
“Resilient MSPs are renowned for their agility as well as their expertise and skill set. The ones I’ve spoken to also tend to have had a history of using innovation to actively guide their clients to adopt new technologies — rather than taking the easy route and supporting the status quo. During this pandemic, these MSPs were better placed to support their clients’ remote work transitions and maintain their business continuity. Existing customers of such MSPs were typically better positioned for such a transition.” – Marius Mihalec, Forbes Technology Council.