Differentiate or Die: Why MSPs and Hosters Need to Change their Game
I admit, I’ve borrowed the title from an excellent presentation given by Dr. Joseph Williams, Managing Director, Microsoft WW SaaS Channel. He gave a presentation at the recent Microsoft Hosting Summit, and the point was this:
The hosting market is crowded and includes huge players such as Microsoft itself. If you want to maintain a healthy hosted services business, don’t chase the same commodity offerings as everyone else, and especially don’t try to compete with the basic online offerings of Microsoft itself. Instead, compete using one or more of the many ways to differentiate your service.
Just because the market for Managed Services and Hosted Services is growing, that doesn’t guarantee that you can preserve margin. And if all you do is compete on price, it will be a race to the bottom…
The differentiation spectrum
One way to think about service differentiation is along a spectrum. At the low end may be commodity services that have to be offered – such as email or dedicated servers – which help win the basic business. Or perhaps they are just “check mark” requirements the MSP is expected to offer. However these basic services are generally low-priced with low margins.
But as you move along the spectrum to the right, your offerings (as well as sales, support and technology models) will need to shift. Perhaps you begin to offer cloud services. Or perhaps hosted applications. Or even basic hosted desktops. These services can command much higher prices – as they are higher value – but will require you to re-think how you provide them. Rather than offer commodity offerings or customized “bespoke” services you’re accustomed to, higher-value offerings need to be scalable. That means fewer SKUs and a more cookie-cutter approach to sales and set-up. Why? They are inherently more complex at their core, and thus need to be replicable – avoiding risky customization.