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3 Business Challenges that Managed Service Providers Face in 2019

Posted by Geraldine Hunt on Mon, Jan 14th, 2019

Being in business for yourself isn’t easy.  If it were, everyone would do it.  MSPs provide a valuable service to their customers.  Oftentimes, smaller organizations don't have access to high level IT personnel, nor have use of advanced enterprise equipment if it weren’t for MSPs.  There is a need in the market place for managed services, however, the opportunity is usually fused with challenges, and MSPs face some distinct challenges in 2019.

The Migration to the Cloud Will Continue

According to Gartner, “Cloud-first and even cloud-only, is replacing the defensive no-cloud stance that once dominated large providers in recent years.”  Says one Gartner vice president, “More leading-edge IT capabilities will be available only in the cloud, forcing reluctant organizations closer to cloud adaption.”   This cloud-first mentality demonstrated by larger organizations eventually trickles down to smaller organizations.

For those MSPs that built successful businesses implementing or hosting computing infrastructure for their clients, this sudden interest in the cloud is potentially disruptive.  The first concern, of course, is how does an MSP make money reselling and supporting cloud services?  Those MSPs that have seen their customers migrate from the traditional hosted Exchange model to Office 365, for example, have found that there is little margin in reselling O365 services.  The truth is though that the cloud is where the money is going.  A recent report by IDC indicates that global spending on public cloud services and infrastructure is forecast to reach $266 billion in 2021.  The cloud computing market overall is expected to eclipse a compound annual growth rate of 21 percent.  The cloud is not going away.

MSPs are incorporating a Cloud MSP model into their service portfolio

A cloud-first world may bring distinct challenges; it also brings forth opportunity.  The cloud is a vast wilderness of service options that a typical small or medium sized business owner does not have time to explore.  As a result, SMBs are seeking experts in cloud technology who know how to navigate through the ever-expanding maze of cloud security technologies.  In order to take advantage of this opportunity, many MSPs are incorporating a Cloud MSP model into their service portfolio.  A cloud MSP provides guidance to help customers maneuver through the cloud, distinguishing between what offers true value, and what is just noise. 

If your customers are now thinking that the cloud is the way to go, then you need to be able to offer cloud services including cloud-based email and web security.  This means you must establish relationships with cloud vendors.  When seeking a cloud partner, you can’t just think about what is best for your customers, you have to partner with a company that embraces MSPs and understands their need to make money as well.

At TitanHQ we have been building relationships with MSPs since 1999 and currently partner with over 1,500 MSPs across the globe.  For TitanHQ, MSP’s are a focal point for our company.  Our dedication to serving the MSP sector culminated in a market strategy called the MSP Alliance Program that serves the needs of OEM, ISP and MSP partners.  At TitanHQ, we welcome feedback from our MSP partners - as a company we use this feedback to further develop our services specifically for MSPs.

Hacking and Nation State Threats Targeting MSPs

The Department of Homeland Security publishes warnings and alerts perpetually throughout the year to caution citizens and organizations about discovered threats.  Just last October, the United States Readiness Team, a division of DHS, released Alert (TA18-266B).  This warning concerns advanced persistent threat activity that specifically targets Managed Service Providers.  Hacking organizations are pursuing MSPs in order to leverage their networks and access their clients.  By successfully compromising a single MSP, they hope to laterally move throughout the networks of their customer base and steal data and intellectual property. Some of the recommendations of US-CERT include:

  • Ensure MSP accounts are not assigned to administrator groups
  • Restrict MSP accounts to only the systems they manage
  • Use service accounts for MSP agents and services
  • Separate internal networks by function, location, and risk profile
  • Configure and enable private Virtual Local Area Networks (VLANs)
  • Restrict VPN traffic to and from MSP and update VPN authentication certificates annually

Another important step is to protect your network with web and email filtering as part of your multi-layered security strategy. TitanHQ offers cloud solutions for both of these security necessities.  As an MSP, you can protect yourself and all of your clients from malware and malicious code.  What’s more, we allow custom branding of our products so that you can proudly get all the credit for the security you are providing your customers.

MSP Margin Erosion

If you are an MSP and feel your margins are shrinking, you aren’t alone.  A recent study shows that while new revenue for MSP services has actually risen by 42 percent, profit margins have shrunk by 30 percent.  Some of this is because MSPs have to expand their portfolio of services, while still relying on their former pricing structures.  Some of it has to do with choosing the wrong cloud service partners. 

As an MSP you need to partner with cloud service vendors that price their solutions with you in mind.  Providing essential IT support and security services is still profitable, you just need to readjust your businesses in sync with the digital transformation taking place across the globe.

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