In previous blogs, we have explored a number of themes relating to the impact of digitalization on IT. Here, we turn our attention to specific industries within the IT sphere – service providers and vendors. These businesses, including managed service providers (MSPs), third-party maintenance providers (TPMs) and value-added resellers (VARs), are all experiencing increased demand, and this is forecast to continue for the next few years:
- Annual MSP growth is 11%, and by 2022 the market will be worth $258bn.
- Between 2017 and 2020, TPMs will experience growth of 35%.
- Against overall IT market growth of just 0.2% and 1.9% in 2016 and 2017, VARs in Europe experienced average growth of 9.44% during the same period.
However, these statistics only tell half the story. That a business can match this demand with growth of their own is not assured, and many such companies are at a crossroads in their business model. Why are these businesses at a crossroads, though? Why is it that these industries, which are facing so much potential business growth, also face such vulnerability and uncertainty? A business’ ability to maintain competitiveness and take advantage of the growth in demand is dependent upon how they overcome the vulnerabilities and uncertainties that hide within their existing business models.
Essentially, the demand for MSPs, TPMs and VARs is growing. However, the demand can only be met by those providers and resellers that move away from the traditionally reactive or incomplete service business model, and adapt to the new data paradigm that now determines business success. Quality and quantity of data will give businesses better insights and the ability to make better decisions, faster. Every decision and action must be steeped in data – in the age of data, there is no space for hunches or instinctive decisions. At the heart of this evolution is the ultimate source of data, the network.
Of course, MSPs, TPMs and VARs are all separate industries with their own peculiarities, but in this blog series I will be discussing the issues suffered and competitive advantages available in the areas commonly shared amongst these specific industries. It will be most productive to discuss the problems being faced in respect of what these businesses are seeking to achieve, because these are the circumstances in which such problems are found.
Here in Part 1, we will begin by considering the movement of these industries from reactive to proactive outlooks, and the contribution that network analytics can make to this process.
Reactive break/fix to proactive advisor
Prevent issues becoming business problems At the most basic level, across all IT environments and business models, is the desire to prevent issues from escalating into business problems. Service providers of all types have traditionally delivered remedial offerings under the break/fix model – something breaks, and they then fix it – but it is no longer enough to simply react to hardware issues. Regardless of how quickly vendors such as MSPs or TPMs may react to a reported fault, it is firstly human nature and secondly essential for business that customers will always want action faster.
Across small to large businesses, network downtime costs the business an average of $8,851.
Ponemon Institute, Cost of Data Center Outages (2016)
It is important to remember that MTTR (mean time to repair) can be influenced by both customer and vendor. It might have taken the customer reporting the issue minutes, hours or even days to notice the problem, especially if there is no alerting system to flag such faults. Or, the vendor might take a while to source the appropriate replacements or engineers. Either way, time is money, and the longer a fault exists, the greater the impact on end-user experience – which affects the customer’s income and the vendor’s reputation.
Delivering a more comprehensive service The key driver in this shift from reactive to proactive offerings has been the desire – and necessity – to deliver a more comprehensive service to the customer. This is reflected in the growth of VARs as described above, and the examples set by a number of TPMs that are branching out into service management. These businesses are beginning to harness analytical insights to maximize uptime and enhance their traditional hardware support. Even MSPs, which by definition are already providing services beyond traditional break/fix models, have not fully mastered this delivery yet and are looking to expand their own offerings. As individual sales and single-instance project work is declining, half of businesses expect their managed services to undergo high growth and comprise ¾ or more of total annual revenue in 2018, with another 45% expecting it to comprise half or more.
Tellingly, however, the percentage of MSPs citing the desire to upsell to existing customers doubled from 30% in 2012 to 60% in 2016. This means that nearly half of MSPs do not yet have plans for comprehensive service provision, leaving a huge gap in a market worth billions of dollars per year. Businesses cannot afford to leave such gaps in a world that demands continuous, complete and always-on service. With the current growth in these industries, if one vendor cannot provide all that a customer is looking for, then there is sure to be another vendor coming along who can.
Service outages cost more than just money. Brand reputation, customer loyalty and continuing business are all threatened when there is an interruption to service.
Meeting SLAs The service-level agreement (SLA) is at the heart of the services relationship between provider and their customer. Effective utilization of network analytics will not only give providers and customers understanding of networks at the component level, but also at a services level. True analytics means enabling the right people to see both the cogs that make up a business service, as well as the impact these cogs have on business outcomes.
Alongside MTTR, businesses will then be able to measure MTRS (mean time to restore service), which is arguably a better measurement for issues relating to availability and change management, because it encompasses all aspects of service restoration and not just a single element. Without a service-level approach, providers might see an alert or fault and feel it needs to be fixed immediately on behalf of their customer. This could stretch resources, especially if the provider is catering for large numbers of other customers, all with their own alerts. However, understanding the effect this fault has on service provision can help providers make a more measured and appropriate assessment of when fixes and repairs can be made.
An emphasis upon service management is becoming ever more important as customers no longer look just for a provider, but also a business partner. This is as beneficial to the vendor as it is to the customer – the vendor creates a source of recurring revenue, and the customer receives service tailored to their business’ needs. Not only can network monitoring platforms provide customers with the full scope of their network infrastructure, but network analytics solutions enable vendors to offer opportunities for future planning, such as capacity optimization. These opportunities would not be possible without an overview of exactly how the network’s operation impacts on the business. Such functionality can only help vendors demonstrate their commitment to and secure a long term relationship with their customers. It is as much an investment in the customer’s future as it is for the vendor itself.
Check out Part 2 of the series to catch up on how network analytics can help service providers unite the big data ecosystem.
 Managed Services Market 2017 – Global forecast to 2022 (2017)
 Gartner, Market Guide for Data Center and Network Third-Party Hardware Maintenance (2017)
 IT Europa, Solution VARs in Europe – The Top 1000 (2017)
 Comptia, 5th Annual Trends in Managed Services (2017)
 Comptia, 5th Annual Trends in Managed Services (2017)