MSPs – Who Are your Competitors?

April 3, 2011

Business Development

competition image | MSPs – Who Are Your Competitors?

I have been helping Managed Service Providers (MSPs) for several years now. MSPs represent the best source for small business IT service out there. The model of combining automation, remote monitoring, and management tools while being the outsourced IT department for small businesses is powerful. As the definition of what a small business is today evolves to include many “large” companies with few employees IT needs will outpace the ability to support them.  MSPs must close the gap and provide much more than an alternative to self-service or internal IT labor. MSPs must change the game.

There are over 11,000 qualified MSPs in the US today although this number can be argued as there isn’t an accepted certification for MSPs. If you consider the tools and automation required to profess to be an MSP the 11,000 number seems safe. Every large and small city and most rural areas have local and personalized MSPs servicing their small business community. Even with a high degree of geographic coverage and decent penetration for large and small cities approximately 80% of small businesses today are self-service. The approximate 20% that aren’t are serviced by MSPs (18%) and franchises (2%). Even the largest MSP (All Covered)  focused on small business has less than 1% market share in the 22 markets it services.

Any significant market segment where the largest provider has less than 1% share and the total service market is less than 20% should be considered both fragmented and ripe for growth.

So who are the MSPs’ competitors? I’ve asked this question many times and typically get responses that cover local MSPs, larger VARs, multi-regional MSPs, and manufacturers like Dell where there is concern that the manufacturer might steal the customer away. In the end the largest competitor by far is also the largest opportunity – that is the self-service small business. With such a small combined share, MSPs don’t compete with each other and actually have an opportunity to collaborate  together. They can combine efforts in marketing and education especially in areas that can better inform small businesses why self-service makes less sense in a cloud-based, internet oriented, hosted service environment.

Business 101 says you need to know your competitors. For MSPs this gets a little complicated. Who we might think are MSP competitors – other MSPs, are actually not and, instead, should be complimentors. Self-service small businesses  are the competition and the job for MSPs is to convince them to outsource something they already do. Ironically small businesses are also the source for new business and growth. Tricky yet not an impossible situation. Some suggestions for MSPs:

  • Educate the small business community on how the evolution of their IT needs outpace their ability to support these needs internally
  • Collaborate with other MSPs to strengthen your collective brand. Ever see a full page Toyota ad  in the Sunday paper that is paid for by the 8 or so Toyota dealers in your city.
  • Understand the definition of a small business as your target market is changing and quite possibly changing faster than your ability to keep up with it. Know your space.

Best of Luck!

About Frank Picarello

Frank is a well-respected leader in providing technology services to small and medium-sized businesses. He is currently COO for TeamLogic IT, Chairperson for CompTIA's Small Business Owner's Group, and a member of CompTIA's Unified Communication Committee.

View all posts by Frank Picarello

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