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Week 6: Consumption Economics Predictions Came True…Now What Do We Do?

This week, we present Chapter 5: The Data Piling Up in the Corner. This is the sixth post in a series dedicated to helping MSPs understand and adopt the recommendations of Consumption Economics–The New Rules of Tech. Chuck introduces the chapter by sharing how the content resonates with his 30+ years of industry insight.

A FEW WORDS FROM CHUCKCE

Chapter 5 of Consumption Economics, “The Data Piling Up in the Corner” was one of my favorites. It resonated with something I learned early in my career that still holds true today: the information about an event is more valuable than the event itself. Interestingly enough, this concept is now forefront in the national discussion, only it now has a name – Metadata – made famous by the NSA. Metadata is defined by Merriam-Webster as “data that provides information about other data.”

I started my career in telecom in 1992 as a founding member of the Advanced Technology Group at MCI Communications. One of my mentors explained how the information related to a customer’s “phone call” was more valuable than the money MCI received from the customer for the call. It took some time for me to truly understand this concept until I actually saw the “information related to” a customer’s phone call.

In the world of telecommunications, the “information related to” a phone call is called a Call Detail Record or CDR. If you have never seen a CDR, it is an impressive and extensive “record” of a phone call. It can include over 50 metadata containing “data fields” with information related to a single call but does not include the content of that call. Phone numbers of both the calling and receiving parties, the start time, and the duration of the call are just a few pieces of information included in the content of a CDR.

If you are wondering — yes, this is the phone Metadata the NSA was collecting under the Patriot Act that just expired and was replaced by the Freedom Act signed this week (thankfully, they were not collecting a recording of the calls.) Obviously, the NSA believed that the information about our phone calls was more important than a recording of the phone call itself.

Just by using information about their customers’ calling patterns, one of our White Label Resellers (WLR) was able to generate an additional $1,000 in monthly revenues from their existing customer base. By reviewing their customers’ CDRs, the WLR was able to identify those who used their phone for three way calling. Since most IP phones only support 3-way conference calling from the device, a “conference bridge” becomes necessary for more than 3 users. They offered these customers free use of a conference bridge for 30 days. This added functionality became indispensable to 100 of their customers—a pure monthly profit of $1,000.

Do you review the information available to you regarding how your customers consume your technology products and services? Are there other products or services you could provide to them to generate additional revenues? Review the excerpt of Chapter 5 to find out how you can utilize pertinent information.  It could lead you to selling them additional services they might not know they need ☺!


AN EXCERPT FROM Consumption Economics—The New Rules of Tech

Chapter 5: The Data Piling Up In the Corner

The key enabling capabilities in the age of Consumption Economics are our real-time access to users and the ability to aggregate and analyze usage data. Right now, at most tech companies, that data is piling up on their cloud servers like junk piles up in your garage.  Most companies intend, eventually, to do something with that data, but for right now they are just putting a mental tarp over it.

Hewlett Packard did some pretty great things in their garage in Palo Alto. Now it is our turn. We need to take the tarp off of our pile of data and get to work on it. It represents perhaps the most important new opportunity for this generation of tech. We can leverage real-time user data to change how we develop our products, simplify their use, guide the end users to increased capability and adoption, deploy the best practices in much more targeted and in-depth ways, increase customer value, and grow big, profitable customers. In short, we can change the world by developing a Consumption Model that drives profoundly higher success rates for all manner of technologies, and with that, we can fly over the Margin Wall and rescue our products from commoditization.

Broadly speaking, we need to use our best people and their experiences and insights into how the products should be used and are being used by the most successful customers. Product managers need to begin to identify how they want the product’s use to unfold to create an optimized end-user experience and to get full adoption of the product’s stickiest, profitable features. The service organization needs to document what it learns about the successes of actual customers and the roadblocks that prevent others from achieving them. In essence, we need to identify the best practices for consuming our product’s value. We also need to introduce the ability for the product’s consumption to be guided by the priorities of our corporate customers and/or the individual end users themselves.

Week#6 CE Chart

We can’t scale all the smart people, but we can scale their insights by embedding them into the products themselves. In the future, we must build a layer of capability into the products that is designed to take the learning that comes from the product’s experience in the market and dynamically, purposefully, alters how the product presents itself to different end users in real time.

The freeing power of the cloud will enable more and more customers to try or pilot new technologies. Why? Well, for one, the up-front investment to try things goes to near zero. For many cloud offers, there is no need for installation, etc. Just sign up and go. Secondly, the risk shift means that if they don’t like it or can’t use it, then they pay little or nothing. All they have lost is a little bit of time. The risk is on the tech company, and their reward only happens if they take the right steps to ensure the customer is successful. This is Consumption Economics.

Taking a small “trial” opportunity and turning it into a huge customer—and doing that around the globe—will become a differentiating capability for tech companies. Companies that survive and prosper on this side of the Margin Wall, where prices are lower and volumes must be high, will need to get really good at this.

NEXT WEEK: Chapter 6: Consumption Development – the Art and Science of Intelligent Listening


Because D3UC is dedicated to and entrenched with the MSP community, each week a new chapter of Consumption Economics will be discussed with emphasis focused on the challenges faced by VARs and MSPs who are transforming their companies’ business models to survive and thrive in the new, Cloud-driven world.

If you would like an overview of the book Consumption Economics, you can download a copy of the “abridged” version written by the TSIA from our website.

 

Originally published June 7, 2015. Reviewed November 2016.

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Week 5: Consumption Economics Predictions Came True…Now What Do We Do?

This week, we present Chapter 4: Learning to Love Micro-Transactions. This is the fifth post in a series dedicated to helping MSPs understand and adopt the recommendations of Consumption Economics–The New Rules of Tech. Chuck introduces the chapter by sharing how the content resonates with his 30+ years of industry insight.

A FEW WORDS FROM CHUCKCE

In the old world of technology product development, the more features and functions included in the standard product, the better. Bundling more and more “bells and whistles” into the next release of a product was very lucrative for technology vendors. Continuing to add new functions on a regular basis encouraged existing customers to upgrade to the latest and greatest version. But the fascination with technology slowly faded as products became too complex to learn, too difficult to use, and too expensive.

Customers don’t want to buy a costly product with 30 features, particularly if they will only use 10 of them. The savvy consumer only wants to pay for the necessary features and submit payment only at the time of consumption. Technology VARs and MSPs have customers who are content with using outdated versions of their products because they don’t feel the need to regularly upgrade to new products with features they will never use. This change in buying behavior has created a serious dilemma for technology VARs and MSPs. So, what is the strategy for surviving this massive shift? How do technology VARs and MSPs prosper in this environment and simplify product offerings while meeting customer needs?

The answer involves a discussion about transforming the technology VAR / MSP business model to embrace micro-transactions (MTs). From a revenue perspective, this isn’t an ideal scenario. But, like it or not, this is what the customers are demanding and it IS the new reality for technology VARs and MSPs. Read on for more discussion about MTs in Chapter 4 of Consumption Economics.

 

AN EXCERPT FROM Consumption Economics—The New Rules of Tech

Chapter 4: Learning to Love Micro-Transactions

The cloud will trigger the need for a completely new set of capabilities from companies that play in the space. It, along with managed or outsourced services, means OpEx budgets are where many tech categories are headed. In an OpEx world, volume matters. That means tech companies need to learn to love micro-transactions (MTs)—to monitor them, drive them, count them, and bill for them. We need to make our ability to proactively drive their consumption a top priority. We need to build an MT revenue gas pedal that we can use to accelerate our growth speed. So what do MTs look like?

Needed: A High Volume of Micro-Transactions (MTs)
  • Per app
  • Per user per month
  • Per feature level
  • Per print or per document
  • Per GB data stored
  • Per hour of resource used
  • Per purchase
  • Per data service subscribed
  • Per content downloaded

Tens of dollars per transaction…

NOT tens of thousands per transaction.

All these other industries are busy redefining themselves to be consumed in a service- based offering model. Once they begin to think that way—and bill that way—their strategies for growing customer revenue change.

Week#5 CE Chart

Tech companies historically viewed both product waves and account development cyclically according to the product playbook: Develop a new product, and then penetrate the market and the individual customers within it. Then build a second product that links to the first one, and repeat the cycle. The faster you are able to get each customer to take on additional products through a new selling cycle, the faster that account grows. As we mentioned before, because product prices were high and big customers needed big systems, the sale contracts were huge. It was a stair-step selling process built on big contracts.

Imagine being a fly on the wall at the tech company headquarters of a traditional product playbook company on the day the CEO first realizes they are at the tipping point. They are going to miss their number this quarter, not because they didn’t sign enough key deals, but because the tiny end users didn’t consume as many micro-transactions as they thought they would. Who will the CEO yell at? It’s not R&D’s fault; the product works. It’s not sales’ or marketing’s fault; they got the IT departments to sign the platform contracts. It’s not service’s fault; all the customers were up and operational. Who’s left to yell at? The answer is no one — and everyone. The question the company needs to ask itself is: Who owns the job of driving consumption?

What we realize now is that driving consumption is a corporate model, not a functional or departmental task. In the new normal, it is a web of micro-transactions, and it will require the involvement of every employee in every department to optimize that web.

 

NEXT WEEK: Chapter 5: The Data Piling Up In the Corner

Because D3UC is dedicated to and entrenched with the MSP community, each week a new chapter of Consumption Economics will be discussed with emphasis focused on the challenges faced by VARs and MSPs who are transforming their companies’ business models to survive and thrive in the new, Cloud-driven world.

If you would like an overview of the book Consumption Economics, you can download a copy of the “abridged” version written by the TSIA from our website.

 

Originally published May 30, 2015. Reviewed November 2016.

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Week 4: Consumption Economics Predictions Came True…Now What Do We Do?

This week, we present Chapter 3: Looking Over the Margin Wall. This is the fourth post in a series dedicated to helping MSPs understand and adopt the recommendations of Consumption Economics–The New Rules of Tech. Chuck introduces the chapter by sharing how the content resonates with his 30+ years of industry insight.

A FEW WORDS FROM CHUCKCE

The technology industry was living a dream for about 30 years. Products were in high demand, they were sold at a premium, payments were made upfront, and technology companies reaped significant profits. All of this changed in 2008 when the economy spiraled out of control and cloud computing became the rage. Companies large and small evaluated their budgets and slashed spending to align with their anticipated decline in topline revenues. They also started to take advantage of cost effective cloud-based alternatives. The new reality for technology VARs and MSPs quickly became a nightmare.

Companies were operating with fewer IT staff members and required to do more with less. There was a complete shift in mindset: the notions of “good enough technology” and “pay-as-you-go” feverishly took hold. Technology VARs and MSPs could no longer dictate the cost of maintenance agreements, sell expensive premise-based equipment or justify the benefits of the latest and greatest software. Gone were the days of collecting large upfront payments.

The economic collapse and cloud computing have permanently altered how companies purchase technology services from their technology vendors. For the technology VARs and MSPs serving the SMB market, these changes have destroyed their business model. Finding profitable recurring revenues and trusted partners are paramount to recovering from these shifts and adapting to the new reality.


AN EXCERPT FROM Consumption Economics—The New Rules of Tech

Chapter 3: Looking Over the Margin Wall

Tech is not immune to commoditization – it’s just harder to spot. The phenomenon occurs when one product becomes close enough to its competition that customers start to buy on price alone. Since tech products are usually complex and feature rich, it is hard for the company that makes them to imagine that they would ever reach such a lowly state. Yet more and more product categories-hardware, software, even advanced products like medical devices-seem to be feeling the pinch of price competition and customers who seem increasingly indifferent to our latest attempts at differentiation.

There is a point where the company just can’t afford to continue with the product. The prices are getting too low. Yes, even tech products-entire categories-can hit the Margin Wall.

The Margin Wall

 Week#4CEChart

You’ll know your product is at the Margin Wall when your cost of goods on the equipment plus your sales, marketing, and service costs on the deal add up to more than the customer paid for the system. Once you get there, it doesn’t seem to matter what you do to the product, how many new things it can do, customers just won’t pay a premium. It is frustrating to the tech company and its engineers because they know that the product can do some very cool things better than the competition. Maybe it can do something that the competitor’s product can’t do at all! But the Consumption Gap, the evil enemy of differentiation and margin, has set in.

Despite all your exciting features, the customer is still just going to use the product to do the basics. They know how to do them, but that’s all they know how to do. So when they go to buy the next product, they choose the one that can do those basics at the lowest price. When that happens, the whole product category crashes into the Margin Wall. Commoditization in tech is real, maybe more real than we have admitted.

Every company that plays in markets near or past the Margin Wall needs to start thinking about a Consumption Model. Even as good as Apple’s initial forays are into the world of driving consumption, they are only at the beginning of what’s possible. Their model works, but it is costly and hard to scale. Opening stores and putting thousands of people in them to work with customers is not an option for many tech companies. The Consumption Model that the cloud enables will create some very exciting new opportunities for you to get similar results, but to do it at scale and get paid along the way. This is not just a plea to spend more on services. For the first time, we may be able to put the entire company in service to the customer’s successful consumption of value. Not just the people in services, but the IP, the hardware, the software, the data…all of it. Want to fight commoditization and fly over the Margin Wall? Let’s start to innovate not just on what our products can do, but how we can get users to fully use them!


NEXT WEEK: Chapter 4: Learning to Love Micro-Transactions

Because D3UC is dedicated to and entrenched with the MSP community, each week a new chapter of Consumption Economics will be discussed with emphasis focused on the challenges faced by VARs and MSPs who are transforming their companies’ business models to survive and thrive in the new, Cloud-driven world.

If you would like an overview of the book Consumption Economics, you can download a copy of the “abridged” version written by the TSIA from our website.

 

Originally published May 23, 2015. Reviewed November 2016.

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Week 3: Consumption Economics Predictions Came True…Now What Do We Do?

This week, we present Chapter 2: Shifting Clouds and Changing Rules. This is the third post in a series dedicated to helping MSPs understand and adopt the recommendations of Consumption Economics–The New Rules of Tech. Chuck introduces the chapter by sharing how the content resonates with his 30+ years of industry insight.

A FEW WORDS FROM CHUCKCE

The first blog post in this series introduced the seven shifts for technology companies as predicted by Consumption Economics. The authors were very confident that these shifts, along with new types of customer demands, would profoundly impact the way technology companies do business. And they were right. The Cloud has become a legitimate competitor for technology VAR’s and MSP’s traditional product offerings and it has forever changed the business model.

Take a minute to think about how the Cloud has impacted the way your company operates. Have you experienced a reduction in high-margin professional services revenue? Are you searching for recurring revenue streams? Does your business model align with your customer’s buying behavior? Do you find yourself doing fewer traditional installs and signing fewer maintenance agreements? To what degree has the Cloud affected your customers? Have their needs and demands changed since the advent of the Cloud? Are they seeking technology with minimized complexity and reduced costs? Do they refuse to buy premise-based products and prefer the pay-as-you-go model?

The modern day technology consumers are savvy and expect simple, low cost, low risk technology solutions. This is a complete 180 degree turn from 30, 20 or even 10-years ago. It is the reason that technology VARs and MSPs need to reevaluate their business model. If it has shifted out of alignment because of the Cloud or the economy, be prepared to pivot and take action to drive profitable growth. The successful VAR and MSP will assume much more (maybe all) of the financial risk as customers engage with their products and services. Companies will have to invest in their customer success—not just setting up the products, but also helping the customer actually use (consume) their capabilities.


AN EXCERPT FROM Consumption Economics—The New Rules of Tech

Chapter 2: Shifting Clouds and Changing Rules

The cloud has buzz. The media is citing it as the next “big thing” in tech. Traditional tech companies are running around figuring out who to acquire to stake their claim in the next big gold rush. But wait! What, exactly, is the big deal?

Larry Ellison, CEO of Oracle, is on record as saying the cloud is just the mainframe reincarnated, and he has a good point. Is it really a big deal where the software and hardware are hosted or how cheap an endpoint device you can get away with? No. That was the whole mainframe model. We would also argue that it’s not whether you rent or own. The “XXX as a service” model has received a lot of focus. But paying over time rather than paying up front is not unheard of. Capital equipment has been leased or financed for years.

So, then, what is the big deal about the cloud? At TSIA, we think seven shifts will profoundly affect how tech companies operate, differentiate, and make money:

  1. The risk in the purchase decision will shift from the customer toward the supplier.
  2. Complexity’s long and illustrious reign will end. Simplicity will be king.
  3. Cloud customer aggregators will shrink the direct market for tech infrastructure providers.
  4. Big changes will come to the channel ecosystem.
  5. Cheaper enterprise software will emerge.
  6. IT departments will “get out of the way” of end users.
  7. Tech companies will capitalize on user-level behavioral data.

These seven shifts could profoundly impact existing tech company models. Not everyone will like them; not everyone will want them. In fact, many existing tech companies will fight against them tooth and nail. How tech companies succeed and why they fail may never look the same again. The tools to deliver value have never been this exciting before! It could truly be time for a “new normal.”

thenewnormal

We will look at some of these shifts and the new normal in coming chapters of this book. But first let’s take a deep and important look at the way commoditization plays out in the unique world of technology products. We are not selling wheat futures or pork bellies here. Commoditization in the “old normal” of tech is not a simple story. We have a perspective on the Consumption Gap’s role in causing it and customer lock-in’s role in preventing it. This perspective might not just open your eyes to the true effect of category commoditization in your markets, it may also give you unique insight in how to reverse the trend.


NEXT WEEK: Chapter 3: Looking Over the Margin Wall

Because D3UC is dedicated to and entrenched with the MSP community, each week a new chapter of Consumption Economics will be discussed with emphasis focused on the challenges faced by VARs and MSPs who are transforming their companies’ business models to survive and thrive in the new, Cloud-driven world.

If you would like an overview of the book Consumption Economics, you can download a copy of the “abridged” version written by the TSIA from our website.

 

Originally published May 16, 2015. Reviewed November 2016.

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Week 2: Consumption Economics Predictions Came True…Now What Do We Do?

This week, we present Chapter 1: How Good We Had It: The Money-Making Machine Known as High-Tech. This is the second post in a series dedicated to helping MSPs understand and adopt the recommendations of Consumption Economics–The New Rules of Tech. Chuck introduces the chapter by sharing how the content resonates with his 30+ years of industry insight.

A FEW WORDS FROM CHUCKCE

For almost my entire career, the technology vendor business model was stable, predictable, low risk, CapEx driven, and highly profitable. The products offered to businesses featured complex hardware, software, networks, and services. Buyers disregarded the significant investment risk and willingly invested their capital. Prior to 2008, buyers viewed capital expenditures as an opportunity for value creation—increased revenues, reduced costs, improved competitive advantage, enhanced customer service and increased employee productivity. The cost-benefit analysis from the buyer’s perspective supported bearing far more of the financial risk than the technology vendor.

Technology vendors had a good gig going. They locked in significant profitable revenue before the customer even started using the technology vendor’s products and services. The product revenue, the professional services revenue, and the first year maintenance were all in the bank whether or not the customer realized the promised return on investment. Over the course of 30 years, this business model created trillions of dollars of wealth for technology vendors. Life was good.

Here is where I must evoke the old adage, “All good things must come to an end.” Over time, customers began to resent the ongoing cost of managing the technological complexity handed to them by their technology vendors (think about your own technology buying behavior!) Complexity began to exhaust company IT budget dollars. The reality of cheaper, faster, and more efficient (and less need for complex technology) started to resonate with companies. They lost interest in the high priced, high risk, high complexity offers that had been so profitable for technology vendors in the past. The old way of doing business was forever changed in 2008.


CEAN EXCERPT FROM
Consumption Economics—The New Rules of Tech

Chapter 1.  How Good We Had It: The Money-Making Machine Known as High-Tech

In sector after sector, the profitability of selling tech products is shrinking. Price competition is taking a huge toll on product margins not just in consumer sectors like PCs, but also in traditionally profitable enterprise segments like networking and software. It’s not because tech companies can’t innovate anymore, but because tech customers can barely use the complex technology they already own. They have unused features and licenses, excess capacity, and stable systems that serve their basic needs, so why buy more unless it’s cheaper? This is not the path to profitable growth. It is the path to commoditization and it is forcing companies to change what business they’re in just to maintain margins.  Hardware companies are jumping to services and software. Software companies are making their profits off of maintenance contracts, not selling software.

In the new economics of the cloud, driving usage is even more critical since nearly all the revenue will be based on consumption, and switching costs will be low for disgruntled customers. The cloud could lead to the rapid draining of the profit pool for high-tech—a relentless drive for cheaper and cheaper versions of standard functionality. And if you looked closely, if you talk to frustrated corporate CIOs, the handwriting is on the wall. There is a steady, growing pile of customer frustration—dead wood waiting for a match.

And sure enough, in 2008, the match appeared. Three things within fifteen months—not directly related but highly synergistic—occurred that will forever change the rules of the tech business.

  1. The global economy tanked.
  2. Cloud computing got hot.
  3. The iPhone came out.

Put these three things together—increased scrutiny on technology ownership costs and ROI, the disruptive promise of cloud-computing models, and the consumerization of IT—and you have the underpinnings of a sea change in how tech companies must operate to drive profitable growth. A brutal and uncertain economy has created a permanent demand for simpler, lower-cost, lower-risk technology solutions.  A shift is beginning. In the growing worlds of cloud and managed services, the pattern of purchasing technology is changing. With this new purchasing pattern, risk is moving from the customer to the tech company.

So regardless of whether your company is facing declining margins in your traditional product markets or starting to understand the profound risk-shifting impact of the cloud, the rules of the game are changing. The ability to successfully drive consumption is about to become the critical enabler of profitable growth. How we build products, how we drive revenue, what services we offer, what we must do to succeed are all on the table. It is the rise of Consumption Economics, and it has new rules.


NEXT WEEK: Chapter 2: Shifting Clouds and Changing Rules

Because D3UC is dedicated to and entrenched with the MSP community, each week a new chapter of Consumption Economics will be discussed with emphasis focused on the challenges faced by VARs and MSPs who are transforming their companies’ business models to survive and thrive in the new, Cloud-driven world.

If you would like an overview of the book Consumption Economics, you can download a copy of the “abridged” version written by the TSIA from our website.

Originally published May 9, 2015. Reviewed November 2016.

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Week 1: Consumption Economics Predictions Came True…Now What Do We Do?

This is the first blog post in a series dedicated to helping the owners of MSPs understand and adopt the recommendations of Consumption Economics—The New Rules of Tech. Chuck Daniels, CEO of D3 Unified Communications, shares his 30+ years of industry insight each week.

CEIn 2011, the Technology Services Industry Association (TSIA) – the technology industry trade association whose members are the largest technology companies in America – published, Consumption Economics – the New Rules of Tech which sounded the alarm for the entire technology industry.  The authors outlined the dramatic changes the Cloud would bring to the technology industry – changes that were for the most part financially detrimental to the business models that generated steady profits for TSIA members over the past 30 years.  The authors also suggested adjustments technology vendors needed to make to their business models in order to survive the transformational shifts about to impact their industry.

Below are the seven shifts that Consumption Economics predicted in 2011 would permanently change forever how customers consumed technology services. Today’s challenge is to think about these shifts and ask yourself, “So now what do we do?”

  1. The risk in the purchase decision will shift from the customer toward the supplier.
  2. Complexity’s long and illustrious reign will end. Simplicity will be king.
  3. Cloud customer aggregators will shrink the direct market for tech infrastructure providers.
  4. Big changes will come to the channel ecosystem.
  5. Cheaper enterprise software will emerge.
  6. IT departments will “get out of the way” of end users.
  7. Technology companies will capitalize on end-user behavior data.


Next Week: Chapter 1: How Good We Had It…


Because D3UC is dedicated to and entrenched with the MSP community, each week a new chapter of Consumption Economics will be discussed with emphasis focused on the challenges faced by VARs and MSPs who are transforming their companies’ business models to survive and thrive in the new, Cloud-driven world.

If you would like an overview of the book Consumption Economics, you can download a copy of the “abridged” version written by the TSIA from our website.

 

 

Originally published May 2, 2015. Reviewed November 2016.

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MSPWorld Fall 2016

Hope to see you in Vegas at the MSPWorld Conference! Chuck will be presenting on October 8th. Buy, Build, Partner: 3 Paths to New Managed Services Offerings.

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Preparing MSPs for 2020

This was my fourth time attending MSPWorld which the MSPAlliance held at the Swan and Dolphin Resort in Orlando. The two day event was very well-attended with over 24 diverse educational sessions and several Keynote presentations. There was ample time for networking at the golf outing, cocktail hour, casino night and during breaks between sessions.

Being experts in their respective fields, industry leaders focused on topics pertinent to MSPs—cyber security threats, sales and marketing tips, the importance of certifications, and current legal issues. Charles Weaver, CEO of the MSPAlliance, always gives his annual state of the managed services market overview on day two of the event, citing information from the Gartner Group. The title of this year’s presentation was, “The State of the Cloud Managed Services Market – How to build the MSP of 2020.” In comparing last year’s actual global IT performance with Gartner’s forecast for the current year, Charles highlighted areas of potential growth for MSPs and cautioned them about spaces that could be problematic in the future.

Here is what I took away from this year’s annual State of the Cloud Managed Services Market.

Global IT spending according to Gartner Group
• 2015 was a flat to slightly negative year for MSPs
• 2016 will be a growth year for MSPs

Highlights
• Global spending was down approximately 5% in 2015 and will grow less than 1% in 2016
• Spending on hardware like PCs, laptops, and smartphones dropped over 5% in 2015 and will decline another 2% in 2016
• Data Center spending grew almost 2% in 2015 and will grow another 3% in 2016
• After declining one percent in 2015, software sales will grow over 5% in 2016
• Spending on communications dropped over 8% in 2015 and will drop another 1% in 2016
• After declining almost 5% in 2015, IT services (which include MSP revenues) will grow 3% in 2016

Data from Spring MSPWorld
With the continuing trends of decreasing premise based hardware sales and above average growth in data center, software, and services, what will the future for MSPs look like in 2020?

Regulations will be here to stay by 2020.
• European Union Data Protection Reform (General Data Protection Regulations-GDPR)
• Right to be forgotten could bring about big changes
• Regulation and laws from Europe could be applied in US
• Fines for noncompliance (regulations have teeth)

Where will MSP’s find their customers 2020?
• Customers will be more educated and will find you
• Don’t chase your customers
• Customers need resources, education, and mentors
• Make your customers come to you

Where are the new opportunities in 2020?
• Internet of things will create a huge opportunity
• Shutdown, turn around, and outages of utility companies
• Social media monitoring

In 2020, MSPs will:
• Face more regulation
• Be more important in the fight against cyber crime
• Have greater influence over customers
• Serve both business and residential customers

All of the presentations are available for viewing to MSPAlliance members (login from the home page click Resources > Blog). Membership is a free, quick and easy process.

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MSPWorld Spring 2016

Once again, D3UC is a proud sponsor of MSPWorld! This event is organized by the MSPAlliance® and driven by those that have had actual real-world experiences and successes in the managed services industry as managed service providers. We hope to see you at the Swan Dolphin Resort on April 3-5, 2016. Please join Chuck for his presentation Overhauling the Classic Sales Model: Navigating the “New Normal” on Tuesday, April 5 at 12:45pm.

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MSPWorld Fall 2015

Attending our 3rd MSPWorld event and sponsoring again! Las Vegas, here we come! We hope to see you sometime during our visit at The Cosmopolitan on October 18-20, 2015. Chuck will be presenting this year. Be sure to check out Consumption Economics: 5 Key Trends Impacting MSPs in 2016.

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