Last week, we were delighted to host a dinner for a small selection of our CEO and chair network in the MSP space to discuss ‘what does the future of MSPs look like.’ The lively discussion ranged from how consultancy led approaches are changing customer relationships, to the pace of M&A activity in the sector. Reflecting on the discussion, Mo Aneese gives his key takeaways.
100% cloud adoption?
We began the discussion by considering customer needs, recognising that both private and public sector clients are looking to tech to manage the ever-increasing demands of their customers and to evolve their proposition. Cloud migration is a key part of that process, supported by recent research from the Cloud Industry Forum (CIF) which shows that the overall cloud adoption rate in the UK now stands at 88%. 
Clearly, the question for industry is not whether public and private customers will look to migrate to the cloud, but which cloud solution will future-proof customers’ businesses and suit their needs.
Public cloud, private cloud or a hybrid solution?
Customers are starting to become more aware of the pros and cons of public cloud vs private cloud and are increasingly looking to MSPs to implement custom hybrid solutions.
A Tech Republic study of MSP customers showed that 93% of respondents had heard of hybrid solutions, with a third stating that it had already been implemented. The New Era of Hosted Services, commissioned by Microsoft, that said 68% of organizations will adopt a hybrid cloud model over the next two years, which is a 19% increase over the current hybrid cloud adoption rates.
In light of these statistics, its clear that MSP providers can no longer rely on hybrid solution offerings as differentiators, but instead should be offering them as part of a broad range of value adding services.
Standing out from the pack
In an increasingly competitive landscape, MSPs who simply propose and implement a strategy with minimal client involvement will find themselves losing customers to consultancy led providers that are offering bespoke client-centred processes.
This approach is being adopted as a way to both educate and understand the needs of their customers, involving them in strategy, discovery and design, and resulting in a more informed solution proposal.
Operating this way gives customers the chance to spend time with an industry experts and work together to identify business challenges, and how to overcome them. MSPs can ensure their clients’ complex needs are understood and build the beginning of a long-term relationship.
MSPs face the same issues as other industries concerning the importance of appealing to a millennial employee base in order to attract and retain new talent. Millennials have particular wants in terms of employee benefits and management styles, and MSPs must create value propositions which align with these. Those wishing to attract the best and brightest talent may need to consider culture, career development programmes, working flexibility and creative perks. Given the scarcity of tech talent, many develop graduate schemes to support this and build the required skill set.
Security offering- a must have or optional offering?
The argument for making security a core offering has never been stronger. Security breaches cost customers and providers both in terms of legal costs, reputational damage and resource wastage.
Risk Based Security recently reported that 2019 is shaping up to be a landmark one for data breaches, with over 3,800 breaches— a 50% increase over the last four years. As criminals develop more advanced ways to breach security, clients need to be prepared. MSPs who offer a full security offering, including defensive strategies, such as web protection and mail security, as well as damage control measures such as virtual server recovery, will be a valued partner to businesses looking to secure their data.
M&A activity in the MSP space
The MSP market is hugely fragmented, and highly attractive, as it operates in a massive total market and through offering a critical service to businesses, is sheltered from economic downturns. So it’s no surprise that M&A momentum in the MSP space is showing no signs of slowing, with the 2018 increase in buy and build activity continuing so far in 2019.
Notable trends in the space include buyers on the hunt for technology and skills that extend both geographic reach and the ability to span multiple public cloud platforms. Having the firepower of an investor behind you with significant funding and - in Livingbridge’s case - a dedicated in-house team focused on corporate development, can really accelerate that process and help identify best-in-class businesses.
Given all these fantastic opportunities in the MSP space, all attendees agreed current valuations showed sustainability and expected continued interest from investors. We would like to thank all attendees for their time, and insightful contributions.
If you own an MSP business and would be keen to discuss the valuation of your business or how we’ve helped similar businesses in the past, please get in touch on firstname.lastname@example.org.