This is part 1 on our two-part MSP series. Part 1 focuses on the basics of the MSP delivery, while part 2 will discuss how to make this model work for you.
Nothing’s much has changed since I last blogged about Wi-Fi managed services almost a year ago, other than that I now work for a different manufacturer. The reason for the longer-than-expected ramp-up time is that Wi-Fi manufacturers (in general) haven’t yet adequately equipped their channel partners to take advantage of this market trend. The slow ramp-up is over, and it looks like it’s a land grab of epic proportion… starting… NOW. For those of you waiting on the sidelines, it’s time to get in the game.
Market Drivers for MSPs
As the challenges of delivering high-performance wireless access networks in the face of exploding user demands become ever more daunting to the average IT guy, midmarket CIOs are still having a difficult time of adequately staffing their IT organization. Gartner and I both still believe that midmarket companies should consider using Managed Service Providers (MSPs) to solve this problem.
Engineers who are well-trained and experienced in designing, deploying, troubleshooting, and maintaining enterprise-class Wi-Fi networks are still fairly scarce and expensive. MSPs can offer high-end engineering skills, paired with economies of scale (leveraging shared resources), to midmarket customers who would otherwise have to hire their own expensive, dedicated engineers; the alternative being to try their luck with general IT installation contractors that may not have the right Wi-Fi expertise in-house or the ability to adequately support the installation once it’s done.
The decreased costs and lower risks of outsourcing to an MSP, in combination with attractive SLAs, may in many cases be a significant competitive advantage to midmarket organizations.
How is an MSP Different from a VAR?
If you’re unfamiliar with MSPs and how they differ from your garden-variety value-added reseller (VAR), I’ll briefly explain. Your local VAR will happily sell you a Wi-Fi network (making a little profit in the process), and their hope is to add services (hence the “value added” portion of the name) around the sale of the equipment. Those services could be anything along the lines of design, surveying, installation, configuration, optimization, maintenance, troubleshooting, reporting, and more. These services can be offered as prepaid (for a certain amount of man hours per month/quarter/year with additional time being paid hourly/daily) or it could all be an hourly/daily rate.
With managed services, you may still have the option of buying/owning the network hardware/software (called a capex sales model, short for “capital expenditure”), but there’s often the option of an opex sales model (short for “operational expenditure”, more commonly known as “leasing”) as well. The most common question that arises with the opex sales model is “who is doing the equipment financing?” More on that topic later.
The real differentiator offered by an MSPs is in the level of service provided. MSPs do everything for the customer throughout the lifetime of the network (as it relates to the service they are providing) while VARs most often perform tasks on an as-requested basis. MSPs therefore often provide the customer with a Service Level Agreement (SLA) contract stating exactly what they will/won’t do and what the adverse ramifications (to the MSP) of not performing those tasks (as stated in the contract) will be.
|Scope||design, installation, configuration, light helpdesk||all of that plus full responsibility for on-going operation of the network, often including applications riding on top of it|
|Pricing Models||primarily 1x costs (capex) with small (~10%) annual maintenance fee||can also offer opex-only model, on per-user or per-network-node per month basis, as an alternative to capex + operational fee model|
|Guarantees||typically commit to performance metrics at final acceptance of network install; maintaining network performance over time is customer’s responsibility||offer service-level agreements (SLAs) for install time, network uptime, and possibly other performance metrics|
MSPs will be managing, monitoring, and troubleshooting the network remotely (in the large majority of cases), they must choose technology solutions that lend themselves to this scenario.
How Can a Manufacturer Support You in this Model?
Manufacturers differentiate themselves in a number of ways:
- Specializing on various aspects of the technology, such as performance, architecture, ease-of-use, or cloud services
- Having a broad product portfolio: Wi-Fi, switches, firewalls, and routers
- Offering varied sales models, from standard capex to 100 percent opex
- Focusing on assembling solutions for vertical markets, rather than selling “horizontally” across various markets
Channel partners – distributors and resellers – are also looking for additional ways to differentiate above-and-beyond the manufacturer’s own technical or business-related advantages. Given the model’s inherent advantages, one valuable way to set themselves apart from the crowd is to additionally offer Wi-Fi as a managed service, either in a capex + service or even full-opex sales model.
- In a capex model, the customer buys the equipment from the MSP and then additionally pays the MSP for their services (design, survey, install, integration, optimization, reporting, troubleshooting, etc.).
- In the opex model, there are a variety of nuances of how an MSP might go about a sale, but most commonly, the APs are “leased” to the customer for a contract period (with periodic payments), and the customer is then charged for those same services (as previously mentioned) – either up-front or rolled into the periodic payments.
In part 2 of this post, we will discuss how to determine if a Wi-Fi solution is ready for the MSP model, how to get started, and how to sell the model to your customers.