The business side of being a managed service provider is at least as important as the technology. MSPs need to be careful in who they do business with. They need to take a long term view of their relationships and understand the impact of ending those relationships if necessary.
Whose Customer is it?
One of the most important aspects of any MSP to Supplier relationship is who owns the customer. In our last blog we compared the type of relationship the MSP might have with their supplier, agency or provider. One of the challenges with the agency relationship is the customer relationship is a bit murky.
Under the agency model, the cloud service supplier more than likely has direct access to the end customer’s contact information as they are the one actually providing the service. If the relationship ends, it’s hard to see how the agent will have any recourse in obtaining sole ownership of the customer. The cloud service supplier isn’t going to let the agent delete all of the shared customer’s data from the supplier’s infrastructure and it makes sense that the cloud service supplier would continue to pursue that customer’s business or transfer it to another agent.
In the provider relationship, who owns the customer should be easier to delineate, although some technology suppliers may still try to have at least joint custody. In the provider business model though, the customer’s data is held exclusively by the provider. The technology supplier may have very limited, if any, access to that data. The provider needs to make sure though that any data that is shared with the technology supplier is either very limited in scope, is protected by a contract or is masked or encrypted if shared with the technology supplier.
Whose Prospect is it?
Beyond protecting their customers, the MSP will also want to protect the prospects it is trying to convert to customers. The MSP needs to carefully examine the go-to market practices of the supplier. The safest strategy is to work with a supplier that has no direct business relationships and pushes any potential business through one of its partners.
Short of a no-direct business capability the MSP should make sure that the lines of delineation are clearly defined and make sure they are comfortable with those definitions. For example, many suppliers will only engage in direct relationships with a large enterprise. The MSP needs to decide if they are willing to give up that enterprise business. MSPs, especially those that have chosen a non-agent business model, are in a much better position to engage directly with large enterprises as compared to the traditional reseller. Walking away from the enterprise business opportunity is more frustrating for the MSP.
Whose Data Center is it?
A final area to consider, data center location, is driven to some extent by technology but the technology reflects the business’s attitudes towards the supplier. The technology supplier’s solution should allow the MSP to host the software and store the data related to that software in a location of the MSP’s choosing. The MSP, especially a non-agent, will more than likely want to host the data in their data center or a location that they rent. They may also want to partner with another MSP in another region as a replication target in case of a disaster. Other MSPs may want to replicate data to a public cloud provider for disaster recovery and service uptime/availability reasons. The choice should be the MSP’s; it should not be forced on them.
While nothing lasts forever it is important that the MSP looks for suppliers that have a multi-year, even multi-decade track record of not only being in business but being consistent with their business model. A risk for the MSP is if the supplier goes out of business then they need to move quickly to get their customer’s data onto another platform plus deal with the embarrassment of explaining the situation.
The MSP should also place the same scrutiny on the supplier’s business practices. Many suppliers change their stance toward MSPs seemingly on a quarterly basis. They can go from channel-only to MSP-only to direct mostly, in a matter of a few quarters. In some cases, the new ownership of a technology supplier, may pivot or augment the business practices than the original founders. Many private equity groups now own technology suppliers, and they may be dispassionate about the channel. Having paid large sums of money to acquire ownership, they serve their investors who expect a return on capital however it comes.
MSPs should look for a supplier with a long and consistent track record of being engaged with the MSP community.
MSPs have a tendency to stay too focused on the technological capabilities of a prospective supplier’s solutions. Certainly, technical capabilities are important, and in our next blog will examine what MSPs should look for in the backup and recovery use case, but MSPs need to also understand who they are doing business with from a business perspective. The way their supplier implements their go-to market strategy tells the MSP executive a lot about what it will be like to do business with that supplier.
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