How MSPs Can Build Midmarket Managed Services Practices


Author: Neal Bradbury

Regardless of an MSP’s vertical market preference, the most popular go-to customer for most MSPs is an SMB. More specifically, MSPs primarily target the “S” in SMB, which Gartner defines as companies with less than $50 million in annual revenue. Small businesses are a natural fit for MSPs because there are so many of them (nearly 30 million, according to the U.S. Small Business Administration). Plus, small businesses often can’t afford enough IT staff to cover their business technology needs, so the MSP model is very attractive.

Companies with more than $50 million in annual revenue but less than $1 billion—the middle market or midsize market—has traditionally been a harder segment for MSPs to reach. Unlike their smaller counterparts, midsize companies have IT staffs that are comparable in size to most MSPs (or larger). However, midsize companies have lots of IT challenges that MSPs can potentially solve, and they’re a viable and potentially lucrative alternative that MSPs should consider targeting.

In a ChannelE2E article, Jason Waldrop, CEO of CWPS, an MSP that made a conscious decision to scale into the midmarket years ago, revealed why the midmarket is underserved by MSPs. He said customers of this size don’t want to go offshore for outsourcing services, but they aren’t big enough to engage the biggest service provider companies like IBM Global Services. “At the same time, most small MSPs aren’t equipped to fill the midmarket gap,” Waldrop added.

So, the big questions are: What are midsize companies’ primary business needs? And, how can MSPs win business in this market?

Midmarket Companies’ Needs vs. Small Businesses’ Needs

Small businesses often have far-reaching IT needs, including consulting services, hardware and software implementation management and support, ongoing networking and security services, and virtual CIO services, just to name a few. Most midsize companies, on the other hand, are more strategic about which IT services they want to outsource and which tasks and processes they want to keep in house.

A 2016 survey of middle market companies from Deloitte found that 52 percent of executives approach technology investments for their strategic value, up from less than 40 percent in the previous two years. A focus on productivity and speed-to-value drives executives’ investments, while IT security continues to be a top priority. Another interesting finding from the survey was that 83 percent of respondents devote at least 40 percent of their IT budgets to implementation of new timesaving solutions, rather than spending money on maintenance of their current systems.

Where do your IT services fall when it comes to implementing new timesaving solutions? Are you constantly working on upkeep and maintenance for clients, or are you helping them with projects like cloud integration and adoption? According to the survey, the biggest differentiator in the middle market is dependent on technology and the productivity gains businesses can make by implementing that technology. So, CIOs and CEOs are really looking for an MSP that can help them not only with day-to-day operations, but with making a strategic investment in the solutions they’re implementing.

How MSPs Can Win Midsize-Business Deals

In addition to understanding the different needs midsize companies have compared to small businesses, there are a few additional differences MSPs need to understand. First, the decision-making process. With small businesses, there’s usually just one decision-maker — usually the business owner or the office manager. With midsize companies, however, there are more people to sell to and different goals and agendas that have to be taken into consideration, so you’ll need to tailor your message accordingly. Also, be prepared for a longer sales cycle.

The biggest hurdle you’ll face, however, is convincing a prospect that your company, which has but a fraction of the employees your prospect has, can solve their business challenges. The key here is to show how your IT staff is different than a typical IT person. For starters, by contracting with your company, a customer gets access to an entire team of experts for a fraction of the cost of hiring one IT person. Plus, your team has a deep bench of IT expertise, confirmed by the diverse customers you serve and the range of IT and vertical market challenges you solve. This will have a stronger impact if you can back it up with specific metrics such as customer satisfaction scores and/or service level agreement (SLA) response times that confirm your company’s competence serving other customers.

The key to winning a midsize-business deal is convincing the prospect you can support their technology goals and needs. When you’re having conversations with them, highlight your understanding of the business needs of the market and their pain points—and how you can help. Delivering the right message and painting a picture of your company’s capabilities can go a long way in helping you win their business and growing your MSP.

Neal Bradbury is senior director of business development for Intronis MSP Solutions by Barracuda. Read more Intronis MSP Solutions by Barracuda blogs here.




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    Nick Bock:

    Good read, and excellent description of challenges in moving upstream for a S focused MSP.

    The bigger, unaddressed question, is really SHOULD an MSP try to move upstream to midmarket. Its a different landscape, requiring a very different sales, AM, and engineering team. Trying to use your S MSP team to provide solutions in the midmarket is a lot like asking an account manager to instantly become a successful outside sales person. Rarely works because when it comes down to it they are two completely different people / skillsets.


    Neal Bradbury:


    Thank you for commenting. You bring up an excellent point. Here are my thoughts:

    If you are running a successful MSP that serves SMBs well, and you’re making a ton of profit and have a pipeline of great opportunity, awesome. Stay the course. If you want to see what other markets might be good for business, take a closer look at where you are having the most success in your business? Often times an MSP will find a specialization in either a vertical or application that is driving their most profitable customers. That specialization is typically what motivates the move up market – being able to do what you do and solve a specific pain for a much larger customer. As long as these larger fish don’t kill off the rest of your business, you’re good and a new, and hopefully more reliable and profitable, revenue stream is introduced.

    Also, as you point out, once you have closed the first deal, that’s when the real work begins. If you as a business decide to continue closing opportunities in your specialization for larger customers you will need to review your staff and procedures to make sure they are able to scale without harm to the rest of the business. This of course does not happen overnight, but we’ve seen it time and time again lead to positive change for our MSP partners.


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