Co-Managed IT Services: An MSP Market Opportunity?

Author: Stefanie Hammond, head sales and marketing nerd, N-able
Author: Stefanie Hammond, head sales and marketing nerd, N-able

One of our partners recently asked me about my thoughts on co-managed IT services. They were having a difficult time finding new managed services leads and were considering moving upstream into the midmarket space to see if it would bring them better success.

It does seem like there has been renewed interest and enthusiasm in the concept of co-managed IT services as a new viable revenue source for MSPs to consider. The notion of co-managed IT services isn’t new. N-able has been promoting this type of model for many years now—going back to our old N-able University days. From that era, we prepared sample marketing collateral for our fictitious MSP, called Primetime Inc., that promoted a supplemental program called Prime Assist to their prospects. But co-managed IT services have evolved significantly since then.

Definition of Co-Managed IT Services

Co-managed IT services is the strategy where an MSP partners with an organization’s internal IT department to help it achieve its technological and operational goals and objectives. It is designed to be a non-threatening, non-competitive business arrangement, where the MSP strives to supplement the organization’s internal IT team, filling in gaps when it comes to deficiencies in knowledge, skillsets, or resources. The objective of the co-managed approach isn’t to replace a company’s IT team, but to complement it. At its heart, it’s the best of both worlds—combining the asset of having an internal IT team with the support, global industry knowledge, and expertise of an MSP.

But given the rise in popularity of the co-managed IT services model, is this really a market that your MSP should consider pursuing?

Five Benefits of the Co-Managed IT Services Model

1. Helps to broaden your target market and scope

Without potential mergers or acquisitions, many MSPs are limited in how to grow their customer base and their revenues within the traditional, outsourced managed services structure. But, if you have some specialized expertise in one or a few key areas, those skills can translate well into the small to medium-sized enterprise space. For example, take the new remote work movement, coupled with the current threat landscape, where employees are no longer behind the protection of corporate firewalls. This remote workforce environment has introduced new sets of responsibilities and significant risk for the internal IT teams, which if not handled appropriately, can increase the threat exposure for the organization. But MSPs—who may have specialization in delivering more comprehensive security services—can offer to partner with organizations to help them obtain the acceptable security services needed to properly protect their employees and infrastructure from attacks.

2. Will provide a new revenue stream for your MSP

Because security IS at the top of every CEOs priority list, this is now making up the bulk of organizations’ IT budgets. According to a recent 2020 report on security trends by the Herjavec Group, 42% of organizations expect to increase their IT budgets for security. As a result, this presents an opportunity for MSPs to partner with midmarket companies to help improve their overall security posture, especially if the company does not have, nor can afford to hire, their own specialized security staff and bring it in-house. And because there is a significant talent shortage when it comes to IT staff and IT security, co-managed IT service offerings can be a greenfield for MSPs.

3. Helps to mature your own MSP

By shifting their focus and moving upstream into the mid-market space, several of our MSPs have been able to work with much larger customers than what they would have under the traditional managed services model. Promoting co-managed IT services allows them to aim for bigger contracts, with much higher monthly recurring revenue fees tied to them, providing them with new business opportunities. This enabled them to break through their revenue and growth plateaus, which they might not have been able to do otherwise.

Also, working with larger customers in the mid-market space helps MSPs mature their business and improve their own integrity because the team is being exposed to new business processes. Midmarket organizations think differently, act differently, and have different requirements and needs, which can be a great learning experience for the MSP’s own tech team to be immersed in.

4. Can strengthen your existing customer relationships and improve retention rates

When speaking with our MSP partners about their origin story and introduction to co-managed IT services, it is often described as a happy circumstance. According to Joe Morris, CTO of ITvantage, due to their longevity in the industry and the strong client relationships they had forged, it became inevitable that some of their customers would begin to feel they had outgrown the traditional managed services model and want their own technical resources in-house. But instead of allowing themselves to be let go, ITvantage fashioned a new arrangement with those customers that worked to benefit both organizations.

Through their in-source offering, they assisted in the hiring and vetting process of new internal resources and designed an arrangement where they handled the day-to-day, help-desk-type work, while ITvantage handled the higher-end, more complex work. So instead of being dismissed, ITvantage developed a different approach that not only enabled them to retain those client relationships, but helped strengthen them and make them more profitable.

5. Can elevate your MSP to true trusted advisor status

The in-sourcing option works really well for another N-able partner, CRS Technology Consultants. According to their owners, John Joyce and Julie Klein, they have several clients they have assisted and are now enrolled in the in-source model. With these clients, CRS Technology Consultants is no longer seen as the company that fixes the printers; instead their status has been elevated to that of trusted advisor. They have been able to successfully transition from being a company of techs to becoming a valuable resource to the C-suite executives, providing guidance and leadership when it comes to their clients’ overall technology strategy and direction.

This guest blog is courtesy of N-able. Stefanie Hammond is head sales and marketing Nerd at N-able. You can follow her on LinkedIn and on Twitter at @sales_mktg_nerd. Read more N-able guest blogs here. Regularly contributed guest blogs are part of ChannelE2E’s sponsorship program.