There’s strength in numbers. That claim appears to ring true even in the MSP industry.
The latest evidence: According to a new study from ConnectWise looking at the current state of the industry in Australia and the UK, MSP that join peer groups typically outperform solitary companies in the sector.
MSP peer groups allow IT service providers from non-competing markets or regions to network with one another, compare business performance, and share best practices. The dialog typically features CEOs and/or business owners representing each MSP.
Key peer groups organizers within and around the IT services market include HTG Peer Groups (now owned by ConnectWise); Taylor Business Group; Technology Assurance Group; TruMethods; and Service Leadership Inc., among others.
In some ways, distributors, educational organizations and IT services franchises also act as peer groups. Examples in those areas include CMIT Solutions, Growth Achievement Partners, Ingram Micro TrustX Alliance, The Network Group, and TeamLogicIT. ( Side note: Thanks to Continuum CEO Michael George for some conversations about peer groups that date back about a year ago.)
MSP Peer Groups: Delivering a Competitive Advantage?
In the current climate, the ConnectWise research seems to demonstrate that MSPs participating in peer groups have a distinct advantage over MSPs that go it alone. “While the race to the top is becoming more intense, it is worth mentioning that where there are winners, inevitably there will be losers – and some non-peer-group MSPs will likely fall by the wayside if they cannot overcome the multitude of challenges that they are facing and will continue to face in future,” the study asserts.
Indeed, four in 10 non-peer group respondents said their organization is taking shortcuts to keep up with customer demand. “These organizations will need to be incredibly careful. Many non-peer-group MSPs are being forced to adopt a very short-term mentality, which seemingly allows them to keep up with customer demand and their competitors, but in reality, they might just be papering over the cracks,” write the authors.
Additional challenges facing these MSPs include the changing threat landscape, offering services at a competitive price, and offering a service that is cost-effective for their organization.
Of course, MSPs within peer groups face a similar set of challenges -- including developing new business and cultivating new customers, addressing the changing threat landscape, and offering services at a competitive price.
MSPs and Peer Groups: Top Eight Takeaways
According to the study’s authors, the top lessons to learn from the study are:
- Diversified Services: Non-peer-group MSPs typically offer five different services to customers. In stark contrast, peer-group MSPs scale to currently offer about 14 services, on average.
- New Services: The majority of peer and non-peer MSPs are planning on rolling out new services in the next 12 months.
- Got Support: Most MSPs from both groups (peer and non-peer members) now offer support for the services they roll out. But here again, the figures are higher for peer group members.
- Customer Demand: This increase in demand is proving too much for some, and corners are being cut in order to keep up, particularly among non-peer group members.
- Key Challenges: The threat landscape, competitive pricing, finding new customers, and innovating are all top challenges suffered by non-peer-group MSPs.
- Keeping Pace?: The majority of peer-group (58%) and non-peer-group (57%) MSPs now find it harder to meet customer needs.
- Customer Experience: This is being overlooked by non-peer-group MSPs. Only half (50%) measure their success by it and only 53% are prioritizing its improvement over the next 3 years.
- Bottom Line: Most (87%) non-peer-group respondents worry that their organization will miss out on the emerging billion-dollar industry of managed services.
Ultimately, some MSPs may become too fixated on top line of revenue and bottom line profitability at the expense of customer experience.
“In any buyers’ market, if you ignore customer experience, customers will ignore you in return,” the study asserts. “And improving customer experience is easier said than done, with customers demanding more (technology, security, speed, reliability, contact) for less.”
Peer-to-peer partnering is one way to potentially boost those customer experiences. We'll dig for more info and analysis next week at ConnectWise Automation Nation 2018 in Orlando.
Additional insights from Joe Panettieri.