Building successful ecosystems: a strategic advantage for MSPs

According to Canalys, “50% of MSPs report they will be working in a managed services hybrid delivery model in 2024.” This means that they will be working in an ecosystem of other partners and vendors, as well as with customers’ IT teams, to deliver solutions to those customers.

The concept has been around for a while, but digital connectivity nowadays provides companies the chance to connect with a lot more partners than before. Therefore, it’s not a surprise that it’s getting more and more important to build an efficient ecosystem and partnerships with other providers, and vendors, and to collaborate closely with clients’ IT teams to deliver holistic, or as we like to call them, fit-for-purpose solutions.

We are in touch with MSPs daily, both as clients and partners, and we believe in the importance of bringing all parties together, now more than ever.

But first, what do we mean by ecosystem? 

James F. Moore, who first theorized the concept in the early 90’s, describes a business ecosystem as follows:

“An economic community supported by a foundation of interacting organizations and individuals, the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they coevolve their capabilities and roles and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the community values the function of ecosystem leader because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles.” 

For the TL;DR instead of operating a linear/channel relationship between a supplier and client, the client is now the center of a solar system-style of organization, with planets being the different partners gravitating around and interacting to maximize the value for both clients and partners, as Bob Layton puts it nicely at Channel Futures.

The concept revolves around the notion that every component within the ecosystem influences and is influenced by others, resulting in an ever-changing dynamic where each entity must remain flexible and adaptable to endure, with this being very similar to the dynamics observed in a biological ecosystem.

OK, but why is it particularly important for MSPs?

According to PWC, businesses that use MSPs strategically in an ecosystem are outperforming others by a wide margin: “The highest performers in our research are 4.2 times more likely to use MSPs for strategic advantage, beating companies that use them only for cost savings by 43 percentage points of performance premium. Further, companies that use MSPs for strategic advantage are 1.6 times and 2.4 times more likely to be faster to market and more innovative, respectively, than those focused solely on cost savings.”

Being ecosystem-driven is an integral part of top-performing companies, with the goal of not only reducing costs, but also becoming faster and more innovative, and what applies to MSPs applies to the entire IT industry.

If you want to be a top-performing business, you have to be ready to outsource and build a strong ecosystem of niche partners that will cater to specific needs, but in the most efficient and reactive way. 

As an MSP, adapting to this need naturally means building a strong ecosystem yourself: you’ll be able to differentiate from the crowd by offering strong services in several niche areas, therefore reducing the cost of business for the client (as they don’t have to seek and maintain relationships with a myriad of other MSPs), and developing a competitive advantage that is really hard to beat, as potential competitors not only have to copy the product but also compete against the entire network of complementing businesses.

MSPs collaborating with partners and vendors can tap into a wealth of knowledge and resources, extending their service offerings beyond what is achievable in-house. This collaborative ethos is at the core of the managed services hybrid delivery model, fostering innovation and adaptability in a rapidly changing technological landscape.

With the focus on working closely with clients’ IT teams, MSPs gain a deeper understanding of the intricacies of their businesses. This collaboration ensures that solutions are not just technically sound but also align with the broader strategy and objectives of the client. The result is a more customer-centric approach that goes beyond meeting immediate needs to address the long-term goals of the client.

Sounds good, but what’s the catch? 

While ecosystem building seems like a no-brainer, it comes with its set of challenges: MSPs need to navigate the complexities of managing diverse partnerships, ensuring seamless interoperability, and maintaining effective communication channels. Overcoming these obstacles is crucial for unlocking the full potential of collaborative ecosystems.

While this would need a much deeper dive, here is a non-exhaustive list of the main challenges and some tentative solutions: 

• Communication: Many vendors find it challenging to convey their message effectively, leading to misunderstandings. Keeping communication clear, timely, and relevant is crucial for attracting and retaining partners. The solution? Keep partners informed and maintain open lines of communication. Regular updates on product improvements, market trends, and program changes through various channels like newsletters, webinars, and partner portals should be standard practice. Remember, communication is a two-way street. Listen to feedback from partners to improve and refine your communication strategies.
• Training for Success: CompTIA drops a bombshell: 44% of MSPs admit they lack the technical training and skills needed to handle new, complex services. It’s like expecting partners to whip up a gourmet dish without a recipe. So, what’s the fix? Continuous training and certification programs are the secret sauce. They keep partners up-to-date with the latest tech trends and enable them to offer more advanced services. Think of it as handing your chefs a complete cookbook by setting up a dedicated partner training portal with self-service learning options.
• Balance partner engagement: Often enough, the Pareto principle (also known as the 80-20 rule, even though the proportions don’t need to be exactly those), holds true: a small group of partners brings in the majority of channel sales, which can really hold back-channel revenue growth. The solution here would be to get the whole team ready for the race: make sure that the larger partner bases have all the tools they need (training, education, joint business planning, and any resource you can think of that will help generate more sales).
• Choosing the right partners: According to Accenture’s research, 77% of partners say they have more options in providers than they did three years ago. This has flipped the script from vendors choosing partners to partners picking their vendors. Now, vendors have to put in extra effort to win over partners and grab a piece of the market. So, what’s the solution? It’s time to bring out the flashlight. Define your ideal partner profile and spell out your value proposition to your partners, their staff, and their end customers. Craft a focused recruitment strategy that highlights these benefits and sets you apart from competitors, all while showing your dedication to helping your partners thrive.

Conclusion  

In conclusion, the rise of the managed services hybrid delivery model emphasizes the crucial role of ecosystems for MSPs. These ecosystems, characterized by collaboration between partners, vendors, and clients’ IT teams, drive innovation and customer-centricity.

As a circular system integrator, we recognize the importance of ecosystems in delivering comprehensive solutions. We might not be cooling specialists and we are not developing the next gen hypervisors, but we understand that, as clients and partners, if we all sit at the same table, the chances to efficiently help all stakeholders involved increase significantly.

To succeed in this landscape, MSPs must build strong ecosystems themselves. This involves partnering with diverse businesses, offering niche services, but also overcoming various challenges such as effective communication and balanced partner engagement.

Ecosystem is more than a buzzword; it is the way to go for the years to come.