Managed Services is Quickly Commoditizing

Yesterday I met with Bob Howard, founder of Contact Science (a firm specializing in telephone prospecting productivity). We were exchanging ideas on prospecting – specifically in the SMB managed services business. The SMB managed services business is quickly commoditizing – becoming a price per box sale just like the PC business a decade ago.

That’s bad news for those who have been working to build this economic engine over the past decade.

But it’s not over – it’s just changing.

What Does The Future Managed Services Provider Look Like?

I guess there are many answers to this question, but undoubtably, security is central to the long term SMB business requirement. There are some offerings that are pure security management – but I don’t see the SMB company hiring multiple companies to manage their systems.  They need one – and it will include both the commodity and the security.

SMB Security is extremely relevant.  Note, I am not talking about firewall management – that too is a commodity. Anyone can provide this.

Last week I spoke to 24 business owners in Tennessee. One single sales rep was able to pull in 24 lunch & learn executive-level attendees – mostly new logos, for a single event. The results? 100% of them moved to the assessment stage. This was not a product dog and pony – it was an educational event put on for the benefit of small business owners.  The hosting company ended the session by offering an assessment; every business owner saw the need and jumped on it.  Security is in high demand – when presented correctly.

The Future Security Offering

So what does the future MSSP offering look like? If you look at what’s happening in the enterprise space, it’s significant. CISOs are recognizing that they can’t really keep the hacker out. They also see IT control fading as end-users bring their own computers to work (iPads and phones), accessing thousands of unapproved apps. Corporate data is everywhere – and in many cases, stored and transmitted in clear text.

New technologies are popping up to manage this new intractable world. Companies like RiskIQ are searching the web to analyze a company’s attack surface – finding anything online related to that company, and discovering data outside the firewall. They can also look for rogue apps sporting a company’s logo – apps that are not necessarily part of that company’s program.

Yesterday, WSJ Reporter, Rachael King wrote a piece on cloud apps and security brokers entitled, Companies Sniff Out Employees’ Cloud Habits. Interesting article. This technology helps companies find the apps their end-users are using, and enforces policies around them such as blocking or encrypting data destined for the cloud.

In my latest version of The House & The Cloud (2nd Edition) I invited guest author, Steve Rutkovitz (Founder and President of Choice Technologies) to write a chapter on managed security services he is offering through small resellers to provide compliance and event correlation.

All of these are growing needs. As Mike McConnell, former Director of National Intelligence under George Bush, put it, “We need predictive security” intelligence. He talks about having the people who possess the trade-craft to analyze the data and respond accordingly. The SMB can’t afford this. The programs I’ve referenced above are targeting large companies with big security budgets. But through cloud and managed offerings, the SMB can have it. Just as CRM, before cloud apps like Salesforce, was once an enterprise thing (remember using Act installed on a DOS computer), the new MSSP for the SMB will bring enterprise class services downstream at an affordable price.

Not Everyone Will Make The Leap

There’s definitely new business to be had. But not all will make the leap. Just this week I was talking with a colleague over breakfast at Starbucks. We’ve both had opportunity to work locally with a Charlotte-based SMB reseller. My one and only engagement with this company was about 5 years ago. Even then I could see this day coming. Their offerings were behind the times. They hired me for 2 days to help them outline a growth plan. At the end of two days they agreed to move forward with it. However, I was never able to get back in touch with the owner.

My colleague reported a similar experience with this same company.  The owner of that SMB reseller had made the investment to get a plan – twice. Yet, he was not taking action to implement. At some point over breakfast, as we shared ideas, that SMB reseller name came up – they’re going out of business.  Why? My guess is they were too busy to consider the future. Now it’s too late.

© 2015, David Stelzl

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