We often divide new technology into two categories: immature and mature. Immature, of course, is when something is first developing. Over time, technology improves and becomes mature, the point by which it’s considered robust and generally accepted.
As an industry, we often prejudice immature technology because of its lack of features, performance issues or difficulty in use. We pine for mature technologies, those that have all the kinks worked out and enough general market acceptability to make them relatively easy to sell and support.
I’m going to argue that technology maturation isn’t a good thing. In fact, it may even work against a managed service business.
Recently, Gartner CEO Gene Hall said, “Mature is a polite code word for increasingly obsolete."
I agree. Immaturity of technology is part of the reason the channel is able to make money. The old saying, “Where there’s mystery, there’s margin” is a reflection of immaturity – the technology is so new and imperfect that end users need outside help to make it work properly.
What’s valuable to the channel is a balance of moderately mature technology and market adoption. It’s at this critical inflection point that solution providers have the best opportunity to make money on goods and services, as there’s enough market awareness to drive sales and enough mystery remaining in the technology to necessitate outside help.
These principles apply to the managed services market. Some would argue that managed services are the continuation of mature technology adoption by other means. When technology reaches a certain maturation point, end users will find it simple enough but burdensome to operate on their own. They will then turn to a managed service provider to assume administration.
MSPs are able to charge premium prices for such services so long as the market for those services remains relatively immature. Once the market matures – or reaches saturation – MSPs will lose the ability to charge premium prices, and they’ll see margins erode.
So, how do MSPs maintain high margins amid maturing technologies? Two ways. First, continue to adopt and support technologies that end users can’t implement or manage on their own. Second, lower your delivery costs by remotely managing and administering the stable services, such as core infrastructure management, that are considered more mature by most small-to-mid-market enterprise standards.
NetEnrich can help on both fronts. You will always need to offer foundational managed services, such as network monitoring and management. You can maintain your profitability by remotely managing these services and using partners such as NetEnrich on a fixed-fee basis, to free up your staff and financial resources for investments in more complex engagements, such as managing virtualized environments, Unified Communications or cloud, which create a higher value to your customers and higher margin returns for your business. Better, NetEnrich can help make easier that adoption and management of these next-generation services, ensuring continued profitability.
Of course, all of this is code for growth and expansion, rather than maintaining the status quo. Too often, vendors, solution providers and even end users try to wring value out of increasingly obsolete technologies and ignore new opportunities in emerging technologies. We think what’s needed is a balance between the two extremes.
Keep an eye out for next quarter’s webcast series, beginning in January – we’ll explore the best ways to grow your managed services portfolio without breaking the bank. Of course, expect Justin Crotty to have fun with a few of our topics. Why not? This is a great business that we’re all in, and it’s fun!
On behalf of the entire NetEnrich team, we want to wish you a very happy holiday season. May your days be filled with peace, joy and happiness throughout the New Year!
President and CEO, NetEnrich, Inc.