Managed Services to Take Centre Stage in 2024

By Richard Thomas, founder and CEO of Highlight.

  • 6 months ago Posted in

Markets are continually evolving and repeating. With every new disruptive technology there are opportunities for creative and innovative solutions. However, once these technologies become established with preferred ways to operate and sell them, the focus then shifts to maximising cost efficiency until the next big disruptor comes along.

In the telecoms sector over the past 10 years, providers have gradually commoditised connectivity, pushing down prices and striping away all the helpful value-add elements until they are just selling the basic nuts and bolts.  This race to the bottom makes it hard to differentiate since everyone is basically selling the same thing and the only way to stand out is to charge even less.

Changing this pattern of behaviour is difficult and many providers are starting from a hard place.  The need to continually compete on price means they no longer employ the experienced and usually expensive people who understand how the technology works and how to get the best out of it. They were the first to go when cost cutting.

There be gold in them thar hills

However, we have seen a rapid change in attitude. There has been a sudden realisation that there's a big pot of money in managed services if organisation have the determination to go for it.  

Amongst both our customers and partners, we have also seen a bit of a philosophical reinvestigation into what managed services mean. People are trying to properly reengage with it and make the managed portion of their services more significant rather than just using the term as a marketing tagline. 

Cisco was one of the first to get the ball rolling about nine months ago by setting a three-year objective to deliver 45% of its current $57 billion revenues via managed services rather than selling direct to corporates. To achieve this huge leap in such a short space of time, Cisco has shifted funding to support the move with training, incentives and commissions all designed to drive behaviours and sell more managed services.

Many MSPs are looking to capitalise on the opportunity. For example, in the last six months, Gamma Telecom, one of our largest partners, launched a new range of innovative managed services and is now selling SD-WAN solutions at scale, differentiated by the value of its service wrap. 

It’s hard to pinpoint what prompted these changes. Perhaps the race to the bottom finished and nobody won, or perhaps SD-WAN reignited the interest from customers. Whatever prompted the interest, it’s going to drive a huge shift in the overall telecoms and reseller market. 

The role of SD-WAN 

One catalyst to change seems to have started with the manufacturers of SD-WAN solutions saying that their technology was so easy to manage that enterprises no longer required a service provider. All they needed to buy were the wires and basic connectivity.  

This message has basically turned out to be false as users soon realised it takes a lot more time and effort than they anticipated, and many would much rather build a proper relationship with their service provider. 

Interestingly, those customers that have tried to manage SD-WAN have also achieved a level of visibility into their systems. They now know what is possible and have seen behind the curtain.  When they decide to move back to a provider, many are now asking for tools that give them visibility of their networks.  

The art of managed services

At present, there appears to be considerable confusion in the market over what a managed service comprises and that's almost the beauty of it.  With no set definition, a provider can build their own.

A managed service is built on understanding what the customer wants from the relationship, and this starts with a conversation. Many providers need to relearn how to build a relationship. This is where the smaller resellers and service providers have a head start, since they have built their businesses on a relationship basis, whereas larger providers have been largely focused on selling bandwidth with a focus on price.

Interestingly, SD-WAN is well suited to MSPs since to make SD-WAN work effectively, a provider needs to engage properly with both the technology and the customer.  However, providers still need tools to help rebuild a conversation with customers.  The Meraki SD-WAN dashboard for example is very comprehensive but this is still focused on managing the technology and doesn’t help in managing and building a relationship. 

We've demonstrated that when it is done right, and when using a service like the Highlight Service Assurance Platform, providers can increase customer satisfaction and reduces failures. In Gamma’s case, they achieved a 25% increase in customer retention.  So clearly the managed part of the service is demonstrably the part that matters to people. 

So in 2024, I believe providers are going to rediscover the lost art of delivering a proper managed service.  Adding a proper service layer on top of the connectivity is the only way to stand out, to differentiate and to make more margin on sales.   Customers moving back to a service provider are now demanding that their provider supplies the visibility to demonstrate how they will manage the proposed solution and communicate successful delivery of what has been promised. If a provider can include a service assurance platform like Highlight as part of their managed service package, then the customer is more likely to sign on the dotted line and stay with the relationship for the long term. 

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