By Michelle Welch, Senior Vice President of Marketing and Channel at WatchGuard Technologies
Managed service providers (MSPs) make money the same way most businesses do, by increasing recurring revenue while reducing costs. However, unlike many larger corporations, the average MSP has very little wiggle room between profitability and loss in the early stages, or when transitioning from a product resale model to managed services.
This is why it’s more important than ever for MSPs to focus on vendor consolidation to work with those that can help not only maintain and grow client rosters but also contribute to cost savings and higher margins. With the right vendor partnerships, consolidation can help drive competitive differentiation, which will increase new business and end customer wallet share for your MSP business over time. Strategic vendor consolidation also can generate dramatic savings as it relates to staffing, training and certification, and ongoing service administration.
The Power Of One
The growing desire for security consolidation was what ultimately led WatchGuard to acquire advanced endpoint protection provider Panda Security in June 2020. Our partners and customers have consistently listed enhanced endpoint security as one of the top solution categories they wanted to see from WatchGuard over the last several years. With the spread of the COVID-19 pandemic and subsequent shift to remote work in 2020, demand for endpoint security has continued to grow. At the same time, traditional network security controls remain a high priority, with network attacks growing by 6% in Q2 2020 even as most employees work from home. This acquisition allows our current and future customers and partners to consolidate their fundamental security services for protection from network to endpoint through a single vendor relationship.
Let’s take a deeper look at the key benefits MSPs experience through consolidation:
- Simplified Partnership – The most commonly cited challenge for solutions providers – especially MSPs in the security services space – is the ability to attract and retain qualified employees. Moreover, MSPs face the challenge of balancing workloads for those technically trained individuals over the long term. All vendors have some level of training-based certification they expect partners to maintain. This means that for every vendor you choose to engage with, there’s a higher level of strain on your pool of precious technical resources.
Beyond training and certification burdens, if you’re struggling to maintain expertise across competing vendor offerings, your technical staff ends up stuck with a backlog of additional administrative work. Instead of maintaining a single test environment, your staff is forced to maintain multiple disparate environments. All of this adds up to more time spent on training and administrative work to sustain vendor partnerships and less on building your business.
Vendor consolidation means that you can dramatically reduce the number of sales and technical training requirements, management tasks, and partner program requirements your team is dealing with. Reducing vendor partnerships to a single offering for each service category is the best, most efficient use of your most valuable and scarcest resource – your technical staff. Additionally, with fewer vendor engagements, partner program criteria become easier to manage, and the benefits and incentives are far simpler to track and achieve.
- Simplified Experience – Purchasing and reselling IT products and services can be complex, especially when it comes to the security space. You have to navigate a sea of competing vendors and distributors, each with their own slightly different approach to critical business processes such as licensing, invoicing, renewals management, and customer support. MSPs that maintain too many vendor relationships struggle to manage the differences among them, which slows down and even stifles business and can degrade customer experiences.
Consolidating vendors allows you to streamline and simplify those business processes. Not only will this reduce the need for manual procedures across various vendors, but it will simplify the ongoing management of integrations with your automation tools. Moreover, consolidating vendors enables an MSP to consolidate distribution sources. These distributors often play a major role in how you get invoiced by vendors and can therefore also impact customers’ billing experiences. For example, an MSP who is providing a per-user price for a set of user-based security services (a very popular offering with the recent explosion of remote work) may be forced to aggregate dozens of invoices each month for hundreds or even thousands of customers. Consolidating vendors, distributors, or both can shrink that pile to a single invoice per customer, per month to manage, which saves time and money.
- Simplified Platform Management – Vendor consolidation also can help you streamline platform management requirements. The most profitable MSPs are looking not only to consolidate vendors but to align with vendors that provide solutions for more than one offering in their stack – with centralized management. For instance, WatchGuard’s acquisition of Panda allows MSPs to maintain one vendor relationship for network security and advanced endpoint protection services, along with multi-factor authentication (MFA), and Wi-Fi solutions as well – and to manage them from a single, MSP-focused cloud management console. In this example, your MSP business could potentially eliminate the need for at least three other vendors while also streamlining management processes.
Many vendors have started down the path of diversifying their portfolios, however, few have demonstrated a strong ability to integrate unique offerings in a simplified manner or through a single management console. So, before choosing a strategic vendor to consolidate on, you must explore and understand that vendor’s plans for streamlining administration and reporting tasks.
- Simplified Vision – Acquiring new customers and expanding business with existing customers is all about the breadth of your portfolio. That’s why it’s critical to partner with a vendor who not only provides a wide range of services today but shares a similar vision for investing in new services over time. By choosing vendors with robust and expanding offerings, you’ll have more opportunities to increase your footprint with existing clients. For example, five years ago, WatchGuard partners were focused on network security – protecting data within and traveling between trusted networks. Now, those same partners have access to a broader portfolio that includes advanced endpoint security, MFA, and secure Wi-Fi solutions. Many of those MSPs have used our growing portfolio to build their mindshare (and therefore wallet share) within existing customer accounts. This also allows them to cast a wider net with marketing and sales activities, aiding in new business development.
The more vendors you’re working with, the more challenging it becomes to align on end-customer needs and associated portfolio requirements. Consolidating vendors and working with those that share your vision for which products and services your combined customer base needs most – both presently and over the long term – can drive tremendous business growth.
Consolidate To Separate From The Pack
Strategic consolidation will help ensure that you’re working with vendor partners that understand your needs, reduce your costs, and can help generate new business opportunities and growth. It’s the most effective way to achieve the flexible pricing, service sophistication, in-depth expertise, and business efficiencies you need to differentiate in today’s competitive marketplace. Heading into the new year, now is the perfect time to assess your vendor stack and identify opportunities to consolidate that will take your business to the next level.
About The Author
Michelle Welch is Senior Vice President of Marketing and Channel at WatchGuard Technologies.