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Which One Among The Specialization And Commoditization Model Helps MSPs Lucrative?

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Apr, 2016


With the growth of the Managed Service Provider industry in the current economic scenario as all the small, medium and large scale enterprises adopt its services within their enterprise, there is an obvious spurt in the number of IT companies delving into providing the service. Earlier, something that was only a questionable job profile, has pirouetted into a work profile that is way more lucrative. Where 71% of the IT service sector have incorporated the managed service provider model, this exuberant surge has resulted in commoditization in the Managed service provider’s work structure.

In order to spawn effective monetization, MSPs need to decide whether to deviate from the commoditization model and adhere to specialization or stick to the indistinguishable commoditization model where due to multiple sellers, the unique selling proposition of the MSP itself is a deluge.

Although, there are MSPs who cater to a standard business portfolio, there are also other who  indulge into effective specialization work model. Deciding between the two is the question of debate.

What the Specialization Model Offers to the MSP, it’s benefits.

1. Scalability:

It is important that the MSP model is profitable and enables business growth. Keeping this in mind, it is essential that MSPs target specific industries and specialize in their requirements and deliver standardized services that will result into scalability. This will prevent stagnant growth due to adopting multiple practices as the same time, being proficient in none. This does not imply refusing to evolve, but only mean to improve the core values itself.

2. Target Client Base:

While it is given that different services delivered to different industries vary inter profit output ratio, MSPs who plan to settle towards the specialization model need to maintain the field or industry which they intend to cater to. This will ensure a lucrative growth model. For eg. specializing in managed services for a SMB as compared to a managing the IT elements of a healthcare organization will both yield business but with a varying profit proportion.

3. Technology:

One of the most effective and obvious benefits of specialization is being able to stay at the top of the industry as far as the growth in the technology is concerned. If you are handling one lucrative profile, you will always be all eyed about the developments that industry has to offer and will be able to benefit in terms of staying updated with the technology. Being technologically advanced will only come to the benefit of MSPs as it will attract more clients, there by increasing the customer base.

4. Competition:

It is not doubt that with the commoditization model out in the field, there will be many sellers or managed service providers who will be delivering what you sell. But the key here is to perform effective vendor management and thereby increasing monetization. Understanding and being calculative about the competitor movements while they are busy into many other field, will allow you to have a bonus. keeping your service profile attractive is the key that will convert competition into a beneficial factor for your business.

The MSP Commoditization Model:

It is clear that the commoditization model is where MSPs perform a variety of services that sort of get replicated within the industry.  With the technological advancement, innovation strategies and educational upgrowth, managed services are getting commoditized and widely accessible. Delving into this structure has its benefits such as mentioned below:

1. Pre-established Market:

When you delve into the commoditized sector, you are stepping into a market that has already been set up in the past. By only adopting some very innovative and effective marketing principals, you can benefit as an Managed service provider.

2. Investing like an Expert:

In order to benefit from the commoditized model of MSP, you need to be well versed with what is trending and create a service profile that is actually in demand. Keeping your foot into everything and mastering none will get you nowhere.

3. Increasing the portfolio:

Sometimes, when you offer more than what is expected, you are bound to transfer the probable clients into business portfolios that you are handling. With the commoditization model, this can effectively be done. As a managed service provider, being able to perform adequate vendor management skills and increase the quality and number of service you offer such as billing management, data collection and analysis, managed voice services, etc, you are increasing your monetization ability along with the chances of harnessing an increased clientele base.

Although it is evident from the above debate that both the models have their own structural benefits, it cannot be ignored that the specialization model is by far more lucrative than the commoditization MSP model.  As a managed service provider, the specialized model proves to attract more monetization and scalability in today’s economy structure.

By : Vishal Pokala

Vishal Pokala is The Marketing Research & Strategic Manager of SURE! (a Magnaquest product). SURE! is an internationally acclaimed player in comprehensive end-to-end Subscription Business Solutions for PayTV, Broadband and Cloud Computing businesses – through deployment of Metered Billing, CRM, Service Fulfillment, Value-Added Services, and Managed Services.

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