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This is a continuation of my previous blog post which aims to discuss the near future scenario of extreme competition among Managed Services Providers (MSPs).

Differentiation among MSPs will mostly circle around go-to-market areas like marketing, sales and strategic capabilities as technology advantages will not hold for long, given high speed of wide adoption of new technologies.

In Part 1 we covered the Marketing perspective and in this blog post we will cover the Sales perspective and the Strategic perspective.

√ From a Sales perspective there is a huge difference between selling boxes and selling services. The second needs a consultative approach for convincing customers to sign a service contract. Consultative selling needs dedicated sales teams for each type of service (e.g. managed and cloud services). Acknowledging the different sales roles (e.g. farmers and hunters) is preferred when dealing with both up-selling and attracting new customers.

As mentioned in my previous blog post, the market of IT services delivered by Managed Service Providers (MSPs) is expected to grow by almost 80% by 2018, compared to 2013.

Now, what effects will this growth have on the MSP market? Here are a few:

√     Number of MSPs will increase. This will happen as current ‘box movers’ will start more and more to enter the services area,

√     Prices will go down as commoditization will increase. Commoditization in MSP-type of services (help desk, security management, hosting) will increase much faster than in other types of services (e.g. application management for core functionalities), and

√     Margins will be smaller and smaller

It can be difficult to find relevant estimates for niche market segments, such as managed security services, in such a volatile context. The volatility is mainly generated by the amount of consolidation and business model transformation processes that are currently taking place among managed service providers (MSPs).

In this July, 2014 article from MSPmentor, the author cites forecasts the market values of managed security services, while Research and Markets makes claims for the overall MSP market. If we compare the share of managed security services within overall MSP market, in the two scenarios below, we can easily conclude that the revenue contribution of security services for MSP will grow.