Managed service providers know they want to offer exemplary customer-focused hosted services including apps and hosted desktops. But these firms (players ranging from niche players to global Telcos) also all struggle with the same questions: What are the right services to lead with? What customer sizes should I pursue in what markets? Does market geography matter? How and when should I expand my services offers? 

Arriving at the proper initial Service Definition is critical to answering most of these questions so as to enter the market most intelligently. That is, what initial service portfolio is best to select?  During the service definition, service providers almost always boil-down the options to three potential categories to offer:

  1. A generic “horizontal” hosted desktop
  2. A market-specific “vertical” hosted desktop
  3. Custom services to design bespoke desktops to meet customer needs

In this Blog I’ll try to address the service definition decision points (and pitfalls) we at Citrix recommend, as well as those with which we see most frequent successes.

The first top-level decision 

The first recommendation I always make, is to avoid starting with option #3 – leading with a custom hosted desktop offer. Although custom technology design is at the heart of many MSPs’ differentiation, the ability to scale is absolutely critical to a profitable initial desktop offer… and a “custom” strategy doesn’t scale. Implementing hosted desktops is not trivial – and customization is not, either. Leading with a labor-intensive custom offer will likely strip profitability from initial projects and jeopardize any follow-on business.

That leaves the question: Offer a vertical (market-specific) offer vs. offer a horizontal (generic) desktop?

My recommendation is this: No matter what your size, unless your firm already has strength and experience in a vertical market, lead with a horizontal solution.

By “strength” in a vertical market, I mean you have at least (a) existing offers and customers in a clearly defined vertical or industry, (b) existing experience in a specialized area such as security, compliance, regulation, etc.,  (c) a sales force that knows how to sell into that vertical/industry/specialization, and /or (d) a marketing and demand generation focus in that vertical/industry/specialization. If you can say you have strength in one or more of these domains, then offering a “vertical” hosted app or desktop service into that market might be a logical line extension for the firm. However, if you can’t demonstrate that you have one or more of these domain strengths, then creating the knowledge, presence and offer will be difficult if not impossible for you out-of-the-gate. And even if you do, others already experienced in that market will eat you for lunch.

The next-level decisions

That leaves the decision to initially enter the market with a more generic/horizontal offer.  (Not to say that you can’t offer small/medium/large variants for example, or generic offers that cater to special needs such as security, compliance and regulatory needs, per above). In this manner you position the hosted service as an up-sell opportunity to your existing customers and sales force.  And as you do so, you’ll also gain important experience and learnings about creating, offering and supporting a high-value hosted service.

As you gain customer adoption, your customers may slowly drive you toward greater specialization until you may over time find yourself migrating into one or more vertical-specific offers.

In all but a few cases, I recommend that MSPs ultimately pursue a vertical or specialized offer. (See my earlier blog, Differentiate or Die – why MSPs and hosters need to change their game) The exceptions being very large providers — often Telcos — who frequently cater to a broad consumer audience.

It’s the apps, stupid

Well, really it ‘s about value you create with the apps and the other services you offer. When you do begin to specialize, there are 3 broad areas in which you can differentiate:

  • Applications – Clearly the most defining trait of a market-focused hosted desktop offer is the bundled apps. Besides regular productivity apps, you’ll want to offer (or broker) industry-specific apps – say for accounting, inventory, manufacturing, construction, etc.. Most industry associations, software surveys (and customers of course) can help you identify the critical applications you’ll need to integrate into the workspace to satisfy customer needs.
  • Services – The other high-value components of your offer will include services such as unified communications, storage/backup, back-end graphics processing, or perhaps just plain-old excellent customer service/support. Either way, rely on your customers and market requirements to help you define what these are, and how you’ll leverage them to differentiate your offers.
  • Market-specific needs – The other approach to creating high-value and a differentiated offer in the market is to pursue other market-specific needs such as regulatory compliance, service performance/SLAs, privacy controls (think HIPAA), data sovereignty etc. Not all of these are necessarily product-based, but you will find that certain markets will seek-out providers specializing in these and other areas.

Finding your customer size sweet spot  – and expand from there

The other recommendation I most often give is to determine the proper customer size. For most MSPs delving into hosted desktops and hosted apps, I generally suggest targeting customers with between 50-200 seats.

The rationale is that anything smaller will have significant start-up costs relative to ongoing revenue.  For if  you yourself haven’t mastered on-boarding in a low-cost replicatable fashion, chasing the smaller deals will smother you.  Also, chasing deals with firms of over ~ 200 seats may also be a problem, since larger customers tend to demand more customization… and we’re back to risking profitability with high-labor content.

Once you establish a scalable offer into the 50-200 seat range and gain experience selling, standing-up, and onboarding customers, you can begin to go “up market” chasing larger deals. You’ll have gained confidence that you can make the customizations needed, and know intuitively how well your infrastructure scales.  You can even experiment with going “down market” and pursuing smaller deals, assuming you’ve automated much of your infrastructure and on-boarding, reducing the small customer ramp-up time.

 Putting it all together

In summary, most hosted desktop providers should enter the market with a “generic” or general-purpose offer. Over time you’ll target larger deal sizes – and maybe even find it economical to accept smaller deal sizes too.

Mostly as a result of customer demand, over time you will find the ability to offer your first vertical/specialty bundle into the market… and perhaps at some point following that, you’ll gain the experience & knowledge to add a second vertical, and so-forth.

Remember: This is only an initial model and set of suggestions. Your specific situation, market and technical capabilities will vary.

The good news is that the Citrix Service Provider program has a bunch more resources as well as facilitated discovery methods we bring to bear when defining your entry-level and follow-on services. For more information about joining the Citrix program, see below.

Additional Resources