Managed Service Providers (or MSPs) provide IT services to both small and large companies. They usually focus on high-quality custom services based on a high degree of IT and Network Engineering. Their contracts to end customers (or subscribers) focus on business solutions customized for bespoke implementations. Low-scale, high-margin term contracts. MSPs have been around for a couple of decades now. The industry has defined this approach as “Your mess for less” hosted services.
But this isn’t the only solution.
Greater growth through replication
Citrix Service Providers (or CSPs) look to optimize their growth based on replication. Their service level agreements (SLAs) are still high-quality, but instead depend on a catalog of applications used by a large and expanding pool of small and mid-sized companies to deliver high-volume business.
It is at this scale where CSPs thrive, as they use the same infrastructure over and over again to provide service delivery.
Their terms are usually much more flexible than their counterparts and they depend on a multi-tenant approach to drive down costs and drive up margins. In most cases, the same IT Engineer or Networking expert will work with tens (or even hundreds) of customers.
There is room for both models in the industry today.
The key to a sustainable business model is the cost to the end subscriber. As huge Hyper Cloud Providers like Amazon Web Services provide low cost, hyper scale solutions, MSPs are put under tremendous pressure to lower prices. When term contracts expire they are finding upwards of 30% of the contracts will not be renewed. As a result MSPs are being squeezed to deliver more scalable solutions at a lower price.
Which is better, MSP or CSP?
It’s really too early to tell which model is better, but the market at large is going through a massive transformation. Most of the CSPs in market today actually had (or have) an MSP business model.
By using a prescriptive, programmatic approach provided by Citrix, these MSPs are moving into the higher scale, cloud-based service model and competing well with the hyper clouds. The most productive, highest Average Revenue per User (ARPU) and lowest Churn CSPs are providing bundles of applications in their catalogs to specific market verticals.
These Service Providers are growing their topline at 20%, 30% and even 40% Year on Year while maintaining a good margin. SwizzNet, one of our U.S. partners recently told me, “We’ve found that providing a high quality service with a bundle of apps for Accounting practices gives us a great value for our customers and a scalable alternative to in-house IT management.”
This model is producing high volume account revenues. More importantly the model creates great margins based on a replicatable sales process, which translates into a more successful, more sustainable business model for you.
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