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2 min read

How to Beat the MSP Commodity Trap

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The MSP business model has become a commodity. We can’t change that, but we can disrupt it with the right strategy.

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Back in 1882 Edison was able to capitalize on his invention, and started bringing electric power to parts of Manhattan. Competition sprang up, and many made their fortunes getting people to switch over from gas lighting to the new system. Now it’s a commodity, paid for by taxpayers. The only concern consumers have is price, so the small enterprise opportunities are long gone.

MSP was once the disruptive strategy for IT services. According to the “State of the MSP” report of 2021, published by Datto, the industry is filled with MSPs now. It’s harder to maintain profitability, grow revenues or acquire new clients.

We can’t address these issues without understanding the cause. Now is the time to disrupt the strategy, and avoid the commodity trap.

A commodity trap is where a company sees its competitive position being eroded so that it can no longer command a premium price in its market. In a commodity trap, consumers receive more product benefits for their money or pay lower prices for the same or lower levels of benefits.

The MSP business model is not disappearing, but it is evolving. Even if you’re innovating your service stack, providing advanced cybersecurity, or managing cloud migrations, these skills are becoming more common. They just don’t interest people like business related topics do. You’re not going to grow your revenue or client base with those specialties. You need to get in front of them when they’re looking to talk about business solutions.

 

Start shifting your strategies now to prepare for the future

To be clear, the MSP is not yet dead. Many businesses still thrive in commodity markets, like grocery stores and gas stations. There will be demand for traditional MSPs for the foreseeable future, of course. We are at the beginning of this phenomenon. You can still make a living managing IT, but you’re never going to outpace the commoditization of the MSP model. The market is changing now, and It’s time to future-proof your business.

Streamlining or outsourcing your operations and adding more technology services will not get you out of the trap

This is the point it turns into a trap. There is only so much you can streamline and outsource. After that you’re competing with everybody else who’s doing the same thing. You’re no longer the innovator who helps businesses gain a competitive advantage with your unique system. Now the realities of a free market take over. Your profits shrink, customers are more scarce, and revenues stagnate. You’re in the trap.

A disruptive strategy is innovation that brings a new idea or solution to an existing market. Disruptive market entrants (YOU) usually capture unmet-demands in the existing market.

Look for a disruptive strategy and do things differently. Get an understanding of the trends Get to know the changing current customer pains and try to wrap your services around a better experience. Take a look at how industry heavyweights are responding.

Think about how the Taxi industry - a commodity - was disrupted by the ride-share phenomenon - a disruptive idea. Now you can wrap your whole company around a new narrative.

We are the mavericks who pioneered the MSP industry, which was a disruptive innovation to managing IT. We’ve always been keen to make waves. We built our client base, grew our revenues and increased our profit margins by coming up with something new. 

By learning, implementing and operating a disruptive strategy you’ll not only be viewed as a thought leader. You’ll be able to sell additional services, increase your profits and grow by acquiring new clients.

 

On a bumper sticker

MSPs are seeing shrinking profits, client bases and revenue streams. Heed the signs of the industry becoming a commodity, and rewrite your strategy to future-proof your business.

 

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