How to Unlock up to 50% Profit Margins with ‘Bundles’
Rob Hancock, Head of Platform at Giacom
Over the last 20 months, many SMBs and MSPs have had a tough time, no thanks to the pandemic. Throughout this period, many SMBs have done their utmost to survive against backbreaking market conditions. But equally, some MSPs have faced similar growth concerns and challenges as they’ve strived to support their customers.
One issue that some MSPs may face is being limited by their lack of solution offerings. Without being able to cater for a wider range of customers and expand on their expertise, these MSPs will struggle to increase their profitability over time. If we take into consideration that 34% of MSPs are kept up at night by concerns over competition, 27% are worried about revenue growth and 23% are having sleepless nights over acquiring new customers; this shows the channel has a lot to think about when it comes to growing their businesses.
Rob Hancock, Head of Platform at Giacom explains why the channel (in particular MSPs) needs to consider offering its clients bundled solutions instead of ‘single-solution sells’ to profit.
The market demands complete solutions
Today, when SMBs purchase technology from the channel, they tend to start by pointing out that they only want an email inbox. But in fact, at that point of sale, there is more opportunity available to MSPs to consult and offer comprehensive solutions. This is because nowadays, when SMBs develop their technology stacks, they actually need to buy their technology solutions according to the wider demands of the business. For example, while they might think that an email inbox is all that they need, their requirements are actually greater than this. When buying technology, SMBs don’t fully appreciate this. And, in light of the pandemic, what many SMBs actually require is the capability to adopt new digital ways of working and/or hybrid working – not just in the short term, but long-term too. Further, in a recent YouGov poll, 70% of people predict that workers would “never return to offices at the same rate” post-pandemic. This makes an ongoing case for digital/hybrid working technology.
In these situations, while a single-solution sell to pre-pandemic customers might have made sense, supporting the new need for the SMBs’ more complex requirements demands a different kind of proposition and sell. It requires that the MSP market considers providing customers with forms of bundled technology options to offer to their customers, or that they assess how to evolve their existing bundles to more modern ones.
Another factor to consider is the contingent of SMBs that panic-bought technology through the pandemic, without realising that their organisations actually need more sophisticated bundled technology solutions (e.g. greater digital transformation/hybrid working). In these cases, MSPs have the opportunity to upgrade their offering to customers and provide bundled solutions instead.
Bundling can unlock up to 50% profit margins
These days, hybrid working bundles are vital. They typically include cloud connectivity, productivity solutions, email security and backup. Anecdotally, the evidence for offering bundled solutions is strong too: for instance, Giacom found that customers can unlock 50% profit margins by offering a unique software bundle. They’re not alone either, up to 70% of MSPs are offering ‘service’ bundles of various solutions to customers too (Kaseya’s Global Pricing Survey).
What’s more, thanks to how the cloud has propelled technology forward, it means that SMBs can benefit from enterprise-grade solution-sells in bundle form from MSPs too. In the past, these sorts of broader solution sales were thought to be the preserve of the enterprise market. Cloud democratised this and made it possible for CSPs, with strong technology partnerships and roadmaps, to enable MSPs to offer SMB clients powerful technology options (through bundles).
Moreover, since cloud is entirely scalable, bundled propositions can enable MSPs to work with clients to develop their own bespoke technology roadmap, perhaps phasing in different kinds of technology in stages where it makes sense, based on the best of breed technology available to them from their CSPs. With the right supplier relationship in place, CSPs and MSPs can partner effectively and provide flexible service level agreements that work in everyone’s favour. This reduces financial risk, especially for the end customers.
Tied in with the effectiveness of offering bundled solutions to customers is marketing. As MSPs consider bundled solutions, they should work closely with their CSPs on the right kind of marketing that is required to sell these solutions too. Bundles can enable MSPs to differentiate themselves in the market, so it will be important to communicate the benefits of these solutions to the market effectively. This is why MSPs should evaluate how their partner CSPs can support with messaging and positioning to end customers.
Aside from market differentiation, packaging more than one software product together from suppliers to offer to the market can enable MSPs to save money and offer greater price flexibility. This approach could also enhance operational efficiencies (e.g. savings on overhead cost), and help prevent customers from talking to competitor MSPs or tech suppliers.
In addition to this, stringing together compatible cloud solutions in bundles enables MSPs’ to deploy more capable and effective hybrid ways of working for end customers. Customers will benefit from cloud’s accessibility and availability, the collaboration options it offers, as well as flexibility, security and the fact that it’s always up-to-date.
Finally, with the current shift towards solution-based selling led by bundled propositions, the time is now for MSPs to align with proven CSPs who can support them on their journey towards not only bundling solutions and sales, but also increasing the profitability of their business.