The pandemic might have given managed service providers a boost, but a competitive environment is adding pressure on market participants to offer a wider mix of products and services, including those which speak to broader sets of business problems.
Small-scale, boutique managed service providers, which still occupy the lion’s share of the market, have long been known for offering clients a plug and play approach to technology. In essence, traditional MSPs typically helped firms onboard new technologies and offered support along the way.
But analysts and companies say that dynamic is shifting, with increased competition from big-four accounting firms and consultancies delivering a broader span of service offerings and new demands from clients to realize efficiencies from AI and automation rollouts.
“What many of these smaller [MSPs] are going to have to start thinking about … is some kind of competitive differentiation that would be around a specialty of some sort, whether that's just moving up the stack away from basic network management and device management to playing a bigger role in business applications and in business outcomes,” said Carolyn April, senior director of industry analysis at CompTIA.
April estimates that about 90% of MSPs fall into the small-scale “boutique” category.
With the popularity of cloud-based, SaaS applications, big-four accounting firms and other large consultancies swooped into the MSP market with a pitch that they could help clients go beyond technology onboarding and maintenance and tackle bigger business problems.
The growth of managed service offerings from these firms has pushed smaller players to take a broader approach, including recruiting skills that go beyond technology onboarding, maintenance and support functions. More recently, these firms are recruiting for employees who have a mix of technical skills and industry-specific expertise centered around solving bigger business problems.
Traditional MSPs zero in on business processes
MSPs say they’re doubling down on efforts to recruit employees that can offer clients skills tied to wider business processes. Westwood, Mass.-based MSP Lydonia Technologies said over the last 18 months it has steadily increased the proportion of employees with business process and consulting backgrounds.
One-third of the firm’s 43-member team are business process experts, up from 20% 18 months ago, said CEO Kevin Scannell, who founded Lydonia in 2019.
The skills shift is a response to the changing relationship between business and technology, particularly recent advances in AI and automation, he said. Clients are looking to delegate more tasks to digital workers through automation. Employees, as a result, need to understand how technology integrations fit into bigger business processes.
“A lot of it has to do with the changing environment,” Scannell said. The increased adoption of automation technologies, coupled with labor shortages, means firms are looking to digital workers to carry out certain tasks more cheaply and efficiently, he added.
Lydonia said it competes with big-four firms by working to enable client’s employees to work autonomously through low-code or no-code platforms, instead of being indefinitely dependent on consultants.
Another factor pushing boutique MSPs to recruit more broadly is the need to hire technical experts who have the capacity to understand how different tool sets interact with one another.
New York-based Reveal Group, founded in 2005, operates a consulting services arm alongside its MSP practice. Though the firm has always hired business-process experts, for the last two years it has focused on recruiting employees with a combination of technical and business process skills and experience.
The increasing demand to use AI to improve client business processes is a major factor behind this strategy shift, the company said.
“We're seeing a shift from looking for people that have extensive programming backgrounds to people that have more of a solution or a solution architect mindset and can really comprehend how technologies are going to be working together,” said Nicolas Payeur, a principal at Reveal Group, which has 70 employees.
The objective, he said, is to find people who can grasp technology implementation in the context of a broader set of business issues, “versus being at your desk and doing coding for a specific product.”
Others are looking for recruits who can offer an overarching, non-technical approach to business problems.
Accelirate, a Sunrise, Florida-based MSP, which has 340 employees globally, said since the pandemic the firm has been recruiting team members from other fields who acquired technology skills later in their careers.
“We have shifted to a more of a personality search,” said Gabriela Enriquez, chief human resources officer. The company is prioritizing problem solving and customer service orientations over strictly technical know-how, which has resulted in the recruitment of former teachers and financial advisers who later acquired technology expertise.
Larger players respond
To be sure, larger market participants in the MSP field are also employing a “connect the dots” approach to the recruitment of technical specialists. Global IT services firm Genpact said the adoption of generative AI is a boost for managed services, amping up the business case to hire specialists comfortable with the technology and who can also use it to optimize business processes.
“Generative AI has given a boost to managed services,” said Sreekanth Menon, VP and global leader of AI and ML services at Genpact. Recruiting for technical and business process skills was equally important for the company, he said.
Generative AI is nudging managed services owners at the firm to look at all of their operations through an AI lens, as opposed to embedding it in pockets or specific projects, he added.
Similarly, PwC said it’s aiming to recruit “wide and deep,” for its managed services practice, a strategy to continue to attract technical and business domain expertise through hiring efforts as well as acquisitions.
PwC’s talent pool, according to Nikki Parham, a partner and U.S. managed services leader at PwC, covers all areas of business outcomes and processes, including cloud and digital. The evolving needs of the industry dictate that the firm requires technical alongside broader, business-process skills, she noted.
One obstacle boutique firms may face in attempting to recruit new hires with management consulting-type skills and experience is the ability to match salaries these roles typically demand, said April.
Technologists "who are also good on the business side and able to speak that language, they’re gems," she said. "They can command the terms of their employment that may be over and above what some of these MSPs are able to provide."