The Momentum, the Margin and the “Magic” with Cisco MSP Partners

The momentum of Cisco’s Managed Service Provider (MSP) partners is undeniable. Despite global economic uncertainty, the projected 2023 outlook for managed services indicates a worldwide growth of 12.7 percent, reaching a total value of US$472 billion. In 2022, total managed services revenue saw a remarkable 12% growth, reaching US$419 billion. A recent Canalys study¹ indicates that a striking 79% of partners anticipate growth in this sector in 2023, with 56% expecting growth rates to exceed 10%. By 2027, the managed services route to market is projected to surpass resale for Cisco solutions.

Unlocking MSP Growth

MSP growth opportunities often revolve around five core areas:

• Cybersecurity: Providing a comprehensive strategy for customers, including consulting, architecture, and risk management.
• Cloud Infrastructure: Offering expertise in cost management, data security, compliance, and DevOps.
• Endpoint Management: Addressing the core of many MSPs’ business models, from basic monitoring to patch and license management.
• Data Center Management: Managing data centers, upselling hybrid infrastructure and disaster recovery solutions.
• Network Managed Services: Delivering solutions like DRaaS and full-stack observability.

Across the board, these areas align with the core capabilities of MSP partners and leverage Cisco innovation.

Impressive Margins and Magic

There is a big opportunity for Cisco MSP partner margins, with renewal rates exceeding 90%, further bolstered by Cisco’s transition to an almost even 50% split between resell hardware and high-margin software.

Naturally, the magic unfolds when MSP partners bundle their unique services with Cisco hardware, software, and services to deliver customer outcomes under a Service Level Agreement (SLA) and with flexible consumption options. These outcomes typically encompass the following areas:

• Refresh Opportunity: In some cases, the decision to opt for a managed service begins with a refresh opportunity. Here, the customer prefers not to make up-front purchases of equipment and software, seeking instead an Opex-driven approach to procure hardware, software, and services.
• Assistance with Day-to-Day Operations: Other clients may wish to dedicate their time to new business transformation projects and, therefore, seek assistance with day-to-day operations.
• Skill Gap Augmentation: Customers often require support to bolster skill gaps, particularly in rapidly evolving domains such as cloud and security.

Regardless of the customer’s particular needs, conversations about managed services invariably begin by focusing on desired outcomes, rather than immediately delving into product discussions.

Opportunities Aren’t without Their Challenges

However, it’s important to acknowledge that opportunities come with their fair share of challenges. These challenges range from uncertainties regarding how the economy may impact inflation and customer budgets to supply chain volatility and the persistent challenge of acquiring new customers.

Additionally, recruiting and retaining IT talent presents an added obstacle. Delivering distinctive managed services requires staying ahead of the curve, and deciding where to invest in capabilities becomes a skill in itself. Nonetheless, this challenge offers a mixed bag of both opportunities and obstacles. On the positive side, it encourages our customers to explore partnerships with managed service providers rather than expanding their in-house teams.

Cisco’s Dedication to MSP Partners

Cisco remains resolute in our commitment to assist our MSP partners achieve success through a 3P strategy:

• Platform: Cisco ensures that its platforms are designed to support best-in-class managed services. We work closely with engineering teams to establish a framework for provider partner offerings.
• Preference: Cisco provides tailored sales models and flexible software purchasing programs.
• Performance: Cisco recognizes and rewards partners based on their intended use, underscoring their pivotal role in shaping this significant route-to-market.

By delivering platform, preference, and performance-based rewards, Cisco empowers partners to provide high-value, distinctive managed services to their clientele.

Let me illustrate this point with a partner example.

Introducing Logicalis’ Digital Fabric Platform

Logicalis conducts an annual CIO study, surveying 1,000 global CIOs. The findings revealed a compelling statistic: a staggering 74% of customers urgently require managed service support, in harnessing their data’s potential for successful business transformation. This need has become even more pressing as organizations grapple with resource constraints and talent shortages. Consequently, many are turning to Managed Service providers for support and solutions.

In response to this growing demand and the evolving landscape of digital transformation, Logicalis has introduced its innovative AIOps-powered Digital Fabric Platform (DFP). This platform is a game-changer for managed services customers, providing them with a real-time, holistic view of their digital infrastructure. The DFP underpins Logicalis’ key architectures, including cloud, security, workplace, and connectivity, focusing on five key performance metrics: Reliability, User experience, Security, Environmental impact, and Economics.

Distinguished as one of only six Global Gold Cisco Integrators and boasting 11 Cisco Powered Services, Logicalis has harnessed Cisco technology to create a global managed services platform that consistently delivers proven outcomes for its customers. An illustrative case from one of their global managed services clients highlights the platform’s remarkable capabilities: by leveraging DFP, the client uncovered a startling environmental insight. Their daily cumulative CO2 emissions were equivalent to the environmental impact of running over 32,000 smartphones continuously. Logicalis is now collaborating with them to implement strategic carbon reduction initiatives throughout their IT infrastructure, aligning technology with sustainability goals.

Shaping the Future

By 2025, Cisco foresees that nearly half of all customers will embrace outcomes delivered through managed services. Cisco partners will play a central role in delivering value and tangible results to these customers, infused with Cisco’s innovative spirit. Furthermore, Cisco remains dedicated to assisting our MSP partners in expanding their businesses, offering our expertise to ignite momentum and enhance partner margins.

By 2025, Cisco envisions that nearly half of all customers will adopt technology through managed services. Cisco partners will play a pivotal role in delivering value and outcomes to these customers, infused with Cisco’s innovation magic and commitment to our partners’ continued success.

See the full announcement of our Managed Services study with Canalys to learn more about this burgeoning opportunity and how our partners can #GoManaged.

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^[1] This study was initiated by Canalys, not commissioned by Cisco. In order to refresh their November 2022 data, Canalys surveyed 324 Candefero partner members from around the world in June 2023. They set out to look at the evolution of MS, discover which types of services partners are building, identify the potential benefits and challenges involved in providing MS, and lay out areas where partners see the biggest growth opportunities.

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