MSP Lessons Learned in the Cloud – from Hosted Telecom to Workspaces

Hosted PBX – The Early Days

Years ago, I co-founded and led one of the first hosted PBX companies, IPFone. We bought and deployed a BroadSoft platform and began delivering hosted PBX services, primarily to SMBs (BroadSoft was the leading hosted PBX platform for service providers). This was a very disruptive technology, and we were competing with well-established, traditional phone system channels that were selling and installing business phone systems on-premises. These channels, known as “Interconnects,” were typically selling phone systems from legacy vendors such as Panasonic, NEC, Lucent/Avaya and Nortel, to name a few.

Needless to say, the Interconnects fought us tooth and nail, openly disparaging the concept of a hosted PBX system because it relied upon an “unreliable Internet connection to function.” They also disliked our subscription-based, monthly recurring revenue business model because it circumvented the large up-front expenditures for clunky old phone systems that the Interconnects depended so heavily upon. So in order to compete, we (and our competitors) tapped into companies in the IT service and MSP channel that weren’t already in the business of selling phone systems.

These MSP partners turned out to be a natural fit because the phones were IP-based and they had relevant expertise in managing the specialized network configurations needed to support hosted PBX systems. They were also able to add a new revenue stream to their core business of supporting IT.

It turns out that the Interconnects were on the wrong side of history and are nearly extinct in today’s cloudy world. The hosted PBX market we pioneered 12 years ago is now widely known as “Unified Communications-as-a-Service (UCaaS),” works on fast and dependable Internet connections, and is booming. In fact, hosted UCaaS is currently a $10B market that’s growing at a 25% CAGR – and MSPs form one of the key distribution channels.

Same Trend, New Hosted Service Opportunities
That’s not to say that traditional IT service providers and MSPs were originally enthusiastic about entering the new UCaaS market. Many MSPs were skeptical as well but those that came around ended up winners in the UC market. The parallels between what happened in the telecom industry and what is happening again today in the wider world of IT is striking. Most businesses don’t want to buy and maintain their own IT infrastructure anymore, and MSPs and other IT service providers have a tremendous opportunity to make another shift in their traditional business models, and – most importantly – generate new recurring revenue streams. Just like in UC, the same trend is happening in IT but much faster.

Many MSPs that embraced the UC migration are now taking the next step to move their existing IT business to the cloud. But ironically, some of those same players don’t see the trends in their own backyard of IT and risk the same fate as their Interconnect cousins. So will your MSP be ahead of the curve or looking back on the graveyard of missed opportunity?

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