4 Urgent Reasons the Technology Services Industry Needs to Transform
The IT industry is rapidly evolving, driven by a number of changes that are both technological and human. For technology businesses, you’re likely experiencing these impacts firsthand.
To fully grasp the significance of these changes, let’s consider the nature of the industry until this point. Traditionally, three business models have coexisted within different market segments. Managed Service Providers (MSPs) provide end-user support and infrastructure management, helping SMEs fix problems and get up and running. System Integrators (SIs) who traditionally are within the mid-market and enterprise now coming down to SMB to grow. SIs offer technology specialisation, with a focus on delivering projects. And Value-Added Resellers (VARs), who typically work with IT Managers and other Technical Professionals to provide procurement. VARs are built on selling hardware and complementary service packages, have evolved to resell other products, and expand in areas like networking, servers, and cloud SaaS subscriptions.
The thing is, technology is changing. Client needs are changing. And the weight of these changes is causing traditional technology business models to buckle. Complacency is a luxury you simply cannot afford.
What’s Driving the Industry to Transform?
There are a number of factors accelerating change, from technology innovation, to shifting client demands. Here are four of the biggest.
1. Margins are Shrinking
Over the years, competition has only grown fiercer. The value technology businesses once provided is now no longer unique. (Just search most major cities for MSPs, for example, and you’ll find a handful scattered throughout the area.)
This means clients have more choice than ever. But businesses have become so commoditised that everyone looks the same. You’ve likely seen it time and time again-the same website colours, branding, language, messaging, and positioning. All this has created an environment driving prices down.
2. Industry Demographics Are Shifting
Many MSPs are still owned and led by their founding generation. As more of these owners begin to exit, we’re seeing a wave of acquisitions and consolidation. Large players, in particular, are rolling businesses together to achieve economies of scale, while automation and competitive pricing are putting additional pressure on smaller providers.
For long-standing MSPs, adapting to this shift is a challenge. Many traditional firms lack a clear strategy for differentiation, direction around opportunities like workflow automation, or ways to position themselves as true technology advisors to add unique value for clients.
3. More Vendors are Consolidating
Large technology ecosystems (such as Microsoft, Google, and AWS) are acquiring and integrating more solutions into their platforms. This is creating more vertical silos, reinforcing long-term customer dependency.
As more customers increasingly seek integrated, all-in-one solutions or rely on a single provider, IT businesses face heightened vendor lock-in, reduced differentiation, and mounting pressure to keep prices competitive without sacrificing margins.
Vendor consolidation may also be a factor slowing growth for PSA (Professional Services Automation) and RMM (Remote Monitoring and Management) solutions. With more businesses relying on built-in solutions, PSA and RMM providers are struggling to drive growth through new customer adoption.
4. Client Needs and Expectations are Changing
Ultimately, your clients’ needs and expectations matter most, and they’re evolving rapidly in multiple ways. Your clients may be leveraging technology to increase efficiency, scale, growth, and reduce risk. Additionally, they may be challenged by finding technical talent, rising salaries, and increasing delivery costs – turning to technology to tackle these problems. As innovation accelerates, they’re also demanding smarter, faster, more personalised solutions.
Given this plethora of challenges, it’s apparent that the days for traditional technology business models are numbered. Without true IT transformation, businesses in the industry risk falling behind.
But the good news is this: with the industry at a crossroads, the traditional market is ripe for transformation. There is plenty of opportunity to grow through acquisition, embracing change, and achieving economies of scale.
What is the Key to Business Transformation?
If you’ve noticed industry leaders bundling partner models under MSP terminology, you may think this wording isn’t appropriate for your circumstances. And rightly so. Clients, too, have never embraced terminology like MSP, SI, or VAR. So, what terminology is more appropriate?
Transforming the industry starts with a fundamental mindset shift: from being a “IT services provider”, to a “technology solutions partner”.
Why does this language matter? It articulates a change and direction that makes sense for technology businesses. You’re not providing services, you’re providing solutions!
Consider commoditised services such as electricity, cleaning, accountancy. Services are often straightforward, transactional exchanges. There’s minimal relationship building and maximised commoditisation.
Technology solutions partners should be providing business solutions – technology solutions that solve real business problems for clients. This is fundamentally different to providing a technical service.
Your goal then becomes understanding the unique business challenges your client is facing and delivering solutions in a way that resonates with them, not just in technical terms.
Making the shift, from provider to partner, means offering advice, building relationships, becoming a technology advisor and fostering deeper, long-term connections with clients that stand the test of time. It can also involve building partnerships with other tech partners.
One important thing to note is this: the concept of being a “technology solutions partner” isn’t a one-size-fits-all business model. There are multiple, cohesive models that can fall under this category and many ways to engage with clients to understand and meet their needs. Think: technology procurement partners, technology specialists, boutique TSPs. You can even leverage the expertise of other partners to deliver a cohesive, comprehensive solution for clients – meaning you don’t need to solve every single one of their problems yourself.
With this in mind, how can we truly understand the business challenges our clients are facing, then productise, package, explain and provide solutions that meets these challenges in a way they can understand? How can we become partners, instead of transactional providers?
How to Transform into a True Technology Solutions Partner
If you're ready to make the leap to transform your technology business and become a true technology solutions partner, let’s focus on how you can create real, lasting value for your clients.
Offer Flexible Pricing and Packaging
Be sure to price and package solutions in ways that are suitable and flexible for your clients. Maintain a “solutionised” mindset around project delivery that’s repeatable and profitable.
Drive Growth Through Advisory
Engage your clients in a more proactive, advisory role where your expertise adds strategic value to their business. Monetising these relationships creates new revenue streams, while developing stronger, long-term partnerships.
Focus on Client Engagement
As end-user support becoming less profitable or rewarding for business growth, delivering proactive client engagement is a great way to create deeper, more meaningful relationships. It can even help you anticipate and solve challenges before they arise.
Facilitate Self-Service for End-Users
Of course, providing support for end-users can still be valuable. But consider leveraging technology to enable end-users to solve their own problems and service requests.
Build Trust with Governance and Transparent Reporting
Providing governance and compliance with transparent reporting and information empowers clients with the knowledge they need to understand the action you’re taking. It’s a valuable way to develop their trust and confidence in your abilities to support compliance requirements and manage their business needs effectively.
Empower Senior Leaders
Provide senior leaders with the knowledge and insights they need to understand how technology can align with and drive their business objectives. This ensures they are equipped to make informed decisions and can actively support strategic initiatives that contribute to long-term success.
Leverage Other Technology Partners
It’s hard to be everything to everyone. Sometimes being a generalist or doing it all yourself just isn’t the best approach. Consider the value of leveraging other technology partners to embrace specialisation over generalisation. Collaborating with other specialists can help you add greater value for clients and position yourself as an expert.
Can you see your business moving in this direction?
If so, it’s clear to see the time has come to take the reins of transformation and steer your technology business with a proactive intent and strategy. It isn’t just about keeping up. It’s about leading the charge, embracing the future with purpose, making a real difference for your business, and reshaping the way you deliver value for clients.
Use these insights move forward with purpose. The time to act is now—complacency isn’t an option.
Motivated to transform your technology business? Start a conversation with The TSP Advisory.
