I spent 10 years in the Mortgage Industry in sales and management. I am now working in MSP sales and have been for about a year. I am amazed at just how similar the industries are from a growth and development standpoint...and it gives me some ideas on where the industry might be heading.
First let me explain that this is PURE speculation...but it is uncanny the similarities...now we just have to see if I can get those similarities down on screen as clear as they are in my head.
When i started in mortgages, the "idea" of the mortgage broker had already been around for 10 years or so...and it was a pretty mature concept already, but it just did not have a ton of consumer awareness yet. In other words, I spent a lot of my time just trying to explain WHAT a mortgage broker was, and what we did. I see the MSP industry struggling in this area a bit, but moving on to the next stage. There is no doubt that with what....$25billion in revenues as a whole that this is a mature and viable concept...but I still find that outside current customers and industry professionals, most people dont know what Managed Services are. When you are at a party next time with NON IT people... just say you do Managed Services and see how people react. Then you will see just how few really know what it is.
Shortly after I got started in Mortgages, there started to develop a cottage industry among people that were catering specifically to Mortgage Brokers. There were "Guru's" that were wildly successful as Mortgage Salespeople that would hold seminars and sales training specifically for mortgage brokers. There were companies that developed JUST to source leads for brokers. Magazines, web portals, software packages, etc etc etc all designed by people who were successful in the industry and were sharing what they learned. Sound familiar?
That is when growth really took off. What was interesting is that a lot of the growth did NOT come because the people that were in it early got really big. The growth came because it was REALLY easy to start a Mortgage Brokerage. The licensing requirements in most states were almost nothing. Once you were licensed all you did was sell a product to the end bank...so you had almost no upfront costs. To me, this is a lot of what I am seeing today in MSP's. You can almost make it just reselling products and services with no real investment of your own. If you really want to, you can spend a lot of money on Kasaya and other software...but realistically there is not much stopping most people from going into Managed Services other than maybe industry knowledge...and for a little amount of time as I have been in this business, even lack of knowledge is not stopping some from getting in. There is just a really low barrier to entry into this business. The important thing here that I think really does correlate well is that at this stage, a lot of the revenue growth in Mortgage Brokers did not necessarily favor the companies that had been around a long time. Most salespeople and companies stayed roughly the same size and income levels, and all the new blood so to speak came in and generated revenue. What was good is that with this huge influx of new salespeople, I no longer had to explain what I did. People understood the role of the Mortgage Broker. As more and more companies join the MSP game, there will be more and more people "on the streets" so to speak and most SMB's will at least understand the MSP game if you will. I believe this is really happening now. Try to get into a tips group (at least in my area) and NOT have a company there that is pushing Managed Services. There are 6 or 7 job postings for Managed Service companies...it seems like everyone is trying to get started in this area.
There is one more stage the Mortgage Industry went through while I was still involved...and that was the economy taking a dump. When that happened and people stopped being able to afford newer bigger, more expensive homes, there was not a need for such a large staff of salespeople, and so many splintered companies. People started leaving the industry, small marginally profitable shops closed up, and mergers went on like crazy. In my opinion this is when I believe people started to really do things that they should not have done...they were desperate to find a way to make money when there just wasn't money to be made. I dont think that is really a problem so much here...I dont think we as MSP's have as much 'access' to cause the same kind of problems lead by desperation (we can create problems, but the profit motive is not there like it was in mortgages)...but I do think that we will see a point where the boom fades, and companies consolidate and instead of having 300 small MSP's in town there will be 30 Mid sized companies that really know what they are doing.
In my town, in a 18 month period we honestly lost about 2/3rds of the Brokers in town. The companies that are left are the ones that were doing it right, had solid sales staff and back office support. It will be that same type of company that is still around when this industry slows down.
I read that there is expected to be growth of 15% or more in each of the next 4 years in Managed Services revenue. The bad news is that I think a lot of that growth will come from new players into the market. The good news is that it will make explaining MSP a lot easier. Your just really going to have to explain where your experience makes a difference!
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