When we think of Michigan, it's easy to think only of Detroit - its music scene, its automotive sector and its devastating 2013 bankruptcy. But Michigan is so much more than Detroit. West Michigan offers a multitude of tech companies, universities and start-ups. Meanwhile, Lansing, the state's capital, is home to a variety of sectors, including healthcare, insurance, banking and manufacturing.
So what does all this mean for a Michigan MSP? Does the state's dependency on the automotive sector impact the players operating there? And what other kinds of customer do they find themselves serving? We talked to MSPs across Michigan to learn about the key impacts to their business and how they tackle them.
1). Business climate
Michigan's automotive industry has had its ups and downs over the last few decades. For MSPs in Michigan, whether they have automotive clients or not, there is a "trickle-down effect" that impacts the industry, according to Mike Maddox, president and CEO of Lansing-based MSP ASK.
"As a state we are very dependent on auto, so even though we don't have a lot of auto manufacturers [as customers], there's a trickle effect here in Michigan," he said.
"When the big three - Ford, GM and Chrysler - are doing well, the economy here does well, and when the big three are not doing well, the economy doesn't do well, and it trickles down. And though we've certainly become a lot more diverse in the last 20 years, we're not so diverse that we're independent of that effect, and that causes a unique challenge or two."
With that said, the business climate in Michigan offers considerable diversity, with "every vertical" represented, according to Maddox. But still, because the automotive industry employs so many people in the state, the effects of them struggling are unavoidable.
Mike Ritsema, president at Grand Rapids-based i3 Business Solutions, agrees. He points out that it's not just the automotive firms that play a huge role in Michigan's business climate, but the huge number of automotive-centric suppliers, manufactures and distributors that function in the state.
Though the movements of the big three auto makers are unavoidable for channel players in Michigan, Ritsema said that for those in west Michigan, where i3 is situated, the diversification of the business climate over the last 10 years has seen verticals such as healthcare and furniture manufacturers flourish. Firms like Steelcase and Herman Miller in the furniture sector are going strong, while Spectrum Health is seeing continued growth in the healthcare vertical.
It's also worth noting that Michigan as a whole has worked hard to diversify and attract tech talent, Ritsema said. Detroit is well known for "taking a beating" both during and after the Great Recession, culminating in its filing for chapter 9 bankruptcy in 2013 when the city collapsed under an estimated $18 billion to $20 billion worth of debt. As such, shifting away from the reliance on the once-mighty automotive industry has been key to Detroit's - and Michigan's - recovery, Ritsema pointed out.
"West Michigan is very diverse, with a very strong economy. It is less automotive-centric. In fact, the state of Michigan as a whole has tried to diversify and attract tech talent. Detroit went through a tough 10 to 15 years - it took a beating - so they really rotated toward technology in the whole state, from Ann Arbor to Detroit to Grand Rapids, a strong…technology focus has been emphasized."
Manufacturing plays a pivotal role in Michigan's makeup. Being located in the Midwest, as well as the so-called Rust Belt, means the Wolverine State is heavily dependent on the vertical. For MSPs this offers a ripe customer base that has embraced technology head on over the last decade. Maddox describes manufacturers as one of the top adopters of technology, despite 10 to 15 years ago it being quite the opposite.
This is, of course, thanks to automation and the Internet of Things, also known as ‘industry 4.0'. And with this evolution has come opportunities and challenges for Michigan's MSPs.
The cybersecurity opportunities of industry 4.0 are huge for a Michigan MSP. A manufacturer with an automated production line that utilizes the Internet of Things is clearly going to have security vulnerabilities that will need dedicated security solutions and services.
"If you're going to have all your production equipment on a manufacturing floor internet-connected, you're going to be at risk of cyber attack, and obviously the damage that could cause is enormous," Maddox noted.
The challenge is obvious because of all the cybersecurity concerns the MSP has to deal with, but there are associated challenges to be found.
"It's a challenge because it brings with it all kinds of cybersecurity concerns. Plus, culturally, manufacturers are not typically staffed for advanced technology; it's not part of their DNA. So it's an area that's both a challenge and an opportunity," said Maddox.
Ritsema notes that Michigan is home to not only manufacturing, but also distribution. Both of these offer MSPs opportunities for general integrations and, specifically, software integrations, he said. However, like every client, these verticals present their own specific challenges.
"There is a lot of Internet of Things, a lot of shop-floor data collection and barcode scanning and so on. We have a decent number of customers in that area, and that's a demanding customer - it's not simply an architect fires up their PC in the morning and then it runs for eight hours; it's a much more demanding customer."
What this means for a Michigan MSP servicing the manufacturing sector is the need for a stronger presence at the client site, as well as potentially reduced margins. "It's tough to go in there and say ‘hand me enough money to make it very profitable', so we take that business and we make a little less profit on it," Ritsema said.
3). The weather
One thing's for sure in Michigan, everybody knows it gets cold in the winter. This might seem irrelevant to an MSP, but in fact it has quite a significant impact on business in the Wolverine State, according to our commentators. Maddox notes that June, July and August are a tough time to do business because so many people shut up shop and head out to their summer retreat while the weather is good. "Everybody tries to cram their whole life into three months of the year," he said.
There are other periods of the year that give rise to the same challenge, Ritsema notes. He says in Michigan there are three times in the year that an MSP gets to "kind of breathe and catch up".
"One of them is around the Christmas holiday. We don't take vacations, but some people close the whole business for a week and say, ‘OK, we can get things back under control'. And then in Michigan, it's spring break, when this place just empties out. People go to Florida, they just head south. And so then we can catch up. And then the three months of summer, the same thing - people take their vacations, and it slows down a little bit and we can catch up."
Alongside the impact of summer, the winter months obviously bring MSPs challenges during the cold spell. Smith points out that the winter just past is a perfect example of this. He cites an eight-week period where Grand Rapids got "pounded" with snow, which made getting into the office and to clients difficult.
"We had clients that needed support, and we had guys who couldn't make it to the office, but fortunately, because technology has changed, they could work remotely. But when you get into Michigan winters, January and February can get pretty dicey about how to handle the management of clients if your guys can't get around because there's just too much snow and too much ice."
4). Day-to-day business
Like many MSPs, travel time to clients can prove challenging for MSPs in Michigan. Bill Smith, president at Grand Rapids-based CompuCraft Technology Solutions, notes that in Detroit, where he started life at an MSP "you'd go a few miles and it would take you a long time" because the city is so busy. Now that he is based in Grand Rapids, travel time is not much better because clients are so spread out.
"One of our challenges is distance to the client. So we might have a client that's 40 miles away, and we think nothing of it, but actually even if you can move right away, your best chances are that you're going to be there in an hour. And because over time technology has become strategic to some clients, if they have a problem, they risk having their whole plant down, so because of our location on the west coast of Michigan, distance is an issue," he said.
Also somewhat specific to the west side of Michigan is the region's entrepreneurial streak. The region is populated by a large number of colleges - including Western Michigan University, Ferris State University and Michigan State College of Human Medicine - all of which are heavily engaged in entrepreneurial activity, Smith said. What this means is a lot of start-ups, which for an MSP translates into a large number of small businesses seeking MSP services. It may sound desirable, but in reality it means a lot of work for usually just a few seats.
"To do really good managed services you need to have enough seats to make it pay. And here there are a ton of businesses that are around 15 employees and even though they're a small company, they have the same [security] problems that a major enterprise with thousands of players have. So you struggle with, how do you provide the services to them that they can afford and keep them safe when there's not enough seats to really pay for what that costs every month?" Smith said.
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