Why Two Percent Is A Big Problem for Managed Service Providers

Only two percent of manged service providers in North America have advanced their businesses enough to offer true fixed-fee services. That estimate, from N-able VP of Sales Mike Cullen, caught my attention earlier today.

I find Cullen's estimate fantastic and depressing. Here's why.

The 2 Percent Upside:

  • The low figure suggests that we're still very early in the managed services market
  • Fewer than 1,500 MSPs have really mastered this market, leaving lots of fertile ground for the ongoing managed services land grab
  • The tipping point, folks, is still ahead of us. As one very successful MSP told me, his entire business plan is to march toward 100,000 managed devices under fixed fee contracts.
The 2 Percent Downside:
  • Managed services aren't new, folks. So I get concerned when I hear so few VARs have successfully moved to fixed-fee services
  • Many small businesses will never -- I repeat: never -- move to manged services because they don't see value in their network infrastructure, and therefore aren't willing to spend a predictable monthly fee to maintain it.
The 2 Percent Opportunity: So, how do MSPs convince more customers to shift to fixed-fee services? Cullen, several N-able representatives and a few MSPs gave me multiple answers. Now, I'd like to synthesize their thoughts down to a single answer:
  • Don't focus on the infrastructure. Do focus on the data. Even the cheapest small business owner understands his business can't survive without its data. So focus on technologies like storage as a service (running on your own virtualized servers or a partner's servers) to get customers used to writing you a monthly check.
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