Datto, which was recently acquired by Kaseya, just released its Datto Global State of the MSP Report. The report surveyed more than 1,800 MSPs worldwide. What makes them tick? What keeps them up at night? Where do they think their biggest growth opportunities are? These are the questions the survey sought to answer.

Of those surveyed, less than 20% were active Datto partners. The other roughly 80% were comprised of MSPs of all different shapes and sizes around the globe.

Kaseya’s Fred Voccola

“For the second year in a row, the Datto Global State of the MSP Report shows that our partners are worried about the competition,” said Fred Voccola, CEO, Kaseya. “This comes as no surprise. The pandemic led to an increase in need for IT services and produced savvy customers who like to shop around. MSPs have had to evolve to keep pace with the competition.”

There were a number of results that stood out.

Key Takeaways

Competition Set to Get Stiffer

Nearly one-quarter of the survey participants reported that they’ve been in business for less than five years. This likely indicates the industry is still attracting newcomers, which ties in with sentiment we’ve heard. This is also supported by the fact that 95% of respondents said now is a good time to be in their industry. Further, 82% expect revenue will likely increase over the next three years.

That being said, not all will be unicorns and rainbows. Competition is getting stiffer. For the second year in a row, MSPs have said competition was their biggest challenge (29%). Why? Conclusions vary. There are challenges finding time to market their business. Also, there are simply more MSPs in the market, and retaining clients can be difficult.

Datto’s Chris McKie

“Competition drives innovation,” Chris McKie, VP of product marketing security and networking solutions at Datto, told Channel Futures. “In order to grow, MSPs may have to focus on becoming more specialized to carve out a unique niche. This could be by technology stack, or it could be by a market vertical, such as health care. Bottom line, MSPs will have to show value in new and compelling ways.”

A Good Time to Be an MSP

Even with one eye on the challenges and growing competition, 95% of respondents said they believe now is a good time to be an MSP. Sentiment is also growing (64%) around the preference of using fewer vendors to meet technology needs.

“Now is a good time to be an MSP for a variety of reasons,” said McKie. “Businesses are working through their digital transformation processes, which drives new demands for securely moving workloads to the cloud. The hybrid workforce is here to stay, which fuels cloud, SaaS and remote IT needs. And the technologies that tie all this together are getting more complex, causing reliance on an MSP to make it happen and keep systems running smoothly.”

Revenue and Business Opportunity Shifts

Nearly 36% of respondents reported annual revenues between $1 million and $5 million. Almost one in three (32%) shared they had annual revenue of less than …

… $1 million. However, 8% of respondents had annual revenue of over $10 million and 5% over $20 million. 

Why is this? Some MSPs have flexibility built into their contracts to charge extra for work that falls outside of their normal scope. This, of course, is called the break-fix model. Other providers utilize it for legacy clients that have not been converted over to managed services. There has been a hike in these services recently, which could explain a shift to new business opportunities.

“Now more than ever, we see interdependencies across cloud, network, endpoint, applications and services,” said McKie. “Failure within any one of these can trigger a domino effect, bringing productivity to a halt. This increases the value and drives the need to have quick and robust break-fix response capabilities, as down time can be incredibly costly to a business.”

Market Sentiment

Market sentiment appears to remain positive, even headed into a possible recession. Quite a few MSPs (82%) have said that they expect revenue growth to continue over the next three years. Furthermore, they have set specific growth goals. 

“Economic slowdowns tend to accelerate the adoption of new, more efficient technologies,” said McKie. “Moving workloads to the cloud is a good example of this, and many respondents noted that they see big opportunities ahead in cloud migrations. As well, cybersecurity is more important now than ever, as businesses get hit by ransomware almost at will. This, too, is driving opportunities for MSPs to bring new services, such as managed detection and response (MDR), endpoint detection and response (EDR), dark web monitoring, access management and more.”

When it comes to planned offerings, the report identified a few areas as top-of-mind for MSPs:

It will be interesting to see how these components play out, given the challenges MSPs and their customers face, and how the market is growing. Access the full Datto Global State of the MSP report here.