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MSP Benchmark Survey Results Provide Roadmap to Growth

There will inevitably be fewer clients still standing when this is over, but those that make it through will use more technology services than ever.

7 Min Read
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The technology industry has had its share of disruptive moments, but the economic impact of COVID-19 is likely to dwarf anything we’ve lived through to date. While assumptions and traditions have been largely scuttled and transformed, we’re also more reliant on technology—and technology services–than ever.

Earlier this year, the MSP industry was surging. Already valued at nearly $200 billion, it was predicted to grow another 75% by 2025.  This growth was largely fueled by small and midsize businesses whose IT needs surpassed their in-house expertise and capacity. There were more systems, more endpoints and increased security threats to worry about as increasing numbers of everyday functions depended on technology.

Much of that isn’t going to change because of this pandemic. Businesses won’t revert to the old ways of doing business, privacy and security regulations won’t be rolled back, and cybercrime volume will unfortunately continue its upward trend.

Many businesses will become even more reliant on technology services. Their switch to online ordering, telehealth, remote work and other solutions to facilitate social distancing and complying with public health guidelines won’t disappear when a vaccine is available.

This increase in scope of what now qualifies as mission-critical technology for SMBs should keep MSPs busy. These businesses don’t have the time or talent to manage it all themselves and so will need technology services.

At the same time, SMBs are facing enormous financial pressures due to the economic crash that has accompanied COVID-19. Many are losing revenue and reducing headcount, and some won’t survive this crisis.

It’s hard to predict what the new landscape will look like. There will inevitably be fewer clients still standing when this is over, but those that make it through will use more MSP services than ever.

Whether this results in a net gain or loss for MSPs is still to be determined. Individual MSPs may have quite varied experiences based on their location, target verticals, capital reserves and other factors. Yet we can still learn from how things were trending pre-crisis as we prepare for this unknown.

That said, there is still much to be learned from where we were at the start of the year. The Kaseya 2020 MSP Benchmark Survey Results Report offers a host of insights.

A Vast and Varied Landscape

MSPs are still predominantly small businesses. Forty percent of respondents have fewer than 10 employees, while only 15% of MSPs top 100 workers on the payroll.

With very few exceptions, the volume of endpoints under management aligns with the number of employees. For example, 99% of MSPs with fewer than 10 employees manage less than 5,000 endpoints, while bigger MSPs tend to have far more endpoints in their portfolio.

Shoring up Defenses

Security and cybersecurity are very important to MSP customers, with 43% citing it as a top concern. This has led to MSPs seeing big revenue jumps from security services (73% of respondents) and backup and disaster recovery (59% of respondents).

Pretty much every MSP had at least one client experience a cyberattack in the past year (although luckily this afflicted only 10% to 20% of the customer base for 77% of respondents). Data loss and outages continue to be common, as MSPs saw 60% of customers suffer at least one event in the past year.

MSPs continue to be a trusted source of information and guidance in this domain, with 95% counseling at least some of their customers on this subject. This led to 44% of customers adopting a minimum of four different security solutions, as asymmetrical threats continue attacking from multiple directions in various forms.

The leading security offerings from MSPs are antivirus and antimalware (offered by 83%), firewall and VPN management (80%), and operating system patching (78%).

Two-factor authentication is also skyrocketing in popularity; 91% of respondents consider it important for their clients and themselves.

Keeping up with Compliance

Compliance is a challenge for two-thirds of SMB customers, leading one-third of MSPs to increase their offerings in those areas. New regulations such as GDPR and the California Consumer Privacy Act have brought compliance requirements to industries previously somewhat immune to those burdens.

These regulations have been a struggle for customer. Nearly 60% have reached out to their MSPs for support. HIPAA (68% of customers) and PCI (58%) are still the top topics, but GDPR (35%) and NIST (30%) are also claiming a lot of mindshare.

 A Cloudy Outlook

Cloud services growth continued in 2019, yet many firms were less reliant on MSPs than before. While there’s no question cloud-based solutions will grow further as remote work and collaboration becomes the new normal, many providers have simplified the learning curve, making it easier for some SMBs to manage it themselves.

But that doesn’t mean there’s no opportunity in cloud for MSPs: 56% of respondents are still leveraging MSPs for public cloud services and 49% for private cloud management. Those managing AWS, Azure, and Google environments for clients generally experienced higher MRR growth than other MSPs.

Managed Services Remain the Biggest Share of Revenue

MSPs have wisely diversified their revenue streams, serving customers in a variety of areas including break-fix, hardware and software resales, and professional services. But managed services continue to top the charts at 30% of overall revenue.

Despite the influx of new items on their menu, the original managed service is still a big part of MSPs’ value proposition. Remote monitoring and management services are still a bread-and-butter offering for MSPs; 61% of respondents cite it as their most important application and 80% offer it.

Across the board, the percentage of MSPs offering many popular services has slightly dipped from 2018 to 2019. For example, help desk/desktop support dipped to 88% from 93% in 2018, and network and connectivity support is offered only by 83% of MSPs compared to 91% the year prior. Yet despite fewer MSPs offering these services, those who still do experienced 18% year-over-year growth in MRR.

Dark Web security monitoring saw the biggest growth in terms of how many MSPs offer it. This more than doubled in 2019, up to 32% from 15% in 2018. Office 365 backup saw the second-biggest leap, as 56% of MSPs now offer it, compared to 48% in 2018.

Ninety-seven percent of MSPs provide backup services for their clients, and onsite-to-cloud backup is the preferred backup choice for MSPs, with 61% employing this method. However, just 33% of MSPs are testing their clients’ recovery capabilities monthly or weekly, meaning many are tempting fate with less frequent checks.

 Winning Pricing Strategies

Increasing MRR is the name of the game for MSPs, and those seeing the highest growth are also adopting the smart practice of value-based pricing. MSPs using price matching and cost-based pricing to set their fees are leaving money on the table, working harder for slimmer margins.

As far as how they’re charging customers, it’s a hodgepodge of per-user, per-device, and per-hour fees. When MSPs do opt to charge an hourly rate, the most common range is $100 to $200 per hour.

 Looking Ahead

Just as many MSPs will see some of their clients close down, merge or be acquired in the wake of COVID-19, the same fate may befall some MSPs. Economies of scale and a buyer’s market could lead to market consolidation via mergers, sell-offs and “acqui-hires.” MSPs focused on growth and with deeper pockets may view this as a prime buying opportunity.

For MSPs to survive and thrive, an integrated management platform for the various services they provide is clutch. MSP employees are working in a very challenging environment with far more distractions, so relying on fewer user interfaces and dashboards means a shorter learning curve and less chance something falls through the cracks. Eighty-one percent of respondents said this is key to their ability to drive bottom-line profitability, making an investment in a comprehensive management solution a wise solution even during these trying times.

Learn more about the survey results and see how you stack up against respondents.

Jim Lippie is GM & SVP Partner Development, Kaseya.

 This guest blog is part of a Channel Futures sponsorship.

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