How to Thrive in an MSP World: Increasing Growth, Margins and Customer Loyalty
In last month’s blog, I outlined how rapidly changing SMB client requirements are reshaping the MSP market. These demands to broaden MSPs’ service portfolio, combined with downward pricing pressure from increased competition, are squeezing operating margins and reducing the overall profitability of an MSP’s business.
The MSP world is changing fast, with new technologies, new competition and ever-changing market forces, pushing MSPs toward their next phase of evolution. Kaseya calls this next phase MSP 2.0, since it is a natural extension of the MSP 1.0 phase that emerged after the Break/Fix era.
New MSP Growth Opportunities and New Challenges
The new MSP 2.0 environment creates both new growth opportunities and new challenges for MSPs.
Overall, the rate of consumption of MSP services by SMBs is expected to grow annually over 45% year over year for the next several years, representing a global market opportunity approaching $75 billion USD per year by 2020.
However, while the opportunities are clear and overwhelming for the MSP market as a whole, individual MSPs must each adapt to these changing market dynamics or risk falling behind.
Best Practices in an MSP 2.0 World
In order for MSPs to succeed and thrive in this new MSP 2.0 environment, MSPs must evolve. This evolution requires that MSPs:
- Embrace the changing dynamics of the market: The MSP community is made up of many diverse types of MSPs, with different strategies and goals for success. Some MSPs want to offer multiple services to many different types of customers. Others are looking to expand into larger SMBs, and yet others are running a lifestyle business and are not interested in significant growth. Rather, they just want to continue to operate a steady business serving their customers. Every MSP–no matter the ultimate goal for the business–needs to understand and react to today’s changing market environment.
- Change their investment profiles: To meet these broadening customer requirements, MSPs are now forced to evolve faster and invest more time, effort, and money on technical expertise as well as R&D to understand what customers require and build out that service portfolio. This puts tremendous strain on the MSPs margins as it requires direct investment to meet and address these changes.
- Leverage a modern Unified MSP Growth Platform: Old point systems and first-generation tools used in the legacy MSP 1.0 world are no longer enough for MSPs to ensure their ability to continue to succeed in an MSP 2.0 environment. A new unified platform should combine the business management need of an MSP with the richest current and forward-looking suite of software applications that MSPs can build managed services around to generate revenue and meet all the needs of their increasingly demanding SMB customer base.
Components of a Unified MSP Growth Platform
A Unified MSP Growth Platform should provide an MSP with the tools and technologies to professionally manage their customers and flexibly operate their business with a cost structure that is in sync with the new MSP 2.0 economics. The platform should include:
Next generation PSA: While PSA solutions are critical tools for MSPs, they don’t directly generate revenue for the MSP. Therefore, a next-generation PSA product should be sold at the lowest possible price point so that the MSP frees up money to invest in other key aspects of their business, such as hiring additional techs, or more sales people, to address the growing and evolving needs of their SMB customers and the market overall. Moreover, next-generation PSA solutions should include all functions at this price to the MSP, since efficiencies can only be realized when all the functionality of a PSA is working together.
The system should be easy to use, administer and manage for all users, from sales to finance to project management. The next-generation PSA should be purpose-built for MSPs, with project management functionality that enables MSPs to easily manage even the most complex projects, and that automatically tracks and manages all inventory, people, contracts, billing and so on tied to each and every project
Revenue-Generating MSP 2.0 Software: One of the most important aspects of a modern Unified MSP Growth Platform is the completeness of the portfolio of software from which the MSP can generate revenue in the form of managed services. Revenue-generating software should be inclusive of next-generation Remote Monitoring and Management (RMM) software. Next-generation RMM solutions need to offer all core RMM components within one single pane of glass.
It needs to support the scaling needs of MSPs today, as well as well as a community-shared site where automation can be created and shared by others using the solution. The technician experience should be intuitive, including fast and modern remote control.
In addition, the Unified MSP Growth Platform needs to provide a portfolio of complementary MSP 2.0 Emerging Solutions that MSPs can offer as services that SMBs are asking for today.
According to Kaseya’s 2016 MSP Pricing Survey, MSPs who consistently grow over 20% per year do so by unlocking the hidden revenue in their client accounts. These MSPs have augmented IT support services with cloud application monitoring, end point security, single sign-on, network management, and backup and disaster recovery.
As a bonus, expanding the number of services both enabled a higher price for IT support services and increased customer retention by making it harder for competitors to displace them.
The platform must be continuously innovating and be one step ahead of what the SMBs are asking from their MSPs, so that the MSPs on the platform are seen as thought leaders and can deliver what clients need, when they need it.
Open, Flexible Platform–with Choice of Deployment Options
Since the MSP community is made up of many diverse types of MSPs with different strategies and goals for success, your Unified MSP Growth Platform has to be open, flexible, and provide a full choice of deployment options.
At the same time, the Unified MSP Growth Platform should provide best-of-breed technology in all relevant categories. In addition, each of the components must be able to be used on a stand-alone basis and be open to integrate with products from other vendors. Finally, the platform must support any work flow/usage pattern desired by the users. Using one part, some or all of the parts will yield substantial value and put the MSP in a position for success in the new MSP 2.0 market.
MSPs should have full control to select any, all or any combination of capabilities that is right for them.
Learn more about the changing market dynamics that are driving the MSP 2.0 evolution, and how you can overcome the challenges and take advantage of the exploding opportunities by downloading your copy of Your Roadmap in an MSP 2.0 World.
Kaseya IT Complete: Industry’s First and Only Unified MSP Growth Platform
I also invite you to learn more about Kaseya IT Complete, which was architected and purpose-built to meet the evolving needs of MSPs in this second phase of their evolution.
The Kaseya IT Complete platform is made up to two key areas:
- Solutions to help you RUN your business
- Solutions to help you generate revenue and GROW your business
Learn more about Kaseya IT Complete and how it can enable you to grow your MSP business.
Joining Kaseya in 2012, Miguel Lopez brings over 20 years of experience to his role as SVP, Managed Service Providers (MSPs). In this position, he consults daily with MSPs to help them solve their clients’ business problems with technology solutions. Prior to joining Kaseya, Miguel served as the director of consulting services for All Covered, a nationwide technology services company that is a division of Konica Minolta Business Solutions USA Inc. In 2008, All Covered acquired NetCor Technologies, a leading MSP that Miguel founded and managed since 1997. NetCor specialized in serving highly regulated industries such as healthcare, CPAs, law firms and retail companies.