Master MSPs: 20 Percent of the Managed Services Market?

So-called Master MSPs now represent nearly 20 percent of the managed service provider market, according to the ongoing MSPmentor 100 survey. Still, thriving as a Master MSP isn't easy. Here's why.

First, a little background. Master MSPs are service providers that host applications for other service providers. I first heard the term about a year ago when I started blogging about Do IT Smarter, a Master MSP in San Diego, Calif.

In many cases, Master MSPs serve small VARs that don't have the budget, time or training to deploy managed services platforms on their own. But in a growing number of cases, established MSPs round out their product portfolios and leverage point services (such as hosted Exchange Server) from Master MSPs.

Growing Trend, Crowded Market

Roughly 19.4 percent of managed service providers say they are now Master MSPs, according to our ongoing MSPmentor 100 survey.

Admittedly that figure seems a bit inflated to me. Perhaps Master MSPs are more inclined to fill out the survey, since they've essentially bet their business on this market and need to get the word out to peer MSPs about their services.

Despite the influx of Master MSPs, I believe their business model faces some challenges:
  • Head-to-head Competition: Master MSPs are increasingly competing with one another to find VARs that want hosted services. The cost-per-lead to find those VARs and convert them into customers continues to climb, according to my conversations with two Master MSPs. The recruitment efforts include online marketing, face to face events, online events and extensive travel -- all of which demand deep financial pockets.
  • Platform Provider Competition: Increasingly, MSP software providers such as N-able and Zenith Infotech offer hosted versions of their applications directly to MSPs, and customers seem quite pleased with that approach.
  • Distributor and Vendor Competition: Ingram Micro Seismic, which offers a range of hosted managed services to VARs, has signed up more than 750 partners to leverage Seismic services. And Dell is balancing partner engagements with its own direct MSP sales strategy in Texas and New York.
Despite all the competition, successful MSPs continue to leap into the Master MSP market. The latest example is Network Depot LLC, ranked No. 75 on last year's MSPmentor 100 list. The company in mid-October told me about their strategy to host Kaseya for other MSPs.

Is there more room for Master MSPs in the market? Or is a shake-out coming as more MSPs jump on the bandwagon? I welcome your thoughts.

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