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Annual MSP Benchmark Survey Reveals Remote Work Still a Top Challenge

In a year when hundreds of millions of jobs shifted to remote work practically overnight, the transition hasn’t always been smooth.

Kaseya Guest Blogger

April 20, 2021

7 Min Read
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The dust hasn’t settled yet from the massive disruption in the IT landscape driven by the COVID-19 pandemic and shift to remote work. However, it’s been long enough to see some of the trends and impacts this tumultuous year has brought forth and we can make some educated guesses about what was temporary and what’s here to stay.

In our 2021 Global MSP Benchmark Survey, we heard from about 1,000 MSPs across 50 countries in our effort to see what they’re experiencing and the challenges they face.

Biggest Customer Challenge: Remote Workers

File this under the least surprising survey result ever. In a year when hundreds of millions of jobs shifted to remote work practically overnight, the transition hasn’t always been smooth for their companies and the MSPs supporting them.

That’s why it’s not shocking that among MSP customers, 58% cited remote work as one of their top three challenges, closely followed by security (57%), and then business continuity and disaster recovery (42%). All three of these challenges aren’t new, but their importance grew in the past year due to the larger shift to remote work, distributed staff and the ongoing cybersecurity threats SMBs continue facing.

Biggest MSP Challenge: Landing New Customers

A global pandemic and the accompanying economic upheaval aren’t a great environment for any business to grow. Customers and prospects are cutting unnecessary spending and contemplating a very unsure future.

With this backdrop, a weak sales pipeline was the top issue for 43% of MSPs, which dovetailed with the third most common challenge of shrinking IT budgets and spending due to the pandemic (15%). This dwarfed all other concerns and dealing with advanced and sophisticated security threats was the only other challenge to notch a sizable percentage of responses at 19%.

Future Opportunities

While the pandemic isn’t over yet, there are strong indicators that we’re closer to the end than the beginning with vaccines rolling out and parts of the economy opening back up. With the expectation of all kids returning to school full-time for the 2021-2022 school year, hints of normalcy loom large on the horizon.

But the same IT topics of conversation that dominated 2020 are still expected to play a significant role in MSP growth and activity for 2021 and beyond. Cybersecurity will likely return as the biggest concern, with 37% of MSPs eyeing this as the top growth opportunity.

One in five MSPs believe remote work is the biggest way to get bigger since many knowledge workers will remain remote at least some of the time thanks to the lessons learned in the past year. And some companies are embracing the practice as a way to cut real estate costs and tap into a larger labor market while increasing employee satisfaction. Cloud migration is a close third at 19%, followed by business continuity (12%) and digital transformation (9%).

Relatively Consistent Offerings

MSPs have a broad range of services they could offer their clients, but most of them stick to a pretty similar playbook. Many of these offerings are simply table stakes at this stage, so it’s no shock to see the vast majority of MSPs providing antivirus/antimalware (91%), endpoint management (89%), server backup (82%), and OS patching and updates (82%).

Email security (79%), Office 365 and G Suite management (78%), and network monitoring and management (77%) were also available from more than three-quarters of MSPs. But there is a wide range of other things MSPs can do for their customers. Some of those might be more niche, such as regulatory compliance management (38%), while others are still in the earlier stages of demand from customers, including Dark Web monitoring (48%) and SaaS backup (56%), because they’re not all aware of their value or realize they need them.

For now, RMM remains the most important application to MSP businesses by far, with 65% reporting this as their top app. Professional services automation and IT documentation were a distant second (16%) and third (14%). That said, MSPs greatly value integration between their applications, with 70% citing it as critical or very important.

On the compliance front, HIPAA is still the most common regulatory compliance issue for MSPs (76% of MSPs in the Americas are impacted by it), while not surprisingly GDPR is the most important in Europe at 80%.

Backup and data recovery services are a mainstay for many MSPs, and today 75% of MSPs are offering combination of cloud and local implementations. There was also a significant jump in MSPs offering SaaS application backup, up to 69% in 2020 from just 53% the previous year.

Still Growing Strong

When it comes to an MSP’s viability and long-term prospects, the best indicator of how things are going is their monthly recurring revenue (MRR). This dependable stream of income not only allows MSPs to keep their own lights on and make payroll, but it can also drive investment in the business and adding or upgrading talent.

Many MSPS saw modest MRR growth in 2020. Only 29% of MSPs saw 16% or greater increases in MRR. In general, 6% to 10% growth (28%) and 11% to 15% (20%) was a more common trajectory.

The growth MSPs saw came from almost all of the different services they offer, but a few really stood out: 65% saw growth in their security services; 54% got a boost in cloud management; infrastructure monitoring and management revenue increased for 52%; and desktop support netted more in 2020 for 51%.

To keep MRR on an upward trend, 91% of MSPs said they must continue offering new services to customers: 98% of MSPs added at least one new service in 2020, with most of them adding between one to five of them during the year.

Another route to grow the business is acquiring other MSPs or complementary firms: 26% of MSPs are considering strategic acquisitions in the next two to three years, while 8% are thinking about putting themselves on the market during that same timeframe.

Getting Paid

MSPs are in this to make money, so we took a deep dive into that part of the business. We found a relatively even split of business models, with 30% charging based on a combination of per-user and per-device basis, while 23% use a per-user model and 22% charge per device. Twenty percent of MSPs are now pricing based on service level tiers.

The average contract size tended to be less than $5,000 per month per client, with 23% averaging less than $1,000, 28% between $1,000 and $2,500, and 21% between $2,500 and $5,000.

For per-server pricing, the range varies widely, although most come in between $25 to $100 per month, per server. On the workstation side, it’s primarily $50 or less per month. When MSPs charge per seat for SaaS application backup, this is typically billed at $3 or more per month.

When services are billed at an hourly rate, this is most commonly in the $100 to $200 per hour range (63%). However, rates continue to trend lower outside of the Americas: EMEA tends to bill in the $50 to $100 range more often, and APAC’s most popular hourly rate is less than $50.

Ultimately, MSPs tend to see margins between 6% and 30% for their cloud services management. Twenty percent had margins between 6% and 10%, 25% were netting between 11% and 20%, and 20% cleared between 21% and 30%.

A Bumpy Past and a Bright Future

The main takeaway our survey brought to light is that the MSP business is still strong and growing. While the past year brought many technical and practical challenges, it also reinforced the value MSPs provide to their customers.

The coming years will see more companies begin, progress, or complete their digital transformations and support for remote work and distributed teams, which will only serve to highlight the importance of a solid IT offering and the need for stronger defenses and recovery protocols for cybercriminals looking for new ways into their wider networks.

To see the full survey results, visit https://www.kaseya.com/resource/2021-msp-benchmark-survey/.

By Matt Solomon is Vice President, Business Development, Kaseya.

This guest blog is part of a Channel Futures sponsorship.

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