Every year Kaseya surveys managed service providers (MSPs). This survey offers unequalled visibility into the types – and portfolios – of IT services that MSPs deliver to their clients.
The results report is based on detailed data provided by owners and operators of nearly 900 MSP firms of all sizes spread across over 40 countries.
Key findings include:
RMM remains the most critical application to MSP operations, but IT documentation plays a key role.
Remote monitoring and management (RMM) is essential to managing endpoints, an MSP’s bread and butter, so its prominence is of little surprise. Nearly half of respondents worldwide named RMM as the most important application, followed by IT documentation (20 percent) and professional services automation (PSA) solutions (16 percent). While RMM is most commonly associated with endpoint management, a holistic and comprehensive RMM solution enhances security, reduces downtime, increases productivity, and lowers total cost of ownership. In a nutshell, an RMM solution can make or break your business.
Compliance is important to MSPs; however, many underestimate the potential impact of GDPR on their customers.
Among our respondents, more than half of MSPs worldwide offer compliance assessments. These assessments benefit the MSP and its customers, providing the MSP with opportunities for new revenue streams as well as awareness of changes that must be implemented to protect both businesses.
In addition, regulatory compliance is top of mind for many MSPs. Consider HIPAA and PCI DSS, both significant regulations in the United States that apply to healthcare and retail organizations, respectively. Among respondents in the Americas, 75 percent said they or their customers are impacted by HIPAA and 59 percent by PCI DSS. Following that is Sarbanes-Oxley (SOX) with 33 percent.
GDPR compliance paints a different picture, however. With the May 25 deadline of General Data Protection Regulation (GDPR) nearly here and a general worldwide uptick in privacy regulations, MSPs no longer have the luxury of treating compliance as an afterthought.
MSP’s worldwide must understand the extent of GDPR’s reach. GDPR is not limited to MSPs in the European Union or MSPs with customers in the European Union. GDPR will also impact MSPs whose customers have customers or other transactions in the European Union.
Security remains a key driver in terms of revenue and concerns.
It should be no surprise that security represents both significant risk and opportunity for MSPs. Meeting security risks was cited as the top challenge by 33 percent of respondents. No other problem or service need exceeded 10 percent on either a worldwide or a regional basis.
MSPs are well aware that this need translates into a major source of revenue. As a revenue driver, security leads the pack. It increased up 65 percent for the 12 months leading up to the survey compared to the previous 12 months. In addition to being the most popular service for growth, it was also the service least likely to be stagnant or decrease, with 23 percent of respondents citing flat security revenue year over year and 10 percent noting a decline. No other service came close to that combination.
Price-match strategies continue their decline as the model of choice.
As MSPs move away from relying on break-fix services and look to managed services, price match strategies are becoming increasingly less common. This makes sense given that break-fix lends itself to a commodity approach, whereas managed services are all about value.
For the past two years managed and break-fix services have accounted for more than half of respondents’ total revenue. Managed services accounted for 33 percent of revenue, and break-fix services (based on hourly, block hours, or staff augmentation) have accounted for 18 percent in 2017 and 17 percent in 2016.
This trend has impacted pricing models. Price-match strategies declined for the second consecutive year in favor of cost- and value-based pricing, with some back and forth in preferences between the two. Value-based pricing has been the most popular choice among respondents for at least three years, increasing from 51 percent of respondents in 2015 to 64 percent in 2016, and then dipping to 62 percent in 2017.
Cloud continues to offer ample opportunities for growth.
With 86 percent of respondents worldwide citing some level of cloud adoption, the technology can be considered mature on many metrics. Mature does not mean stagnant, however, and more than half of all respondents said they experienced an uptick in revenue from cloud management services in 2017. Another 25 percent described revenue from cloud management as flat year over year.
Adoption rates for cloud services are equally varied. While 84 percent of respondents offer a customer-licensed instance of public cloud, only 45 percent offer an MSP-licensed public cloud (MSP licensed), and only 42 percent offer cloud monitoring. Cloud backup also has room for growth, with only two-thirds of respondents offering onsite-to-cloud backup, and just over one-fifth of respondents providing cloud-to-cloud backup.
Profit margin ranges for cloud services are also healthy with room for growth. More than half of respondents offering cloud services see 11 percent or greater margins from cloud email (e.g., hosted Exchange), and 73 percent have at least that margin for cloud backup (with 55 percent seeing a 21 percent or greater margin). Half of MSPs offering services around Office 365 also saw margins of 11 percent or greater.
The takeaway: Cloud services continue to offer ample room for growth. MSPs unable to increase their cloud-based revenue would be wise to expand beyond their current offerings.
For more details about the latest trends impacting MSPs read the complete Kaseya 2018 MSP Benchmark Survey Results Report.