Managed Service Providers (MSPs) are enjoying more success than ever.  Why are so many organisations buying IT services from a third party? Mike Puglia, chief product officer of Kaseya explains.

The market for managed services continues to grow rapidly and managed service providers are reaping the rewards of this ongoing dynamic growth. According to Markets and Markets, the global market for managed services will grow from $107.17 billion in 2014 to $193.34 billion by 2019 at a CAGR of 12.5%.

Research from Kaseya aligns with this trend. Kaseya’s 2017 MSP Global Pricing Survey Report, which gathered data from over 900 MSP respondents, finds the MSP market continuing its growth streak.  Up from 23% in 2016, 26% of respondents report their average Monthly Recurring Revenue (MRR) growth over the last three years is more than 15%. But what’s driving these revenue rises and what are the characteristics of high-growth MSPs that differentiate them and help fuel the expansion of the MSP sector?

Key Factors
What is clear is that high-growth MSPs have embraced diversity and are consistently offering more services across the board. They offer everything from basic support services through to high-end network-monitoring.

By offering comprehensive product suites, these MSPs can charge premium prices. Increasingly we see that SMB clients, in particular, are expecting complex new services that include cloud, along with layered security and network monitoring.  The research also uncovered that higher-growth MSPs more frequently offer all four types of backup – cloud-to-cloud, onsite-to-onsite, cloud-to-onsite and onsite-to-cloud.  Cloud-to-cloud backup is a service that the higher-growth providers are 43% more likely to offer. The secret of success in backup and disaster recovery, it seems, is to look to the cloud and have plenty of options available to clients.

The same goes for security.  Of ten different services covered in the research, the more successful MSPs offered each more frequently than their lower-earning counterparts.  When the mean number of security-related services on offer is examined, it is clear the MSPs with larger revenues are offering more.

Meeting security risks was by far the single most important problem that MSP respondents said their clients face in 2017. Furthermore, it is apparent that cloud and security are intertwined as concerns – a set of anxieties that more adaptable MSPs will be addressing.

Mike Puglia, Kaseya

Mike Puglia, Kaseya

The pattern of wider service-offerings bringing higher rewards is repeated in the area of network and infrastructure monitoring services. The higher-growth MSPs are more likely to offer clients more diverse services than their more sluggish rivals. Network Operating Centres (NOCs) are another emerging service category where higher-growth MSPs are doing well. Some 47% of high-growth MSPs report for example, that they are offering NOC services around the clock, compared with just 27% of those with lower growth.

Scale is no barrier
It is important here not to confuse size with growth. While there are advantages from having the scale of a so-called ‘Super MSP’, smaller operators are not being shut out from achieving prolonged growth.  If the evidence of the research is anything to go by, high growth is being achieved by service providers with anything from a handful of employees to more than 100.

Having these facts at our fingertips enables us to make an educated guess that what higher-growth MSPs are getting right is their evaluation of market requirements, their dedication to efficiencies and economies-of-scale, and the ability to insist on receiving the full value for their offerings.

High-growth MSPs are pulling out the stops to give the market what it wants. If the SMB sector is moving towards cloud applications and services, these MSPs have responded by developing cloud monitoring expertise.  Similarly, if 24-hour NOC operations are required, small MSPs can use an outsourcing option to ensure they fulfil client demand. 

Higher value
That the acquisition of larger clients is a key to higher revenues may seem obvious. Only 40% of higher-growth

MSPs in the research have a majority of clients with 25 or fewer employees, compared with 55% of those building revenues more slowly.  Yet a small MSP can successfully serve larger clients through hardware standardisation, the development of remote monitoring and the addition of some smart automation.

Lower-growth MSPs should learn the lessons about obtaining the full value for services they provide, particularly in relation to the cloud. For example, 10% of the more upwardly mobile MSPs in the research are charging in excess of $2,000 per month for cloud monitoring services covering 25 devices and 2,500 metrics. The comparable figure for their lower-growth counterparts is only 4%. 

Higher-growth MSPs are also more likely to have increased prices in the last 12 months. Half (50%) said they had done so for 16 out of 20 possible services, compared with lower-growth MSPs that only reported increasing prices for two of the offerings.  When it comes to increasing prices in the year ahead, higher-growth MSPs said they were likely to do so in relation to a far greater range of services. 

While the growth of managed services in IT is benefiting most providers, it is clear from the research that some are better positioned to take full advantage of a positive market than others.  The highest-performing MSPs are taking the lead in offering a comprehensive range of high-value services, and have the self-confidence to ensure they are properly compensated for the strategic benefits they deliver. And they show that they deserve rewards by going the extra mile for their clients.

Learn more about Kaseya MSP technologies here.

Author Bio:

James West

Editor, SITS Insight

If you have service desk news to share or would like to become a SITS Insight blogger, please get in touch with James

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