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Fast Growing MSPs Offer More, Charge More

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Edward GatelyA new survey by Kaseya, the IT management and monitoring provider, shows “historic” MSP market growth, and highlights behaviors and strategies that set the highest-performing MSPs apart from others.

The 2017 MSP Global Pricing Survey includes data from more than 900 MSP respondents in more than 50 countries. More than one-quarter (26 percent) of respondents report their average annual monthly recurring revenue (MRR) growth over the last three years at more than 15 percent. That’s up from 23 percent of respondents in 2016.

Kaseya's Miguel LopezAn additional 18 percent report an average three-year MRR between 10 percent and 15 percent.

Miguel Lopez, Kaseya’s senior vice president of MSPs, tells Channel Partners the recurring revenue model is a much better overall experience for both the MSP and the customer.

“It helps align cost consistency for the customer, as well as revenue consistency to the MSP,” he said. “There are multiple factors that play into creating and maintaining a consistent, monthly recurring revenue model — which is the ultimate goal for most managed service providers. For MSPs just starting down this path, it’s best to do so by creating services around your area of expertise. Focus on what you know how to do best to demonstrate the immediate value you can deliver to your customers, and the natural evolution from there will be add new services – based (on) customer demand and internal capabilities – that will steadily increase MRR.”{ad}

High-growth MSPs continually find ways to free up resources (both money and staff) to be able to deliver more services, sell more and increase profits. Also, they are able to appreciate and communicate to clients the full value of the services they provide. For example, high-growth MSPs are much more likely to charge higher rates for cloud services.

Some 12 percent of higher-growth MSPs charge more than $600 per month per environment (assuming 4vCPUs and 4GB/100GB with 2 VMs) for private cloud services, compared to 2 percent of lower-growth MSPs.

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Also, 10 percent of high-growth MSPs charge more than $2,000 per month for cloud monitoring services (assuming VMs, network performance, applications and data-center server) for 25 devices and 2,500 metrics. Only 4 percent of the lower-growth MSPs charge rates this high.

In addition, lower-growth MSPs are 34 percent more likely than their high-growth counterparts to charge the lowest listed rate ($500 or less per month).

High-growth MSPs are diverging from their lower-growth peers by consistently offering …

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… more services across the board, from basic support to high-end network monitoring, according to the survey. In particular, high-growth MSPs are capitalizing on the boon of cloud adoption by offering a wider range of cloud-based service offerings. By offering comprehensive product suites, high-growth MSPs warrant premium prices for these services, leading to higher overall average sizes of their monthly managed-services contracts.

The divide between low-growth and high-growth MSPs appears to be increasing, Lopez said.

“MSPs, like many other businesses, need to continue to innovate and be entrepreneurial,” he said. “The primary difference between high-growth MSPs and their lower-growth peers is their vision and ability to invest in their own business. For any MSP to succeed, [it] must have the financial and operational discipline to work in the new world where technology is not only seen as important, but strategic, in the eyes of SMB users. SMBs today are more knowledgeable about the importance of IT, and the threat of how poor IT affects their overall business. So a successful MSP must position itself to be opportunistic, and identify the right technology investments that will not only meet the needs of their customers, but also help them grow their business. That is the path toward achieving high-growth status.”{ad}

Emerging service categories offered by high-growth MSPs include:

  • Network operations center (NOC): Nearly half (47 percent) of high-growth MSPs report they offer 24×7 NOC services, compared to only about one-quarter (27 percent) of lower-growth MSPs.
  • Backup and disaster recovery: Forty-three percent of high-growth MSPs offer cloud-to-cloud backup. Additionally, more than four in five (83 percent) of high-growth MSPs offer full backup and disaster recovery.
  • Security services: The largest delta in security service offerings is with two- or multi-factor authentication, which high-growth MSPs are 30 percent more likely to offer. Also, the mean number of security-related services offered by high-growth MSPs is eight — two more than their lower-growth counterparts. In addition, high-growth MSPs are nearly 40 percent more likely to offer all 10 security-related services than their lower-growth peers.
  • Network and infrastructure monitoring. High-growth MSPs offer each of the eight services more frequently than the lower-growth group. Deltas range from virtual parity for LAN/WAN monitoring to about 40 percent for all cloud-monitoring services combined.

Survey respondents chose meeting-security risks as the most important IT problem or service need their clients will face in 2017. Also, three listed concerns that touch upon different cloud issues. When added together, security and cloud tie as the top risk concern (31 percent versus 30 percent, respectively).

Most MSPs aren’t equipped to address their clients’ biggest concerns, Lopez said.

“Many had already started to make the leap over the last couple years into these areas, but too many have not,” he said. “We already know customers are demanding services around security and cloud, and those that are not able to deliver will end up losing customers to those that are.”

High-growth MSPs don’t just “check a box” when it comes to creating service offerings, according to Kaseya. Having a clear vision of what current and prospective clients need from their service-provider partners today and in the future allows MSPs to invest in the right technologies and align their business strategy for future growth, it said.


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