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MANAGED SERVICE PROVIDERS
10
The rapid rise of the MSP
Miguel Lopez, General Manager MSP Market Segment, Kaseya, looks at what
separates high growth managed service providers from lower growth competitors
that if MSPs want sustained growth, they
have to plan for it and work toward it step-
by-step. For example, high-growth MSPs
charge more for their technicians; charge
more on average for ongoing server support
and maintenance per month; and have
a higher average size monthly managed
services contract.
The data suggests that high growth
MSPs share a determined, continuous focus
on finding areas of growth and competitive
value and clearly articulate this value to
their clients. They are much more likely to
offer new ‘emerging’ services than their
peers, being more than twice as likely to
offer cloud monitoring services, for example,
and 85% more likely to provide hosting
services for customer-owned equipment.
High growth MSPs also tend to have
more of a strategic focus. For example,
they indicated more frequently than
lower growth peers that their clients’ top
IT problem or service need is to address
heightened security risks, increase IT as a
competitive advantage, and deliver higher
standards of availability.
Security and the cloud
The Kaseya 2016 survey shows that
security and cloud services are key areas
of focus for MSPs. A ‘heightened security
risk’ is the top IT problem or service MSPs
expect their clients to face this year, and
over 50% of respondents now offer cloud
services (IaaS, PaaS, and SaaS).
High growth MSPs are leading the way
in both these areas. More than 70% of
them now offer desktop security services,
and they are outpacing low growth
counterparts in offering Cloud services
(58% to 48%) and in expected revenue
increases in 2016 (66% to 56%).
The way forward
These results are more than just an
indicator of the status of the MSP market
today; they highlight areas that providers
might want to focus on in order to drive
strategic growth in the future.
A key theme is the need to differentiate.
Customers are looking for more
comprehensive services from MSPs, who
will need to develop attractively priced
bundles with increasing levels of capability
to differentiate themselves, including more
advanced and specialised services in
developing areas like security and Cloud.
With regards to security, adopting a
more proactive approach should be a key
priority as it will save MSPs money and
significantly improve the productivity of
engineering/technical staff. Security issues
create tremendous disruption, which MSPs
should seek to minimise beforehand
by setting up regular scans; delivering
policy-based automation; and managing
access with password management, multi-
factor authentication and single sign-on
processes.
On the cloud side of the equation, the
focus should be on determining how best
to assist customers with cloud migration,
operations and management. Cloud services
will not replace managed services; in fact
they increase the need for services that
support cloud migration and cloud service
management. It’s key for MSPs to develop
the right sales, marketing and IT capabilities
to address this fast-moving marketplace.
The right software
Selling and marketing managed services
is very different from selling hardware and
software. Having the right software in this
area will pay tremendous dividends in
terms of deals won and the profitability
of those deals. It’s also important to
participate in vendor communities,
meetings and events to keep up-to-date
with market opportunities, as managed
services is a fast-moving market with new
players and new approaches entering all
the time.
Arguably the most important tip for
any MSP looking to drive dynamic growth
is to invest in great tools and to leverage
all the technological capabilities they can.
Integrated and professional tools that
reduce variability, automate routine tasks,
speed problem resolution and support
an expanding managed services portfolio
are a good way to improve efficiency and
reduce business risk.
With service portfolios diversifying and
the onset of the cloud giving the market a
further boost, there is a great opportunity
out there for MSPs who understand the
market and have the strategic focus and
the determination to take advantage of
developments. With market momentum
continuing, now is the time for MSPs to
position themselves for dynamic growth.
The managed service provider market
has been shaped by rapid evolution and
growth, including an expansion in the
range of services offered by MSPs.
In the early days, MSPs
typically concentrated
on remote monitoring
and management of
servers and networks.
However, as time has
gone by, they have tended
to diversify in order to
distinguish themselves
from competitors. Many
MSPs now remotely
support a client’s endpoint
devices; build offerings
around mobile device
management; and develop specialisms in
such areas as managed print services or
security-as-a-service.
The advance of cloud computing has
added another complex blend of challenge
and opportunity into the mix. The biggest
challenge lies in finding ways to manage
new hybrid environments that combine the
traditional ‘on premise’ world and cloud-
based infrastructures. But there are also
great opportunities for growth in delivering
cloud-based services, like cloud-based
backup and disaster recovery.
Today, all the indications are that the
MSP market is continuing to develop
dynamically. According to the consulting
firm Everest Group, managed spend in
the MSP market grew 11-16% in 2014
to reach US$85-90 billion. Last year, the
market size in terms of Net Fee Income
(NFI) was approximately US$1.5 billion.
Research at Kaseya supports this
positive picture. In our
2016 Global MSP
Pricing Survey
, 23% of respondents
reported a three-year average annual
monthly recurring revenue (MRR) growth
of over 20%. An additional 30% reported
average annual MMR growth of 11-20%
over the past three years.
In addition, MSPs reported increased
revenues from most portfolio offerings
in the year leading up to the report,
from services like Backup and Recovery,
Desktop and Server Support, and Cloud.
Planning for growth
Yet, high growth is not something that
happens by chance. The evidence shows
Miguel Lopez,
General Manager
MSP Market Segment,
Kaseya
The biggest
challenge lies
in finding ways
to manage
new hybrid
environments
that combine the
traditional ‘on
premise’ world
and cloud-based
infrastructures.
