It is a good time to be an MSP, according to a report issued by Datto.
The report notes that 40 percent of MSPs have been in business for over 16 years, and there is a solid crop of newcomers. More than 18 percent of MSPs have been in business less than five years, indicating that there’s plenty of room in the market and the managed services industry is attracting new blood. This could explain why 84 percent said that now is a good time to be an MSP.
It is not all great. The issues keeping MSPs getting a good night’s kip include economic uncertainty is troubling for MSPs due to the COVID-19 pandemic as it will likely have downstream effects for their own business. Nearly 40 percent are expecting to reduce their growth projections by between 10-20 percent. Cybersecurity for clients remains a top pain point for 34 percent of MSPs, compared to 30 percent in 2019. More than 61 percent state that they consider anti-virus the most critical security solution for SMEs, followed by advanced firewall and RMM Other pain points include work/life balance (27 percent), hiring staff (25 percent) and sales & marketing (23 percent).
When MSPs were asked how they expect the pandemic to impact 2020 revenue, 11 percent stated that they are actually revising their growth projections upward, expecting revenue to increase during the crisis compared to their original plan.
MSPs believe that the pandemic will accelerate cloud migration projects and security projects for many clients, with both driving the managed services opportunity through 2020. VoIP, business continuity, Azure migrations, hardware sales, and business resilience solutions are also expected to drive revenue as clients continue to recover.
High growth MSPs shared two key attributes and activities: generating a higher portion of revenue from managed services and setting specific growth goals. Over the past three years, 22 percent of MSPs said that their total revenue per year grew by up to five per cent, 24 percent reported growth of up to 10 percent, 19 percent of respondents saw growth of up to 20 percent per year, and 12 percent remained the same.
More than half of MSPs said over half of their revenue came from recurring service, a key marker of MSP maturity while 24 percent of MSPs surveyed reported that their businesses make between $1 million-$2.49 million in annual revenue.
On average, MSPs have 122 clients. However, 69 percent of MSPs have fewer than 100 clients and 89 percent said that the majority of their clients are small businesses. Half MSP contracts are less than $15,000 per year.
MSPs are most excited about the promise of 5G technology, which was ranked higher than AI, IoT and ML in terms of how valuable this technology will be. Given MSPs reliance on remote management technology, the benefit of a faster wireless network makes sense.
At the other end of the spectrum, MSPs aren’t buying the concept of self-healing. Most MSPs have experienced in one way or another that everything that can go wrong, will go wrong, so while self-healing sounds promising, they’ll have to see it to believe it.
