MSPs making the shift to strategic advisors

Datto a global provider of IT solutions delivered through managed service providers (MSPs), has announced the release of its third annual State of the MSP Report.

Based on a survey of more than 1,600 MSP partners around the globe, the report showcases the continued evolution of the MSP industry, as MSPs become more strategic advisors to their clients and derive a larger portion of their revenue through recurring IT services.

"The survey shows what we see every day - it's a great time to be an MSP. It's a positively charged environment," says Datto business development vice president Rob Rae.

"Almost half of the partners surveyed have been working in the industry for more than 15 years and nearly 100% of them said that right now is the best time to be in their industry. For more than a decade, Datto has been passionate about providing the right technology to MSPs, who support the backbone of the economy through their work with small businesses.

As IT plays a growing role in the success of SMBs everywhere, IT service providers are adjusting their business model to include more managed services.

The survey found that more than 80% of MSPs report recurring services driving a portion of their revenue, highlighting an industry shift from IT service providers solely modelled on ad-hoc services to becoming more strategic advisors to their SMB clients.

In fact, 44% of respondents stated that more than 50% of their revenue is a result of recurring services.

"SMBs in particular struggle with increasing IT complexity, an explosion in security threats, greater compliance demands, and intensifying skills shortages. More than ever, companies are turning to trusted IT partners to help solve these challenges," says Canalys chief analyst Alastair Edwards.

"Canalys research shows that more than 80% of channel partners around the world now offer some form of managed service. To stay ahead, IT service providers must evolve their businesses, shifting towards more recurring revenue and greater industry specialisation. Partnerships with the right technology companies and platform providers will be critical to success.

To better capture managed services revenue, MSPs are expanding their portfolios with services they might not traditionally think to offer on a recurring contract, such as Networking as a service.

SMBs are willing to pay for managed services to keep their IT infrastructure and networks running efficiently. In addition to taking on a more strategic role and expanding their solutions sets, 56% of MSPs specialise in services for a particular industry, with healthcare holding the number one spot for the second year in a row.

To keep pace with the growth in managed services, 71% of MSPs plan to hire more employees in the next 12 months.

While marketing and sales remain the top challenges, the data shows that MSPs are becoming savvier about this aspect of their business.

Security concerns also remain a top priority for MSPs and their clients. Ransomware and cybersecurity have almost doubled as a pain point, from 14% in 2017 to 30% in 2019.