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New reports from Datto and IT Glue highlight the impact of Covid-19 on MSPs

 

Changing priorities

Datto’s fourth annual Global State of the MSP Report based on a survey of more than 1,800 MSPs highlights how priorities have shifted during the Covid-19 pandemic. Its findings include:

*More than four out of five MSPs (84%) believe now is a good time to be an MSP. Over the past three years, 22% of MSPs have seen their annual revenue rise by up to 5%; 24% have seen it grow by up to 10%; 19% have increased annual revenue by up to 20%; and 12% have seen no change.

*More than half of MSPs get more than 50% of their revenue from recurring services.

*The two most consistent drivers of MSP growth are to generate a higher proportion of total revenue from managed services and to set specific revenue and growth goals. If combined, these two activities enable MSPs to double their rate of growth. For every 10% of total revenue derived from managed services, MSPs grow their businesses by between 0.25% and 0.75% on an annual basis.

*The pandemic is accelerating cloud migration and security projects and increasing managed services opportunities to the extent that 11% of MSPs have revised revenue growth projections upwards. VoIP, business continuity, Azure migrations, hardware sales and business resilience solutions are also expected to drive revenue.

*MSPs will not be immune to the economic impact of the pandemic. Nearly 40% expect to reduce their growth projections by between 10% and 20%.

*Clients’ cybersecurity is a top pain point for 34% of MSPs, up from 30% in 2019, and ahead of work/life balance (27%), hiring staff (25%) and sales & marketing (23%). Almost two thirds (61%) consider anti-virus the most critical security solution for SMEs, followed by advanced firewall and RMM.

*The emerging technology MSPs are most excited about is 5G, ranked above AI, IoT and ML in terms of its potential value to MSPs’ business. The one they have least expectations for is self-healing IT. The concept is appealing, says Datto, but MSPs’ experience leads them to believe that everything that can go wrong will go wrong.

The full report can be downloaded from

datto.com.

The risk and rewards of specialisation

IT Glue, a Kaseya company and industry standard for IT documentation, has just published its third annual Global MSP Benchmark Report, based on surveys in February and May i.e. pre- and post-Covid.

The latter shows that 51% of MSPs saw monthly revenue decreases as a result of the coronavirus shutdown and 29% saw their accounts receivable increase, indicating that clients could not meet contractual deadlines to pay for services.

The two surveys highlight a big shift in MSPs’ priorities in the first two months of shutdown. In February, before the Covid-19 pandemic, the top concerns of MSPs were a lack of adequate time to complete work (54%); an inability to find good technical employees (53%); changing technologies (32%); a lack of information sharing (27%); and cybersecurity threats (27%).

In May, their main concerns were the risk of a second lockdown (74%); cybersecurity, which leapt up from 27% in February to 50% in May; and customer churn (36%).

Coronavirus has also had a big impact on MSPs’ interest in mergers and acquisitions. In IT Glue’s pre-pandemic survey in February, 52% of MSPs indicated they were at least somewhat interested in acquiring or merging with another MSP (down from 62% in 2018 ). In its follow-up survey in May, only 37% of MSPs said they were considering M&A activity.

One interesting finding highlighted by IT Glue concerns the merits of diversification versus specialisation. MSPs that focused on a specific industry experienced slightly higher revenue this year than more general MSPs (79% vs. 75%). However, MSPs that targeted the following four industries were more likely to report profits of 20% or more: legal (43%), government (40%), finance (39%) and professional services (38%).

IT Glue warns that while specialisation can be a boon for MSPs, placing all your eggs in one basket can also be risky; MSPs that specialised in retail and hospitality were especially hard hit during the pandemic.

https://itglue.com/resource/global-benchmark-2020

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