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Recurring revenue the way forward for MSPs

Dattos’s European State of the MSP Report provides insight into the challenges and opportunities facing managed service providers. Here, Matthew Richards, Chief Marketing Officer at Datto Inc., picks out key findings from this year’s survey of 400 European MSPs.

Matthew Richards

The European managed service provider (MSP) channel is continuing its strong upward climb, as shown by our report’s findings. It’s clear that recurring revenue is the way forward with half of MSPs servicing more than 100 clients on annual contacts. This is up 23% on last year’s report findings, and as a result of this strong growth, MSPs are seeing significant revenue returns with 37% turning over $1 to $5 million on an annual basis and 12% reporting revenues of $5 million or more every year.

Despite market growth, MSPs are still facing an enormous challenge with their marketing and sales efforts, with 47% citing this as their biggest struggle – a 21% jump on the same pain point in 2017’s report, putting it above staffing/training (37%) and ransomware/cyber security (33%). MSPs looking to continue to improve their business growth will need to dedicate time to recruit the right staff to run their sales and marketing efforts, so that they can concentrate on their customers.

Marketing pain points include lead generation, followed by hiring sales talent, cold calling and market differentiation. To mitigate this, MSPs should partner with a vendor who understands their need for sales and marketing support.

While selling backup and disaster recovery (BDR) solutions was the second biggest challenge for MSPs in 2017, that same pain point has dropped from 18% to just 8% this year. Thanks to ransomware and cyber security issues over the past year, BDR is no longer such a hard sell for MSPs, as businesses get smarter about the need to backup and mitigate against issues before they arise.

Specialise to differentiate
MSPs that specialise stand more chance of monetising as they differentiate themselves in an often overcrowded market. While offering a generic service may seem like the sensible way to attract a wider pool of potential customers, focusing business efforts for a specific vertical, or verticals, is far more likely to make MSPs stand out.

The majority of MSPs already recognise this. While in 2017, professional services was the top vertical targeted by MSPs, followed by manufacturing and construction and healthcare, in this year’s report manufacturing topped the list, with 55% of MSPs offering specialised services for manufacturing companies, followed by financial (49%), legal (42%), non-profit (37%), education (34%) and healthcare (33%).

The channel is synonymous with long-term relationships and MSPs are becoming more social, with 90% using social networks, notably Facebook (65%), LinkedIn (56%) and Twitter (29%), on a daily basis – the same order of preference as 2017’s report. Only 10% of MSPs do not use any form of social media. When it comes to socialising with industry peers, Reddit is the go-to forum of choice for the channel, just as it was in 2017.

A Datto ebook containing findings from the latest European State of the MSP Report can be downloaded from

https://tinyurl.com/y7t9kkm8

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2018