While some of the data reflect a higher percentage of lifestyle MSPs who serve Canada’s MSP market, the bottom line is that almost every MSP surveyed thinks it’s as good a time as ever to be in the industry.
Datto has released its Canadian State of the MSP Report, which provides a snapshot of today’s Datto MSPs, as well as various factoids about their interests and lives. The data, which this year is based on approximately 150 of Datto’s Canadian MSPs from across the country, has a few surprises, but its overall thrust is a fairly strong one for the Canadian industry.
“I see the results overall as positive,” said Rob Rae, Datto’s VP of Business Development, and a transplanted Canadian who now resides in Norwalk CT, where Datto’s head offices are located. “Canada is typically thought of as being behind the US market. But that gap, which has ben a couple of a years historically in most areas, has closed significantly. Canadian MSPs are leveraging tech vendors and education at a faster pace. They are getting more information than they had before.”
One key metric here, Rae said, is that almost 100 per cent of Canadian MSPs have some form of recurring revenue – compared to 80 per cent globally.
“The definition of a managed service provider is really a solution provider who offers IT services,” Rae said. “There are very few pure recurring revenue MSPs out there. There’s still a ton of project work and sales – not in a traditional reseller way, but it’s significant. Canadian MSPs are more focused on the recurring revenue model, however.”
They are also exceedingly optimistic. Nearly 100 per cent said that it’s as good a time as ever for a Canadian MSP to be in the industry. That optimism is curious given for instance that in security the study also identifies anti-virus, firewall, anti-spam and Remote Monitoring and Management [RMM] services as the most common ones offered in security. All are heavily commoditized, and, in a fast-changing industry, have been around for many years.
“It’s certainly no surprise on those most popular areas, and it would have been the same ten years ago,” Rae said. “The difference today though is MSP awareness of what these solutions do, and how they work, and awareness of how they fit into the stack is better understood than it used to be. Yes, antivirus has been around forever. But it’s still a product that you must have. With the customer the issue is not ‘why am I buying this.’ It’s ‘how much will it cost me and what will it do.’ I think as well that MSPs are positive because in Canada, things have been changing in recent years and MSP service is being accepted as the norm. Given that 99 per cent of Canada is SMB, that means the Canadian market is completely outsourced. That’s why they are so optimistic.”
In terms of the top services Canadian MSPs provide, Help Desk and Networking [WiFi, switching, routing] both came in at 84 per cent. They were followed by Productivity Software [78%], Business Continuity and Disaster Recovery [78%] and Virtual Infrastructure, including server, desktop and networking [75%]. After that there is a dropoff to 61 per cent for Security Management Software/Tools, and everything else, including VoIP, Cloud Infrastructure Design, Storage Design and Internet Connectivity, were all under 50 per cent.
Many of the Canadian MSPs are smaller. 28 per cent have less than $200,000 in revenue, 20 per cent are between $200-$500k, and 13 per cent are between $500k. Only 10 per cent are above $5 million in revenues.
“I’m not shocked at that,” Rae said. “The industry in Canada is mainly little guys, just as most users are generally very small business. There is a term ‘boutique’ or ‘lifestyle’ MSP, where people pull a good income out of their business to support them, and they aren’t looking to grow beyond that. There’s a lot of that in Canada, but there’s also a lot of growth focus and acquisitions as well.”
Rae said that the lifestyle MSP issue explains possibly the most discordant data point in this year’s study. 58 per cent of MSPs plan to add 1-10 new clients in the next 12 months – compared to 80 per cent globally.
“There are more of these lifestyle MSPs in Canada than most markets because we are a small business country,” he stated. “The key thing here is that the optimism is high, even given the lesser focus on building new business. In Canada this also reflects that MSPs are still selling more to existing customers, with new products coming in in areas like security. There are more new vendors now than we have ever seen.”
Staffing was an issue. 67 per cent said they plan to hire between one and five employees in the next year, but while 61 per cent said hiring difficulty was about the same as last year, 32 per cent said it was harder and only 7 per cent easier.
“This has been an issue, so that’s no surprise,” Rae said. “However, at CompTIA ChannelCon earlier this month, there was some optimism that we are seeing some movement in the education system to address this. As a company headquartered in Connecticut, we have learned that there are some creative things you have to do sometimes to find engineers there. We do think there will be some more creativity from newly-trained kids coming out of the schools.”
48 per cent of Canadian MSPs said that they have a vertical focus in their business. Industry pundits for several years have counselled MSPs to develop a vertical focus, but Rae doesn’t share that view, at all.
“IT is IT,” he said. “It doesn’t matter what the end user is doing. Specialization is not for everybody. Complete verticalization is very rare in our space. If I was to start an MSP I wouldn’t specialize at all, and I don’t think specialization is the future.”
This year’s report had several little nuggets of interest. For instance, 42 per cent of Canadian MSPs said Hyper-V was their most popular virtualization software, only slightly less than VMware at 46 per cent.
“That reflects the fact that Canadian MSPs with an SMB focus are 99 per cent Microsoft resellers,” Rae said. 40 per cent of MSPs recommend Dell servers to clients, followed by Lenovo [26%] and HPE [24%]
Other curious items are that only 28 per cent attended an industry event annually, which seems low when local events are counted. Spiceworks [38%] and Reddit [35%] were, by far, the most popular online communities Canadian MSPs access. No one else was in double digits.
Finally, the question of what’s keeping MSPs up at night, which was asked last year, saw sales and market lead the list at 46 per cent. It also led last year, when it was 56 per cent.
“The MSP space has gotten better at sales and marketing over the years, so I don’t think this reflects techy guys not being good at this,” Rae said. “You have many entrepreneurs who have started MSPs. What I think this number reflects is that we all still worry about sales and marketing. Any good organization will worry about it.”
A surprise is that Work/Life Balance popped up second, at 38 per cent. This one wasn’t on the list at all last year.
“This is not overly surprising,” Rae said. “In this business, you get back what you put in. I think this metric reflects the increased maturity and age of MSPs. You also see some turning to education, writing books, and speaking on the circuit. I’m not surprised that this was an issue, but I was surprised that it was close to the top.”