Unsurprisingly, more advanced security remains a topic of concern for many MSPs, as does automation, and much older issues like sales and marketing.
SolarWinds has released their “2019 Trends in Managed Services” report, which looks at the health of the managed services industry in both North America and Europe. The report shows significant limitations among MSPs. Most still do not offer more than the basics, and many have non-technical problems with sales and marketing. SolarWinds sees a positive though in that MSPs are aware of many of their limitations, and are looking for help from their vendors, which SolarWinds is willing to provide. SolarWinds also sees a major plus in improved metrics from last year around customer retention. The report was done in conjunction with IT research firm The 2112 Group.
“We are now in our third year of doing this report, which is providing a unique look at how things are going among MSPs,” said Colin Knox, who leads community engagement efforts at SolarWinds MSP. “We’ve seen some things that did surprise us, and some that didn’t, and the findings will impact the direction we take in our approach to the market.”
The metrics show an MSP industry that reflects that many MSPs today are evolutions of traditional solution providers. 80% of them still offer break-fix services. The average North American channel partner gets 30% of gross revenue through managed services. Among ones who identify primarily as MSPs, the average gross revenue derived from managed services exceeds 46%. And while most MSPs offer security basics like antivirus, backup, and firewalls, not all do. In North America, 83% offer firewalls, 81% backup, 89% antivirus and 75% endpoint security. Among more basic services, 93% offer device management, 89% server management, 84% network management and 83% disaster-as-a-service.
“There has been an ebb and flow of managed services, in which many IT providers label themselves as MSPs and have some type of MSP services, but don’t provide the broad services of a full managed plan,” Knox said. “Many end clients don’t see the need for full managed services. Some MSPs have also gone from providing fully managed services back to time block hours because clients were too unpredictable. Many MSPs also don’t serve markets that are fully developed. We still talk with MSPs who have customers that don’t have a next-generation firewall or a UTM appliance.”
Not all MSPs even offer recurring managed services.
“97% have some form of recurring revenue-based service,” Knox said. “There are a few who haven’t yet hit the breadth of full services, but are offering IT assistance.”
The numbers of MSPs who are confident that their skills are of high level is quite low, at 24%. Many services were also offered by fewer than 50% of respondents, including software management (45%), risk assessment management (32%), virtual desktop (30%), communications and collaboration (30%), website hosting (25%), database management (15%) and managed print services (10%).
Knox said that the metrics presented in this study offer a more realistic assessment of MSP capabilities than some he has seen in the past.
“When I was on the Security Council at CompTIA, we did a lot of self-testing and a lot of people self-surveyed themselves, and the result was a lot of skewed research showing that many MSPs were offering things like CASB and Digital Rights Management,” he noted. “It wasn’t realistic. Many MSPs had too much pride, and when you dug in, you found that many weren’t at the level they thought. Many people here admit they need help, which is a good thing.”
For example, automation saves North American MSPs an average of 15.6 full-time employee hours per week (in Europe, it’s 23 hours). But the report found that only 35% of respondents are very or extremely confident in their ability to leverage automation in their services practices. 38% say they’re somewhat confident, while 27% have little to no confidence in their automation abilities. In specific areas of automation, the only one where MSPs show strong confidence was in patch management (76%) while areas like network diagnostics and help desk showed little confidence, at 33% and 32% respectively.
“They are asking for help in automating compliance management,” Knox indicated. “They are coming forward and saying that they need help, finding ways on how to partner with other organizations for penetration testing, for example. The questions are what can we do to help them, and how committed are they to levelling up.”
While MSPs were confident in their ability to handle the basic security services, the numbers fell significantly around more advanced capabilities like biometrics (52%), CASB (49%), digital rights management (48%), database security (39%), data loss prevention (31%), and UTM (31%).
North American MSPs identified their biggest obstacles to growth as sales (43%), lack of resources/time (42%), and marketing (26%).
“Some of this is an old conversation,” Knox said. “It reflects the demographic of who is running and owning MSPs.
One positive surprise was that client retention was much better than last year. In North America, respondents pick up an average of four clients every three months while losing one in the same period. In Europe, the average was three new clients every two months while losing more than one on average. Last year, almost as many clients were lost as won – bearing in mind that a majority of clients are lost because they go out of business, or because the MSP fires THEM, typically for non-payment.
So how can MSPs make actionable decisions based off all this data?
“They can see that they aren’t alone in being uncomfortable about parts of their practice,” Knox said. “They can see that they need to continue their focus on automation and on security. Those are areas that SolarWinds is focusing on.
One positive aspect of this study is that compared to last year’s, client retention is better. There are also more private equity dollars flowing into this space because it is a growing market. That offers an exit path for those who want that.”
There is ample actionable information here for SolarWinds as well.
“It shows where vendors need to double down and help pull the rest across the line,” Knox said. “The main obstacles to growth are sales and marketing, so we need to help outfit them. Our MSP Institute will be doing more there – putting a bigger focus on how to sell and how to market. We have also assembled a team specifically to coach and educate on topic categories. Our number one priority this year is partner success. That may sound cliched, but we have a very strong portfolio pf products and a very large partner base. We will invest in partners and fuel their success, down to empowering their techs. We understand where we should be focusing our investment to drive better results – help with sales and marketing, help with their automation, and increase and improve their level of comfort with security, particularly emerging security.”