While the effects of COVID on MSPs were mixed, coming out of COVID, competition has become the primary concern of MSPs, for the first time in the five year history of this survey.
Today, Datto is releasing the release of their fifth annual Global State of the MSP Report. The report is generally positive about MSPs’ self-perception of their businesses. Notably, 96% of MSPs expect their revenues to increase over the next three years.
“That’s immensely positive,” said Rob Rae, Datto’s Senior VP of Business Development. “So is the attitude. 93% of MSPs believe it’s a good time to be an MSP. I love that number. Pre-pandemic, it was 86%.”
In the overall results, the pandemic didn’t have a major impact on MSPs, and the results were somewhat mixed. Nearly half said they experienced a modest increase in revenue related to the pandemic, but almost one in five said that they experienced a decrease. Thirty-six percent reported no change in revenue because of the pandemic.
The survey was conducted by Boston-based Strategy Analytics, and was based on an independent survey of more than 1,800 MSPs worldwide. 610 of them were from North America, with 200 being from Canada and the rest from the U.S. 744 were from Europe, and 526 from APAC.
The statistical differences between the geos could be significant. For example, MSPs outside North America were more bullish about prospects over the next three years. 53% of respondents in Europe and 51% of respondents in APAC said that they expect to see between 5% and 10% growth over the next three years, compared with 35% in North America.
“This reflects the fact that the MSP model is more mature in the North American market,” Rae said. This shows up in other data points as well. For instance, in APAC, 6 in 10 of MSPs expect 75% or more of databases to be in the cloud in the next 2 years. By contrast, only 4 in 10 North American MSPs expect that. It tends to reflect that North American MSPs are more likely to have a hefty server investment on customer premises, which they are less enthusiastic about replacing.
One of the more interesting findings of the report was that, for the first time, competition came in first in the ‘What’s keeping MSPs up at night’ category. It was identified by 34%, compared with 27% for revenue growth, 24% profitability, 23% for both work-life balance, and acquiring new customers, and 22% for hiring.
“The concerns about competition are from other MSPs, not telcos at all,” Raw said. “What’s happening here is that we are seeing the maturity of the market. More businesses understand the need to outsource some of their IT, if not all of it. We have been investing in helping MSPs with sales and marketing to deal with this trend.”
Cloud migration has accelerated, with 93% of MSPs in the survey expecting at least half of their client workloads to be in the cloud in the next three years. Half of the respondents said their clients have 50 to 75% of workloads in the cloud, with almost two-fifths saying they have 25 to 50% in the cloud. Databases, email, and application servers were the most common cloud workloads.
“Cloud migration overall is definitely lower now than it was in 2019, but the MSP’s role in cloud migration is more significant now, because of the whole digital transformation piece of it,” Rae said. “That 93% number reflects the impact of digital transformation for MSPs due to remote work.”
99% of MSPs now said they offer some kind of managed security services. The most common was advanced endpoint security – next gen antivirus or EDR – at 84%. It was followed by email security (82%); data loss protection (79%); security framework and compliance auditing (78%); identity access management and single sign-on, at 75%; anti-malware (73%) password policy management (72%); two-factor authentication (68%); firewall (66%) and remote access technologies and mobile device management, both at 63%.
“With most of these, there remains a balance between convenience and security, with more convenience coming at the sacrifice of less security,” Rae said. “Because SMBs never thought of themselves as targets, and do now, the conversation has changed somewhat. Zero Trust would never have been a conversation a couple years ago with an SMB, but now more of these conversations are starting to happen. 2FA is a pain in the butt. We know all that. But it’s a necessary step to get to where we need to go.”
Rae also noted that past price objections among SMBs to some of these technologies had become somewhat less of an issue.
“Things get created for the enterprise market, and they become commoditized, and people find a way to bring down the cost,” he said. “It started that way even with servers and desktops. You are seeing enterprise class security techs that are now coming downmarket to where SMBs can finally afford them, and MSPs refine their offerings accordingly. With ransomware continuing to be a game-over conversation, the need to invest is more than ever before. Some organizations are now developing opportunities specifically for SMBs because its such a large market. It’s still early days for things like that, but it is coming.”
Finally, Rae noted that the differences between Canadian and U.S. MSPs, while not examined in the survey, have become minimal.
“My conversation with Canadian MSPs are very similar to those MSPs in the U.S,” he said. “Canada is under attack just as much as the rest of North America.”