Pandemic hits revenue, but cloud migration, SMB demand, cybersecurity will help
The coronavirus pandemic is dealing a blow to MSPs, but there are still growth opportunities for managed service providers around such areas as the cloud, growing demand for services from SMBs, and the coming promise of 5G, according to Datto.
The Lowdown: A recent survey conducted by the provider of cloud-based technology sold through MSPs found a market that like many others is being challenged by the public health crisis but also one that sees MSPs playing a critical role as businesses adapt to work-from-home orders and accelerate their digital transformation efforts.
The Details: Datto surveyed more than 1,800 MSPs for its fourth annual Global State of the MSP report. Key points in the survey include:
> Revenue: Before the COVID-19 outbreak, MSPs were projected to grow by 17%. After the pandemic, 40% of MSPs expect to cut growth expectations by at least 10%.
> SMBs: MSPs increasingly are becoming important partners to SMBs. About 22% of MSPs reported that their total annual revenue over the past three years grew by up to 5% and 24% reported growth of up to 10%, with SMBs playing a larger role.
> Growth drivers: The top two most consistent drivers cited were generating a higher portion of total revenue from managed services and setting specific revenue and growth goals. Combined, both enable MSPs to roughly double their rates of growth. For every 10% of total revenue derived from managed services, MSPs grow their businesses 0.25% to 0.75%.
> Cloud: Growth in cloud migrations could offset challenges posed by fiscal uncertainty. About 57% of MSPs expect the use of on-premises servers for critical workloads will drop over the next three years, while global stay-at-home directives are driving increased demand for cloud and IT.
> Concerns: Economic uncertainty, client cybersecurity, work-life balance, sales and marketing, and hiring are top issues for MSPs. About 34% of MSPs say the top concern is cybersecurity, though rising concerns about security from clients – including SMBs – could drive demand for security services.
> 5G: Given the growing interest in remote management capabilities, MSPs point to the emerging next generation of cellular connectivity as the most promising emerging technology. MSPs will see growing opportunities around helping companies develop, test, and deploy 5G technology.
The Impact: A number of factors will help drive the global managed service market to grow from $223 billion this year to $329.1 billion by 2025, according to a report in MarketsandMarkets. Such factors include high cloud adoption, increased automation of IT environments, growing demand among SMBs, the lack of IT skilled professionals, and lower enterprise IT budgets.
The Buzz: “Along with identifying the specific behaviors of high-growth MSPs and the technologies MSPs rely on, we also wanted to understand how MSP priorities have shifted due to the pandemic,” said Rob Rae, senior vice president of business development at Datto. “While economic uncertainty is troubling for MSPs, it’s still a good time to be in the industry. Nearly 40% of MSPs reported annual revenue of $2.5 million, demonstrating health and opportunity in the market. MSPs remain the cornerstone of our economy as they serve small businesses through the pandemic and beyond.”