Business Solutions Magazine recently released the results from a survey they did with their IT Solution Provider reader audience, and the results were very interesting. We've seen the IT channel progress over the past 10-15 years from hardware resellers, to break-fix shops and now, the industry is moving towards the managed IT services model. If you don't think managed services offer a big opportunity for IT solution providers and/or haven't changed your business model yet, perhaps these numbers will help persuade you.
2015 is the year of Managed IT Services.
5 Key Takeaways from Survey
1. Managed Services Shows Huge Growth Potential
Overall, the survey demonstrated the huge opportunity there is when it comes to managed services. Only 5% of survey respondents saw a decline in managed services revenue, yet 30% of respondents saw an increase in managed services revenue between 25-100%!
Additionally, 7% of respondents saw an increase in managed services revenue over 100%. That's huge growth potential for any industry.
2. IT Solution Providers Have Room To Grow
Survey respondents indicated that only 50% of their clients use some form of managed services. That means the other half of your client base is untapped potential. It's much easier to expand your service offering among current clients than trying to find new managed services clients. Take advantage of the clients you already have relationships with and teach them the benefits of managed IT services.
Respondents also said that only 44% of their revenue comes from managed services, meaning the majority of their revenue still comes from hardware sales and break/fix engagements. Managed services contracts offer predictable revenue each month. You have the opportunity to proactively resolve client issues, rather than reactively fix issues and worry about fluctuating revenues each month.
Here are some of the comments respondents said about the benefits of switching to the managed services business model.
“MRR allows us to think about the long term rather than always wondering where our next meal will come from.”
“My focus is now on client satisfaction and not hunting the next project. This has allowed me to take some time off and to focus on working ON the business and not IN the business. I no longer have any operational responsibilities.”
“A book of managed services business means my business is worth more than a break-fix company. Long term, I know that I can retire in style,”
3. BDR and RMM Show Most Promise
There are a number of service offerings that are included in "managed services"; however, the services that show the most promise for those looking to make the switch are Backup & Disaster Recovery (BDR) and Remote Monitoring and Management (RMM). See below for a list of the top services provided by MSPs:
|1. Backup & Disaster Recovery||76.8%|
|2. Remote Monitoring & Management||75.8%|
|3. Managed Network Security||56.6%|
|7. Managed Communications (VoIP etc.)||39.4%|
|8. Mobile Device Management||36.4%|
|9. Payment Processing||17.2%|
|10. Hosted Cloud/Video Surveillance||14.1%|
|11. Managed Print||13.1%|
Security and cloud are growing needs in the SMB market, so expect services like Managed Network Security, Mobile Device Management and File Sync & Share solutions to increase in the coming years. Still, BDR & RMM are head and shoulders above the rest in terms of market needs.
Additionally, there are certain verticals that provide more promise than others. If you're looking to break in to managed services (or expand your offering), Healthcare and Manufacturing both have a strong need for managed services. See below for the top verticals served by MSPs.
When looking to attack a market, make sure to pick a specific segment. It's very difficult to be everything to everyone. Find your specialty and identify what makes you unique as a solution provider.
Start with your current customers. If the majority of your clients are restaurants, it's probably better for you to offer them managed services than trying to go after the healthcare vertical.
4. Sales and Marketing are Biggest Barriers to Growth for MSPs
When asked what is preventing them from moving to a recurring revenue model, 37.2% of respondents indicated a lack of marketing to customers. Additionally, 25.6% cited a lack of internal sales skills to support their growth.
We've written about these topics a lot and hear this frequently from our partners. It's hard enough to find technical talent, where are you going to find the time attract sales & marketing talent?
Here are some resources that may be helpful if you're suffering from a lack of sales and/or marketing support:
- Blog: 7 Steps for Hiring a Good MSP Sales Rep
- Blog: Tackle Your MSP Marketing in Bite-Sized Chunks
- MSPradio: The Ultimate Recipe for Hiring Productive Sales People
5. Using Peer Groups, PSAs and Tracking Metrics Make a More Profitable MSP
MSPs are often accused of not taking advantage of the tools around them. As an MSP, you're frequently dealing with client issues, and you don't have time to take full advantage of these resources. However, this study showed just how valuable peer groups, PSAs and metrics are to MSPs. Take a look at the below table.
MSPs who fully use a PSA have a median annual revenue 4 times higher than those that don't. Now, this may be a result of size (not cause of size), as in larger MSPs with more revenue have the staff to fully manage a PSA. However, PSAs give you strong data that you can use to improve your business and find more profitable customers.
Additionally, MSPs who participate in peer groups have double the revenue as those that don't. Take advantage of peer networking and industry events in order to grow your business.
Tracking Key Performance Indicators (KPIs) is another key step to increasing your revenues. It's hard to know what to fix if you don't know what's going wrong. If you need help identifying a few KPIs to start tracking, check out the blog posts below:
- Video: KPIs You Should Be Tracking
- Blog: Marketing KPIs You Should Be Tracking
- Blog: Profitability KPIs You Should Be Tracking
Lastly, make sure you have a business plan. MSPs with business plans have 3 times more revenue than those that don't. You can adjust your business plan as you go, but you need to make sure you're charting your course to success.
The numbers don't lie. It's clear there are many benefits of switching to a managed services model, yet many IT Solution Providers don't take full advantage of the opportunity. It's an opportunity to make your business more stable and profitable, while also making your clients more successful.
As we move into 2015, this is the year to accelerate your business by moving further towards a managed services model.
By Gretchen Hoffman