MSPs are thriving in the face of the COVID-19 coronavirus pandemic and are in a position to capitalize on a number of new growth opportunities.
That’s the word from Rob Rae, senior vice president of business development at Datto, who Thursday revealed to attendees of the virtual NexGen+ 2020 conference the findings of Datto’s annual “Global State Of The MSP” report, which was released earlier this year.
NexGen+ 2020 is being held by CRN parent The Channel Company.
Rae, during his NexGen+ 2020 keynote, said the “Global State Of The MSP” report for 2020 was unique in that it was based on a survey of MSPs originally done in late 2019 and slated to be released in April of this year.
“What happened obviously in March was, the entire world went into shutdown mode and things changed, everybody changed, and nobody back in November and December was forecasting these changes,” he said.
Because of that, Norwalk, Conn.-based Datto recently resurveyed all of those who originally responded to late last year’s survey.
“So not only is this report unique in the perspective that it’s managed service providers only, but we now have the perspective about what was going on pre-COVID and what’s happening post-COVID,” Rae said. “So we can actually have an intelligent conversation about what’s going on in the marketplace around managed services today.”
As customers learned to navigate the COVID-19 coronavirus pandemic, managed services have become more critical than ever before, Rae said.
“A lot of times, end users would view [an MSP] as potentially the ‘tech guy,’ or where you go to get product from, or hold them if something gets broken,” he said. “That has changed. Now you’re consultative. Now you should actually be involved in planning, and planning ahead for any problem that they may perceive.”
For instance, when talking data backup and disaster recovery, the conversation is typically focused on fires and floods, Rae said.
“Now you can add pandemic to it,” he said. “And now we can add it to say, ‘This has happened. It could happen again. Let’s be prepared for it.’”
In response, Datto has developed a six-step COVID response communication plan that lets MSPs use and edit it as needed to help customers survive and thrive in a pandemic, Rae said.
“You can go and have a proper consultative conversation with your end users about transitioning to whatever their ‘new normal’ is,” he said. “And I hate that term, and I’m not going to use it again.”
Now, because of the pandemic, work-from-home or work-from-anywhere has become a priority part of all MSPs’ services, Rae said.
But following the pandemic, the big MSP opportunity will stem from the question of where people will work from in the future, whether it’s at home, in the office, in a cabin, at the parents’ or kids’ house, or on the beach, he said.
“The work-from-home strategy is something that the MSP can deliver,” he said. “We can deliver security. We can deliver safety. We can deliver technology. We can deliver connectivity. And we can do it all very quickly and at an affordable monthly fee.”
In the future, MSPs will look back and see this time as one in which customers actually understood MSPs’ roles in providing security, education and information on where to invest their resources, Rae said. That will lead to the larger companies that have not yet embraced managed services as much as small and midsize businesses to look at co-managed IT.
“The opportunity for us to go upmarket is better than ever before,” he said. “Again, their needs are same as the SMBs: security, education and where to invest. And it’s not necessarily a complete outsource of IT. But it definitely is recurring revenue projects to help those IT teams.”
In looking at the survey’s findings, 78 percent of MSPs pre-COVID said they had experienced 5 percent or higher growth annually for the past three years, Rae said.
“That is absolutely insane growth for our actual industry,” he said. “Better growth than any other aspect of the channel so far.”
Heading into 2020, MSPs in general were expecting double-digit growth for this year, but then the COVID-19 coronavirus pandemic hit, causing everyone to reduce their forecasts. On average, nearly 40 percent of MSPs dropped their growth projections by 10 percent to 20 percent.
“The good news is, we’re still expecting growth,” Rae said. “Everybody is still expecting growth. … The average MSP that I talk to is still actually growing better than what they originally forecast.”
Even more surprising is that 11 percent of MSPs surveyed said they revised their growth projections upward going into the pandemic, whether it was because certain verticals were impacted in a positive way or because those MSPs jumped on the opportunity to talk with customers about what was going on in the market, Rae said.
When MSPs were asked what keeps them up at night, the response was pretty consistent with past surveys, Rae said. Thirty-four percent of MSPs cited customer concerns about cybersecurity, 27 percent cited work-life balance, 25 percent cited hiring issues, and 23 percent cited sales and marketing.
Of the MSPs surveyed, nearly 40 percent have been in business for 16-plus years, Rae said. He also said that 36 percent have over 25 employees, which is up over previous surveys, an indicator that MSPs are growing in size.
Also, 84 percent of MSPs believe that now is a good time to be an MSP despite being surveyed in the middle of the COVID-19 coronavirus pandemic.
While there are multiple reasons for believing that now is a good time to be an MSP, Rae said he feels the key reason is monthly recurring revenue.
The move to monthly recurring revenue really started in earnest in 2008 during the recession when all the big IT projects stopped and forced partners to flip to the new model just to stay in business, he said. Now, according to the survey, 53 percent of MSPs’ revenue is coming from monthly recurring revenue, Rae said.
“So when the pandemic hit and everybody got sent home, guess what?” he said. “[Businesses] still need their IT. They still value their IT. And rather than canceling large projects, which they did, but which are starting to come back online, they actually still continued to pay that per-month or monthly fee for their IT services as part of their regular operations. It was a no-brainer.”
Datto’s “State Of The MSP” report was a fabulous way to do a survey, said Dave Seibert, CIO of IT Innovators, an Irvine, Calif.-based MSP and Datto channel partner.
The before COVID-19 results and during COVID-19 results show how there’s feast or famine in the channel, Seibert told CRN.
“I refer to the vertical industries partners choose,” he said. “Much of the vendor community supports the idea of focusing on verticals. But there’s a risk to that, and we’re seeing that in COVID. Partners who focused on such verticals as entertainment, travel and retail have been impacted. But many partners who didn’t operate in those verticals are having their best year ever. … There’s no middle ground.”
It is a good marketing tool to market to verticals, Siebert said. “But it’s also important to have a wide breadth of clients so you can survive and weather the storm,” he said.