July 09, 2020
MSPs Positive On Growth, Despite Pandemic
According to our Global State of the MSP Report, the managed services industry has been growing rapidly in recent years, as small and medium businesses (SMBs) increasingly entrust their IT needs to managed service providers (MSPs). Over the past three years, 22% of respondents said that their total revenue per year grew by up to 5%, and 24% reported growth of up to 10%. Meanwhile, 19% of respondents saw growth of up to 20% per year and 12% remained the same.
The largest percentage (42%) of respondents experienced medium growth, with revenue increases of 6 to 20% per year, on average. However, one in five MSPs reported rapid growth of more than 20% per year, on average, sustained for the past three years. Only 3% of respondents stated growth has declined by more than 5% annually.
Thankfully, MSPs have fared better than many during the pandemic and are positive about continued growth, despite challenges.
When we initially conducted our survey, MSPs reported that they expected to see their businesses grow 17% on average over the next three years. This, of course, was before COVID-19. We conducted a follow-up survey that revealed that MSPs are still expecting to grow through the crisis, albeit at a much slower pace than originally planned.
Nearly 40% of MSPs said they expected to reduce their 2020 growth projection by between 10% and 20%, and 23% said they expect to remain on plan or reduce their plan by less than 10%. Interestingly, 11% actually adjusted growth projections upward, expecting revenue to increase during the crisis compared to their original plan, indicating that some MSPs were able to identify growth opportunities amidst the transition to businesses working remotely.
Remote work needs are without a doubt a driver of MSP growth in 2020. In a recent CompTIA survey, 67% of businesses said they are likely to seek third-party assistance for remote work capabilities in the wake of COVID-19. Additionally, their report said that the rising unemployment rates may have less of an impact on MSPs than other businesses, because many serve professional service clients that can work remotely during the pandemic.
Respondents to our survey pointed to security and cloud migrations as major growth drivers and said that the shift to remote working will only accelerate those trends. Nearly 75% of MSPs currently have a managed security offering, but are more likely to offer it in partnership with an MSSP or other vendor (43%). Of the remaining 25%, 69% said they will begin offering security services within the next 12 months.
Use of cloud computing and SaaS is expected to rise as well. 57% of MSPs expect the use of on-premises servers for critical applications to decline over the next three years. And, respondents said that 62% of their clients are currently using Microsoft 365 cloud services and they expect that 70% will be using them within two years.
To learn more about what trends to expect in the channel in the coming months, download the full report.