BENCHMARK REPORT · 2020-07-24 · In last year’s Global MSP Benchmark Report, we explored what it means to be a top-performing MSP. Data collected gave insight into the performance

IT GLUE 2019 Global MSPBENCHMARK REPORT

OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

THE GOLDEN QUINTILE . . . . . . . . . . . . . . . . . . . . . 3

IT GLUE’S IMPACT . . . . . . . . . . . . . . . . . . . . . . . . . . 5

BUSINESS MODEL . . . . . . . . . . . . . . . . . . . . . . . . . . 6

CUSTOMERS, SEATS AND CHURN . . . . . . . . . . . . . 7

TECH STACK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ENDPOINTS/SERVERS . . . . . . . . . . . . . . . . . . . . . . 9

VERTICALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

KPI AND METRICS TRACKING . . . . . . . . . . . . . . . .11

NETWORKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

HEADCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

EMPLOYEE TURNOVER . . . . . . . . . . . . . . . . . . . . . 15

ONBOARDING NEW TECHS . . . . . . . . . . . . . . . 16

BIGGEST CHALLENGES . . . . . . . . . . . . . . . . . . . 17

ECONOMIC OUTLOOK . . . . . . . . . . . . . . . . . . . . 18

MERGERS & ACQUISITIONS . . . . . . . . . . . . . . . 19

WHERE MSPs NEED HELP . . . . . . . . . . . . . . . 20

OUTSOURCING . . . . . . . . . . . . . . . . . . . . . . . . . . 21

NON-TECHNICAL EMPLOYEES . . . . . . . . . . . .22

PASSWORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

ONBOARDING . . . . . . . . . . . . . . . . . . . . . . . . . . 24

OPPORTUNITIES . . . . . . . . . . . . . . . . . . . . . . . . .25

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . .27

CONTENTS IT GLUE GLOBAL MSP BENCHMARK 2019

http://www.itglue.com

OVERVIEW

In last year’s Global MSP Benchmark Report, we explored what it means to be a top-performing MSP. Data collected gave insight into the performance of MSPs, the state of the industry, and how MSPs are being run. We discovered that the top 20% of MSPs were operating with 10% annual revenue growth and 20% net margins. This group, dubbed the Golden Quintile, represented the ideal of what an MSP can be. It is interesting to note that these top performers come in all shapes and sizes. While there is no one magic bullet business model that works, the information in this report can help your MSP make informed decisions.

Since this report marks the second year IT Glue has collected data, we were able to identify trends over the previous year. Not only does this give indications of the industry’s trajectory, it also allows us to verify hypotheses made in 2018. But we also wanted to expand the breadth of the report and gain additional insights, which meant adding a few new questions and also taking a different approach to some pre-existing questions.

The MSP industry is growing rapidly, and MSPs are experiencing a corresponding increase in year-over-year revenue growth. In fact, 77% of respondents saw an increase in revenue over the previous year. One of the most notable findings was that the number of MSPs who fall into the category of the Golden Quintile increased from 20% to 28% — a significant shift. Despite these changes, the biggest challenges (sourcing technicians, and battling time constraints) and opportunities (security, automation, and disaster recovery) remain unchanged.

IT GLUE GLOBAL MSP BENCHMARK 2019


PAR

TIC

IPA

NTS

This year’s survey included over 700 respondents from 23 countries, up from 20 last year. Two-thirds of respondents were from the United States, with the UK, Canada, and Australia all having significant representation. The geographic distribution of responses was comparable to last year, though slightly more international.

Parallel to the growth of IT Glue’s partner base, the sample size for this survey also grew. In total, 90% of respondents were IT Glue partners. Though the number of non-partner respondents increased, the number of partners responding increased at an even greater rate and, as a result, the proportion of non-partner respondents decreased.

2



AVERAGE MSPs 11%

THE GOLDEN QUINTILE

36%

GROWING MSPs46%

UNDERPERFORMING MSPs4%

REVENUE (DECLINING)

REVENUE (INCREASING)

MARGINS (>0%) MARGINS (50%+)

STABLE MSPs2 .%

The leaders of the channel have known for a long time that the MSP industry is evolving. Not only is it growing, it’s becoming more professional. The shift towards more professional business and operating models means that, in theory, there should be more MSPs that perform better year over year — assuming no change in market conditions. In 2018, GDP growth in the US was slightly higher than in 2017, and unemployment continued to fall, providing a strong economic backdrop for the small businesses that fuel MSP demand. Given this, the baseline assumption is that there should be a corresponding increase in demand for the MSP business between 2017 and 2018.

In this year’s survey, 28% of respondents fit into the parameters that identified last year’s Golden Quintile, which was year-over-year revenue growth and 20%+ net margins.

Whether the trend is framed as top performing MSPs starting to push 25% net margins and sustained revenue growth, or whether it’s framed as change 36% of MSPs are performing at what used to be considered the top quintile level, either way it’s clear that top MSPs performed better in 2018 over the previous year. It’s worth noting that a stable MSP that isn’t growing but is earning high margins, may be a perfectly good cash cow to keep milking.

So how did the bottom 20% of MSPs fare? The bottom quintile includes all MSPs that: [1] recorded a decrease in annual revenue, [2] earned margins of less than 5%, and [3] saw flat revenues and margins less than 15%. That’s right, if your revenue remained stable in 2018 and you earned a 15% gross margin, that puts you in the bottom quintile of your peers.

Overall, this statistic is encouraging. It indicates that, for the most part, the managed services business is lucrative — offering growth and healthy net margins to most participants.

Keep reading for more insights as to what distinguishes the top performers in the MSP business.

THE GOLDEN

QUINTILE



This year’s data affirms what we saw last year: that there isn’t much difference between the size of top-performing

MSPs, in relation to the size of MSPs in general. If anything, there’s slightly more small MSPs among the top performers,

but the numbers aren’t significantly different.

<$250K

$50M +

$250-500K

$500K-$1M

$1-2M

$2-5M

$5-10M

$10-20M

$20-30M

$30-40M

$40-50M

14%

13%

18%20%

20%

9% 4%

0%

1%

1%

0%$50M +

$20-30M

$30-40M

$40-50M

$5-10M $10-20M

<$250K

$250-500K

$500K-$1M $

1-2M

$2

-5M

10%

12%

18%

21%

22%

10% 3%

1%

1%

0%

2%$50M +

$20-30M

$30-40M

$40-50M

$5-10M $10-20M

<$250K

$250-500K

$500K-$

$1-2M

$2-

5M

MSP INDUSTRY BY REVENUE

GOLDEN QUINTILE BY REVENUE

As the chart below indicates, the MSP business is still populated mainly by small businesses, with 40% of MSPs reporting under $1 million in revenue, and over 60% reporting under $2 million in revenue.


4


Last year, survey data showed that 80% of IT Glue partners saw increasing revenues, versus 66% of non-partners. This year, the data still shows a divide, albeit a smaller one, with 78% of partners seeing higher revenue, versus 71% of non-partners. The numbers indicate a healthy MSP market, and suggest that IT Glue partners outperform those with other documentation systems — or no documentation, as the case might be.

In terms of the impact on profits, the trend is similar. Most MSPs are earning net margins over 10%. But among IT Glue partners, 77% are earning margins above 10%, compared to 71% of non-partners.

Clearly, the MSP business is robust. Companies in the industry are on average growing, and enjoying healthy margins. In part, this is likely a case of a rising tide floating all boats, but it also shows that there are multiple pathways to success. It helps to have a robust documentation system, and IT Glue partners do perform better, but at this stage of the industry’s life cycle where demand for MSPs is high, some companies survive without it. That said, among smaller MSPs, IT Glue partners showed slightly superior performance compared to non-partners in terms of revenue growth, echoing findings from last year.

IT GLUE’S IMPACT


5


REVENUE GROWTH BASED ON % OF MANAGED SERVICES

100%

80%

60%

40%

20%

% O

F LO

WE

R, A

BO

UT

TH

E SA

ME

, AN

D H

IGH

ER

RE

VE

NU

E G

RO

WT

H

MANAGED SERVICES AS A % OF OVERALL BUSINESS

LOWER

HIGHER

ABOUT THE SAME

0-49% 50-79% 80% +

In the past decade, the biggest shift in IT services has been the rise of managed services. We have moved from a world where MSPs had to explain to prospects what they do, to a world where prospects are aware of managed services and are choosing between multiple different competitors. The move to managed services speaks to the maturation of the industry — a positive change for both small businesses, and IT service providers.

In this year’s survey, findings mirrored those from last year, showing once again that IT service providers with less than 50% managed services (as a percentage of their overall revenue) are less likely to enjoy higher revenue growth. They are, of course, still likely to be growing, but the rough trend still holds that the more managed services you have, the more likely you are to see revenue growth. However, while last year no company with 80% or more managed services saw a revenue decline, that was not the case this year.

The other thing worth looking at is the relationship between managed services and overall profitability. There does not appear to be a correlation between the percentage of managed services that a company offers, versus the margins that

are earned. This is actually in line with economic principles, meaning that over time companies will identify the best mix of business lines that generate the most

profit. An IT service provider can offer a range of services based on the needs of the market, and in general that is what we see. Focusing on managed services, however, does allow you to tap into the ongoing strong growth of that sector.

BUSINESS MODEL


6



% OF MSPs BASED ON CHURN AND REVENUE GROWTH

LOWER

HIGHER

ABOUT THE SAME

The relationship between churn and revenue growth is intuitive. The more churn you experience, the harder it is to grow revenues.

Did churn increase this past year? 63% of MSPs reported churn of 5% or less, down from over 70% last year. Controlling churn (keeping it under 5%) is the truest pathway to growth, illustrated by the fact that 83% of MSPs with low churn reported higher revenues, and just 3% reported lower revenues. If looking at MSPs that reported over 10% churn, 29% reported lower revenues. That’s steep, but it’s actually slightly better than last year.

There are two things you might want to take away from this. The first is that reducing churn benefits your MSP. In an increasingly competitive environment, keeping customers happy is paramount. Only 8% of survey respondents reported that churn was among their biggest challenges, and a growing market probably has something to do with that. That said, competition was cited as a challenge by 23% of respondents. After all, competitors are drivers of churn - that’s who takes your customers away from you.

The other takeaway worth noting is that the market is growing as a whole, and that might lull many MSPs into a false sense of security. In many cases, churn is a symptom indicating that your offering, service level, and/or pricing isn’t competitive. It’s easy to be complacent when the market is growing, but what happens when it slows, and your competitors have already perfected their service model? Don’t get caught in a situation where your revenues are growing but your market share is declining.

59% 12% 29%

70% 21% 9%

3%83% 14%

OVER 10% CHURN

5-10% CHURN

UNDER 5% CHURN

REVENUE GROWTH

CUSTOMERS, SEATS AND CHURN


7


YES

NO

CRM

NO CRM

PSA as CRM

CRM

NO CRM

PSA as CRM

If you want to give a channel executive a myocardial infarction, show them the graph below. A large percentage of many MSPs are considering a new PSA, RMM, or BDR solution.

Nearly 40% of you are considering switching to a new RMM tool, and nearly 30% are considering switching to a new PSA. If you’re questioning whether your current tech stack is meeting your needs, you’re not alone.

4% of MSPs don’t use a PSA—the same as last year.

Last year’s survey identified that MSPs without a CRM were more likely to report difficulty with sales and marketing, and that 46% of MSPs did not use a CRM. This year, 42% reported not using a CRM, while others were using their PSA as a de facto CRM.

There’s no right answer to the question of whether or not you need a CRM. It really depends on the maturity and size of your sales and marketing

operation. The larger the MSP, the harder it is to operate without a dedicated system to manage your prospects and leads.

CRM USAGE AMONG MSPs

41%

17%

42%

10%0 20% 40%30% 50% 60% 70%

RM

MB

DR

PSA

ARE YOU CONSIDERING SWITCHING THIS ELEMENT OF YOUR STACK?

TEC

H S

TAC

K

8



If you follow any channel media at all, you read about the consolidation of the industry through mergers and acquisitions. All. The. Time. The obvious expectation is

that there should be a corresponding increase in the general size of MSPs. This is especially true as more advanced tools position MSPs to scale — but is that

what’s happening?5,000

0

10,000

15,000

20,000

25,000

30,000

35,000

250

0

500

750

1000

1250

1500

1750

This chart appears to show that MSPs are in fact getting larger. Certainly, the bigger MSPs have increased in size

from last year, which is to be expected because those are typically the ones that are most focused on growth

through acquisition. Even a basic analysis of central tendency showcases the industry’s growth:

SERVERS WORKSTATIONS ENDPOINTS

This graph supports the story that the MSP market is growing, and should be a reason for optimism because the more devices you can support, without adding

too much to your stack or staff, the more efficient your business will be.

AverageEndpoints

AverageServers

AverageWorkstations

MedianEndpoints

MedianServers

MedianWorkstations

2018

2019

ENDPOINTS /SERVERS

WHAT YOU MANAGE

AVERAGE DEVICES GROWTH


9


Last year we reported that approximately two-thirds of MSPs do not have any vertical focus, and the same was observed this year. If we break the statistic down by country, we find that MSPs in the US and Australia are more likely than the average to have vertical specializations. International MSPs, especially those in the UK, are far less likely to report having a vertical specialization.

You may be asking whether working within verticals pays off. While one might expect that servicing particular verticals allows for a higher degree of efficiency, similar to last year, there is not much evidence to support this idea.

Once again, healthcare was the vertical most frequently cited by survey respondents. 50% of MSPs that do specialize in a vertical, focus on healthcare. Finance, professional services, and SMB/SME were other focus areas frequently cited.

30.5%

69.5%

CANADA

64%

36%

USA

84.5%

15.5%

UK

79%

21%

REST OF WORLD

VERTICAL FOCUS

NO VERTICAL FOCUS

% OF MSPs WITH SPECIALIZED VERTICALS

VE

RTI

CA

LS



As the IT service provider industry continues to mature, we’ve observed a rise in the use of key performance indicators (KPIs) and analytics to help guide decision-making. As Peter Drucker said “If you can’t measure it, you can’t improve it.” Tracking metrics allows MSPs to know their performance levels, measure the effectiveness of improvement efforts, and communicate this information to clients.

Only 52% of respondents report having KPIs. However, ⅓ of respondents answered “not yet”,

KPI AND METRICS TRACKING

indicating a desire or intention to begin tracking KPIs in the future, but having not yet followed through.

Unsurprisingly, the larger an IT service provider is, the more likely they are to manage their business with KPIs. Only ⅓ of respondents with revenues under $1M reported using KPIs, but this ratio jumps to ⅔ if looking at respondents that generate between $1M and $5M in annual revenue, and up to ¾ for respondents generating between $5M and $20M in annual revenue.

However, there is only a modest relationship between the use of KPIs, and the size of profit margins. This doesn’t invalidate the assertion that KPIs have an impact on margins, of course. KPIs are only as useful as their relevance to business operations, the quality of data, and whether insights are effectively applied to strategy and decision making.

The most valuable metrics reported were those concerning service desk and financial performance. 80% of respondents track service desk metrics in some way, and ⅔ of respondents track financial metrics.

NO

YES

NOT YET

15%

52%

33%

DO YOU HAVE KPIs FOR YOUR MSP?

11



0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

COMPLIANCE

HUMAN RESOURCES

SALES & MARKETING

FINANCIAL

SERVICE DESK

2.31

2.2

3.06

3.6

3.82

ON A SCALE OF 1-5, HOW IMPORTANT ARE THE FOLLOWING METRICS?

It is logical to expect that as an IT service provider matures, a corresponding growth in size

and greater use of performance metrics would be observed. For example, while almost all IT

service providers have some sort of service desk, a small shop won’t have sufficient need to track HR metrics. A working hypothesis that we have

is that over time, the less commonly-tracked metrics will be tracked more frequently, as the industry continues down its maturation path.

12



TOO TIME CONSUMING

LACK OF VISIBILITY

KEEPING UP TO DATE

HIGH COST

DOCUMENTATION

DIAGRAMMING

Networks are one of the most common service lines in the MSP space, with 3/4 of MSPs reporting that they offer some form of network support. The approaches that MSPs take towards network management, however, can vary significantly. While it should be no surprise that there are multiple ways to map out networks, an unexpected observation from the survey was the number of MSPs that use multiple methods.

2/3 of survey respondents reported using manual methods to document networks, but half also reported using a network monitoring solution.

Within this group, manual documentation is done most often with Visio (44% of all survey respondents) and Lucidchart (23%). Among network monitoring solutions, Auvik (28%) and Meraki (20%) were the top choices.

The inherent complexity of working with multiple different methods of network monitoring arises in part from the fact that most MSPs work with multiple network vendors. On average respondents reported using almost five vendors.

Overall, there are many challenges, and most respondents reported facing between two and four challenges simultaneously. It will be interesting to see what the release of Network Glue will do for these numbers next year.

51%

19%

67%

18%

44%

49%

TOP CHALLENGES IN NETWORK MAPPING

NETWORKS



20%

0%<40 40-59 60-79 80+

40%

60%

80%

100%

5-15% MARGIN

<5% MARGIN

15-30% MARGIN

30%+ MARGIN

Similar to last year only 14% of MSPs (12% in 2018) report having less than 40% of employees being technicians. A large percentage reported that 100% of their workforce are technicians. Technicians are still the beating heart of an IT service provider, though the percent of technicians to total headcount does tend to decrease as the company gets bigger and has to hire support staff.

In last year’s Benchmark Survey we found that MSPs with a lower percentage of technicians/employees were more likely to have smaller margins. Though many of last year’s findings held up in this year’s survey, this one didn’t. This year, there was no correlation observed between the ratio of technicians in your workforce and the margins earned.

MARGIN BY % OF TECHSHEADCOUNT

PR

OF

IT M

AR

GIN

TECHNICIANS AS % OF TOTAL EMPLOYEES


14


11-20%

0-10% 21-50%

50% +

Employee turnover is an unpleasant fact of life for business owners. Not only does it cost time and money to find a new employee and get them up to speed, there’s also the risk of the new hire leaving and having to start the hiring cycle all over again.

While it can be expected to see lower employee turnover rates due to lower unemployment rates in North America, and business owners being motivated to retain their workforce, survey results did not indicate this. Turnover rates weren’t much different over last year, however, this year average profit margins increased. This suggests that there is no link between turnover rates and profit margin health. However, despite this, a case can be made that a strong bottom line can help overcome turnover issues.

2%20%

58%

20%

<5%

20%

4%

47%29%

5-15%

2%20%

56%22%

15-30%

3%11%

56%

30%30%+

EMPLOYEE TURNOVER

NET MARGINS EARNED, BY TURNOVER RATE

NET MARGIN



ONBOARDING NEW TECHS

Similar to last year’s report, just over 50% of MSPs reported being able to get their new technicians up to 80% effectiveness in under three months. The consistency of this statistic might indicate that training is a challenge, or perhaps reflect the quality and technical ability of the talent pool. Regardless, efficient onboarding for technicians continues to be an issue for many MSPs.

The fact that turnover rates and onboarding time remains the same while margins have increased, seems to indicate that MSPs are focusing on increasing revenue (perhaps by raising prices or selling new products) rather than optimizing hiring and onboarding processes. As the industry continues to evolve we expect to see a decrease in onboarding times, though increasing business complexity may constrain such efficiency gains.


16


70% 60% 50% 40% 30% 20% 10%

SALES & MARKETING

PRICE PRESSURE

LACK OF INFORMATION SHARING

MALWARE THREAT

CHANGING TECHNOLOGIES

CUSTOMER CHURN

DIFFICULTY HIRING GOOD TECHS

LACK OF RESOURCES

COMPETITION

LACK OF TIME

2018

2019

BIGGEST CHALLENGESThe MSP business is evolving at a rapid pace, and as changes occur in the industry, the challenges faced by MSPs also shift. Here are the biggest challenges you faced this past year.

One of the biggest shifts since our last report is lack of time. Only 56% of MSPs identified lack of time as a challenge, compared to 66% in our previous report. This is an encouraging trend, which can be interpreted as indicating that additional efficiencies have been won. This is especially positive, since at the same time, respondents reported higher revenue despite significant difficulties finding qualified technicians.

While not included in the graph to the right, scaling was also reported as a challenge by a few MSPs, but overall, most respondents didn’t find this to be an issue.

The biggest shift upward was price pressure, which jumped from 28% to 40%. This may be explained by increased market competition pushing prices down as SMBs shop around for IT service providers. This hypothesis is supported by respondents identifying competition as a challenge, which jumped from 17% to 23%. The increase in price pressure may also reflect that customers are becoming more price sensitive, either because they don’t see the value in MSP services, or are pessimistic about future economic prospects. As IT becomes more complex, it is understandable for customers to have trouble understanding the services MSPs offer, which in turn can lead to pushback on proposed price increases. WHAT ARE YOUR

BIGGEST CHALLENGES?


17


0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.452018

2019

While the overwhelming majority of respondents reported feeling neutral or bullish about their local economy, sentiments weren’t as strong as the previous year.

ECONOMIC OUTLOOK

As the above chart shows, there has been a slight shift among MSPs away from a bullish position. This downward shift isn’t strong — nor would we expect it to be when most MSPs are boosting their top lines. However, if the trend of an increasingly negative economic outlook continues it would be wise to develop a business model that can thrive in leaner times.

The question is how well sentiments align with the signals in the overall economy. Economic growth in Q1 of 2019 was strong, and was in fact one of the better quarterly numbers of the past five years — reversing a three-quarter slide in growth rates. A more directly comparable measure, the Business Confidence Indicator published by the Federal Reserve Bank of St. Louis, shows a downward slide in business confidence since August 2018. Our survey results corroborate the finding that confidence among business owners and executives has waned in the past year. While not drastically — enough to have a noticeable impact on business decision-making.

MOST BEARISH SOMEWHAT BEARISH SOMEWHAT BULLISH MOST BULLISHNEUTRAL

HOW DO YOU FEEL ABOUT YOUR LOCAL ECONOMY?


18


2018 2018

YES

OPEN TO OPPORTUNITY

NO

If confidence in the economy is starting to slide, has it impacted perspectives on merger & acquisition activity? The following charts compare the results of the 2018 and 2019 Global MSP Benchmark surveys:

While the numbers aren’t drastically different, they do point to a slightly more conservative approach as more MSPs opt to maintain the status quo. The low number of MSPs who are considering being acquired may be a result of a hot

market in which acquisitions occur quickly, leaving few options for buyers.

ARE YOU CONSIDERING ACQUIRING OR MERGING WITH ANOTHER MSP?

ARE YOU CONSIDERING BEING ACQUIRED BY ANOTHER MSP?

20%5%

38%69%

42%26%

2019

18%

45%

37%

2019

3%

74%

23%

MERGERS & ACQUISITIONS


19


00 1010 2020 3030 4040 5050 6060

SALES

MARKETING

TECHNICAL

EXECUTIVE

FINANCE

HR

2018 2019

Most MSPs are founded by individuals with technical backgrounds, which gives rise to a variety of pain points. The three biggest pain points continue to be sales, marketing and technical. We know that there is an ongoing shortage of quality technical workers, so the persistence of this issue is no surprise.

What’s surprising is that MSPs haven’t sought out more sales support. Given that the market is growing, marketing efforts should be secondary to sales. Leads organically fill the sales funnel as potential clients seek out MSPs independently. The challenge is then converting these prospects to clients, which is where a sales team can help.

IN WHICH AREAS OF YOUR BUSINESS DO YOU FEEL THAT YOU WOULD MOST BENEFIT FROM MORE HELP?

% OF RESPONDENTS

WHERE MSPsNEED HELP

20



25%

20%

15%

10%

5%

2018

2019

ACCOUNTING/FINANCE

ENGINEERING/DEV

HR MARKETING NOC SALES SERVICE DESK

WHAT AREA OF YOUR BUSINESS HAVE YOU CONSIDERED OUTSOURCING?

The majority of MSPs are looking to outsource at least a portion of their business, though this number dipped slightly from 62% to 59%. The functions MSPs are considering outsourcing haven’t changed significantly over the previous year, illustrating that MSPs are facing the same internal challenges and to the same degree.

OUTSOURCING

IT GLUE GLOBAL MSP BENCHMARK 2019IT GLUE GLOBAL MSP BENCHMARK 2019


60%

50%

40%

30%

20%

10%

0%

2018

2019

NON-TECHNICAL EMPLOYEES

At IT Glue HQ, even the most non-technical employees use IT Glue. We’re big advocates of maximizing the benefits of the platform by getting all employees using it. When looking at MSPs already using IT Glue, we’re happy to see a trend in this direction, especially for sales, marketing, and administrative teams. Among other functions, these teams use it for SOPs, team-based passwords for SaaS applications, and reference documents. Survey results show that it’s these teams that are the biggest non-technical adopters of IT Glue. The fact that the needle has moved so much in the past year says that a lot of companies are recognizing the value of IT Glue for their entire business.

HR FINANCE SALES/ MARKETING

ADMIN/MANAGEMENT

NONE

WHICH OF YOUR NON-TECHNICAL DEPARTMENTS USE IT GLUE?


22


60% 50% 40% 30% 20% 10%

NOT SURE

WORD

WE DO IT (MSP)

BROWSER

POST-IT NOTES

MYGLUE

LASTPASS

KEEPASS

EXCEL

2019

2018

PASSWORDS

This graphic tells a great story. Last year, we ran the Benchmark Survey just before we released MyGlue, and we found that client password management practices were less than ideal. Over half of MSPs in 2018 didn’t know how their clients managed passwords, and only a small percentage were using actual password managers. Most used Excel, Word and/or sticky notes.

A year later, we see a positive trend away from using unsecured tools for password management. MyGlue has become the password manager of choice for 19% of respondents within its first year, and the use of browsers, Office applications, and loose pieces of paper has declined. There are still, however, a large percentage of MSPs with limited visibility into client password management practices. Despite this, the

trend is moving in the right direction, and quickly.

HOW DO YOUR CLIENTS MANAGE THEIR PASSWORDS?

(Not asked in 2018 survey)


23


5% 10% 15% 20% 25% 30%

< 5 HOURS

5 - 10 HOURS

11 - 20 HOURS

21 - 40 HOURS

41 - 60 HOURS

61 - 80 HOURS

81 - 100 HOURS

> 100 HOURS

2019

2018

ONBOARDING

The amount of work required to onboard new clients has not changed all that much in the past year. The three most time-consuming activities are:

Documenting a client’s environment 72%

Assessing a client’s environment 57%

Performing a full network discovery and audit 52%

Our new network discovery and documentation tool, Network Glue, was released following this survey. Given that Network Glue is designed to substantially reduce the manual workload for the above three activities, we look forward to seeing the impact it has on survey results collected next year.

HOW MANY TECHNICIAN HOURS ARE USED TO ONBOARD A TYPICAL CLIENT?

IT GLUE GLOBAL MSP BENCHMARK 2019IT GLUE GLOBAL MSP BENCHMARK 2019


Automation

DRaaS

IoT

IDaaS

SECaaS

DevOps

0% 0%10% 10%20% 20%30% 30%40% 40%50% 50%60% 60%70% 70%80%

3% 3%69% 78%

17%

13%

42%

13%

58%

58%

11%

33%

54%

10%

16%28%

47% 13%

40%10%

54%

12% 51%

10%

80%

2018 2019

MOST

LEAST

MOST

LEAST

OP

PO

RTU

NITIE

S

Since last year, MSPs haven’t significantly changed their views regarding where opportunities in the industry are. Security, automation and disaster recovery are still identified as the most important opportunities. This year we added vCIO to the survey, and 41% of respondents indicated it to be a notable opportunity.

The big question is whether the slight decline in security is because there’s less need, or because security is becoming a more competitive space. The latter is more likely.

RANKING MSP OPPORTUNITIES



Get in touch with IT Glue | +1-800-235-4583 | itglue.com

SUMMARY72%

40%

30%

20%

28% of MSPs are earning year-over-yearrevenue growth AND 20%+ net margins

For 50% of respondents, getting techs to 80% effectiveness required almost 3 months77% of MSPs saw higher revenues over the

previous year

of respondents say documenting client environments consumes the most time

are considering switching to a new RMM tool

are considering switching to a new PSA tool

of MSPs are earning over $5 million in annual revenue

Top 3 challenges are:

The biggest opportunities for MSPs are:

specialize in a vertical, with healthcare being the most common

1 Hiring technicians 2 Lack of time 3 Price pressure

1 Security 2 Automation 3 Disaster Recovery

13


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Get in touch with IT Glue | +1-800-235-4583 | itglue.com

CONCLUSIONSThe managed services industry is maturing, and as this unfolds, there will be a greater emphasis on tools and processes that facilitate scale—repeatable processes, automation, and efficiency.

Survey data reveals an industry that is finding its legs. MSPs today are larger, experiencing revenue growth, and maintaining healthy margins. Even so, there is less optimism about the market among MSPs compared to last year. This means that special emphasis should be placed on discovering strategies to outmaneuver the competition.

It is essential to explore new revenue opportunities and to find the best mix of services for clients. Of course, tackling the biggest cost drivers in the business, and alleviating the biggest pain points (mainly sales, marketing and administrative functions) are also important areas of consideration.

It’s a great time to be in the MSP business. Demand is growing, and most MSPs are both profitable and expanding. But as the industry becomes more crowded, it’s time for MSPs to seriously consider how they will differentiate their value from the competition. The biggest challenge is not simply explaining the complex services MSPs can offer, but explaining why your MSP should be chosen over the competition.

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Documents

BENCHMARK REPORT · 2020-07-24 · In last year’s Global MSP Benchmark Report, we explored what it means to be a top-performing MSP. Data collected gave insight into the performance