Now that the dust (has mostly) settled after Kaseya's big $3.99 bundle announcement, questions about the future of the MSP industry come into focus.
Jay McBain
Chief Analyst - Channels, Partnerships & Ecosystems - Canalys - Channel Influencer of the Year
The one statistic that has stubbornly persisted in the industry (through good times and bad) is that 30% of the 335,000 global companies offering managed services do not (consistently) make money.
While some point to the ridiculously low barrier to entry to become an MSP, others point to execution issues around strategy, operations, automation, sales and marketing, financial controls, and governance.
While the industry is growing in solid double-digits, customer demand has measurably weakened and the cost of doing business continues to rise. Inflationary pressures persist across the organization and interest rates add further EBITDA challenges.
Kaseya has shone light on COGS - cost of goods sold - for the MSP. As the average MSP monthly offering now has over 20 elements, customers continue to demand more from their providers. For example, cybersecurity is no longer one or two products - it is a whole suite of 6 or more products that look to achieve an enterprise-level Zero Trust or SASE-type framework for SMBs.
By our count at Canalys, there are 35,000 vendors who are interested in earning a spot in the MSP's tech stack. Whether it is nickels, dimes, or dollars per user, these costs quickly add up.
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Many MSPs are stuck between a market competitive price point (that they don't have the power to move alone) and a growing tech stack, more expensive labor, and escalating operational costs.
These market trends favor larger regional and national MSPs who can drive economies of scale. The challenge for the broader industry is that the average MSP is made up 8 people and sub $2 million players make up almost the entire pie.
Consolidation will not happen at the MSP level as many have been predicting for 25 years now. It will happen at the tech stack level first. Buckle up.
Kudos to my colleague Robin Ody for continuing to produce the best MSP data and analysis in the world.
Helping small MSPs grow with expert, tailored coaching.
6 个月I think most will miss this key insight. Consolidation will not happen at the MSP level as many have been predicting for 25 years now. It will happen at the tech stack level first. Buckle up. Good points Jay!
Jay, interesting insights regarding the dominance of small msp providers. While you mention the tech stack, we find driving down TCO, expanding capabilities, and strengthening collaberative service delivery has worked well for our msp partners and their customers to build long term success (many for more than 10 years). Slow and steady, no silver bullets.
Scott Jones
Publisher, Community Builder, Speaker, Channel Ecosystem Developer with a focus on cybersecurity, AI and Digital Transformation. Subscribe to eChannelNews to learn more or follow me on LinkedIn.
6 个月Hey, Jay, this is a deep one to unpack. Most successful MSPs are continuously adding?new services, optimizing processes, and utilizing cybersecurity to attract new clients. Successful MSPs follow an evolving pattern, but they don't do it mindlessly. The top end is acquiring other MSPs to replicate their success formula or to add a complementing service offering! Kaseya's latest $4 per head intro buffet price (going up to $5+ change) could allow MSPs to offer more for less, accelerate commoditization, create more MSP competition, and jumpstart new start-ups, in addition to vendors who will follow suit, resulting in increased margin pressure. Cloud distributors such as Pax8 and ITCloud.ca assist MSPs on multiple levels. I'm curious to see what Rob Rae will announce at ChannelNEXT. I plan to attend both distributor events to see what's going on the MSP front lines... If MSPs want to find gold, they have to think business valuation!?Understand it and build it.
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6 个月empathizing with struggles. consistent profitability demands strategic execution across operations. Jay McBain