Technology Reseller v35

BUSINESS BRIEFING www.datto.co.uk 12 their growth projection by 10-20%. New opportunities The IT industry has fared better than some sectors during the pandemic largely because technology is an enabler of remote working and essential for socially distant communication, collaboration and commerce. For many MSPs and IT solutions providers, loss of revenue from business disruption and delayed IT projects caused by coronavirus was partially offset by emergency purchases undertaken to support Work From Home initiatives, notably VPNs, laptops, monitors, webcams and other computer accessories. In addition to that sugar rush, there has been an acceleration of digital transformation, with Covid-19 highlighting the importance of modern cloud-based infrastructures that enable employees to work from their homes and any other location, securely and productively. “This represents an ongoing opportunity for MSPs,” explains Justine Harris, Sales Director UK/I. “As trusted advisors, many will now be working with clients to turn stop-gap measures into more long-term, strategic initiatives, with a particular focus on remote access solutions, cloud migrations and security.” Strong growth Demand for such solutions should maintain the strong growth MSPs have enjoyed over the last three years, with two thirds of those surveyed for Datto’s Global State of the MSP Report seeing a rise in annual revenues in each of the last three years. The largest percentage (42%) of respondents experienced medium growth, with average revenue increases of between 6% and 20% per year. However, as many as one in five has enjoyed average annual growth of more than 20% per year over each of the last three years. With a COVID-19 vaccination programme now underway in the UK, it is at last possible to talk about ‘the beginning of the end’ of the coronavirus pandemic that has so dominated 2020 and which will continue to cast a shadow for years to come. While the pandemic has been difficult for some managed service providers (MSPs), notably those operating in specific verticals badly affected by social distancing, lockdowns and travel bans, analysis by Datto, a provider of software and technology purpose-built for delivery by MSPs, shows that many have weathered the disruption it has caused better than they might have expected to. In Datto’s Global State of the MSP Report over 1,800 MSPs were surveyed to find out who they are, how they run their businesses and what challenges they continue to face. In light of the global pandemic, respondents were surveyed both before and after COVID 19 took a hold over businesses. Prior to the pandemic, most MSPs said they were anticipating an average annual growth of 17% over the next three years. However, in Datto’s follow up survey, 11% of MSPs said they expected to revise growth projections upwards as a result of the pandemic; 23% expected to remain on plan or see a reduction of less than 10%; and 40% expected to reduce Of course, not all MSPs are growing; a small minority (12%) has seen revenue flatlining and 3% have seen annual revenue declines of more than 5%. So, what are the traits that separate high growth MSPs from less successful counterparts? The keys to success Based on analysis of more than 800,000 data points from 1,800 MSPs, the Global State of the MSP Report identifies two consistent qualities/actions shared by high growth MSPs: 1 Prioritise managed services. There’s no better way of growing an IT practice than to make managed services a bigger proportion of total revenue. Every 10% of total revenue derived from managed services, adds 0.25 to 0.75 points of annual growth to an MSP’s business. So, increasing the percentage of managed services revenue from 20% to 70% can increase annual growth by 1-4 points. A higher proportion of revenue from managed services also improves business resiliency by maintaining steady cash flow and revenue during economic downturns. Over half of MSPs surveyed by Datto said that more than 50% of their total turnover already comes from recurring services. For 26% of MSPs, managed services generate more than 75%. Datto’s Global State of the MSP Report reveals the secrets of success for managed service providers How to grow your service revenue Justine Harris, Sales Director, UKI, Datto Visit our blog: www.datto.com/blog Subscribe to our podcast: www.datto.com/podcast Report Follow us on: Datto’s Global State of the MSP Report