18 01732 759725 The hybrid model is where the channel is most comfortable. The third big observation highlighted by April is the slow transition to 100% recurring revenue and the endurance of a hybrid model. “Despite the fact we have been transitioning to managed services for 20 years now, our data shows that only about 30% of companies that identify as MSPs are actually 100% recurring revenue. One hundred per cent MSP pure plays make up a very small proportion of that MSP community. My take is that there’s been a very slow transition to get away from some of the legacy product sales and that the hybrid model is really where the channel is most comfortable. They have recurring revenue but they’re still doing product sales and they’re still doing project work that’s necessary for customers, with a start point and end point. I don’t see that going away.” April adds that most hardware sales are for small infrastructure products, networking gear and devices. “A lot of channel companies are not actually selling the hardware themselves but are doing referrals to online marketplaces and are getting some revenue from that, which they would put in the product sales bucket. “The channel is learning how to work with marketplaces and generate some revenue of their own, rather than trying to compete on price. The scale of these hyperscalers is such that they will always beat you on price. They will always beat you on convenience and how quickly they can get a product somewhere. What a lot of channel companies have finally learned to do is refer. If you are working with a customer on a certain project, doing the consulting or doing the implementation or doing the integration and any cybersecurity that has to happen and it comes to the point where they need to buy hardware, you just refer them to the marketplace. There are conventions set up where you can get referrals revenue and still own that customer. Otherwise, the customer might go out and buy it on their own, so why cede that transaction.” Last words April’s parting advice to MSPs is to get their house in order. “What we see in the data is MSPs that are already running a tight ship are the ones that are going to succeed. My advice generally is don’t dive into the new until you really are good at what you do today.” gtia.org Traditional pricing models will change April adds that for MSPs, AI also presents new challenges, particularly around the pricing of services. “Traditional per device or per user pricing for services goes out the window with AI. A lot of MSP scripts have started using agentic AI to execute on trouble tickets and do the billing and other things that go with services directed at customers. So, it is completely possible to imagine your customers coming to you and saying ‘I’ve been paying per user or per device pricing for X number of years for this service and I know you’re no longer paying a salary for this service but using agentic AI so why has my pricing stayed at this level when your costs have gone down?’. MSPs are having to face that kind of question, so I think pricing is going to move to more of a consumption model and an outcome model. Both of those are very trendy terms. The execution on those and how you measure them and how you set up an actual, practical pricing strategy for your customer is a lot more challenging than throwing out names. What does an outcome model mean exactly and how do you do it? It could get very expensive if MSPs get it wrong.” MSPs now more cautious about business prospects The second area highlighted by April is how the macroeconomic environment is making MSPs more cautious in their growth forecasts. She points out that just as AI is causing a lot of uncertainty for businesses so too is the unpredictability of the macro-economic landscape, from inflation and fuel costs to supply chain issues, all exacerbated since the survey was undertaken by the war in Iran. “These concerns have caused MSPs to be a lot more cautious in their forecasts and projections for growth. And that makes a lot of sense. I think it’s smart. People don’t know how their customers are going to be affected by economics and whether they will spend the same amount with them this year, and that makes it hard to forecast. “Again, we do find that companies that are well run to begin with are less affected by what’s going on macroeconomically. They’ve already built in controls for some of that and built in how they will weather it. These are the same companies that did well after the pandemic, that had planned for an emergency, that had plans in place for the proverbial rainy day.” Getting the basics right So, do those 20%-30% of MSPs that are adopting AI in the right way have anything in common that underpins their leadership in this area? “Yes, they do. Most of those companies tend to be run well in the first place. These are companies that have good best practices around their basic business fundamentals. They’re not just good technology companies, they are very good at sales and marketing, they’re good at basic accounting, they have KPIs and they regularly measure things to ensure they’re performing optimally. “In our report, we asked MSPs whether or not they were ahead of their business plan. Those that were tended to be operating optimally and have realistic goals for what they should do. They also tend to be the ones that are more strategic with AI. There’s a direct correlation between companies that are well run in the first place and their ability to add a new discipline.” Maximising revenue opportunities in AI AI has the potential to be so transformative for businesses that it can feel overwhelming, so how should MSPs be presenting AI to their customers and what are the revenue-generating opportunities? “One of the first revenue-generating areas for AI is not selling an AI product or a solution, it is doing advisory work. The customer hears about AI all the time, but they don’t necessarily know what it is and how they should be using it. They know that they should be doing something and that they should probably be asking their tech provider what they should do to stay ahead of the game. Channel firms expect that question: they’ve thought about it and they know what to do to help their customers,” explained April. “A lot of the tools used today are single-purpose, single-user things like AI chatbots or using Copilot to help with one’s work. One of the things we point out in the report is that the real revenuegenerating opportunity lies in using AI solutions that are vertically focused. Whether in relation to agentic AI or specific applications that pertain to a particular vertical, such as legal or manufacturing or healthcare, getting well versed on how AI is being infused into specific applications for that market is a differentiator for the channel. It gets MSPs away from selling simple, horizontal solutions and point solutions where you’re not going to make a lot of margin.” Q&A ...continued
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