Managed services providers expect a quick recovery from COVID-19 slowdown

MSPs think disaster recovery as a service, cybersecurity, and password management are the best new revenue opportunities, according to a new survey.

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IT Glue asked managed services providers about which services are the best revenue opportunities in the second half of 2020 as part of the 2020 Global MSP Benchmark Report.

Image: IT Glue

Before COVID-19 hit, managed services providers listed difficulty hiring good employees and not enough time in the day as the top challenges they faced. Now the biggest worries are more lockdowns, cybersecurity, and customer churn.

The IT Glue 2020 Global MSP Benchmark Report has a pre- and post-covid-19 analysis of how managed services providers are dealing with the coronavirus. The survey of 1,500 MSPs  includes two data sets—one from February before lockdowns started and one from May when companies had been 100% remote for almost two months. 

Seventy-four percent of respondents listed the possibility of another lockdown in the fall as the top concern for the second half of 2020. Cybersecurity threats, customer churn, and price pressure are the other new concerns that have emerged during the pandemic.

SEE: COVID-19: A guide and checklist for restarting your business (TechRepublic Premium)

Compared to other sectors, the MSP industry seems to be faring well compared. The survey suggests that MSPs took a smaller hit than a lot of segments of the economy, and MSP leaders are expecting to rebound quickly.

In the short term, however,  51% of MSPs saw monthly revenue decreases as a result of the coronavirus shutdown. More than a quarter (29%) saw their accounts receivable increase, suggesting more clients were delaying payment for services. Overall, MSP leaders have the same economic outlook now that they did in February, with most respondents expecting a quick recovery from the economic hit in the second quarter.

The survey found that churn had not changed much since the 2019 survey, but that the associated revenue hit was not as big. The report authors suggest that this means either new customers were brought on immediately, the cost of acquisition for new clients was lower, or  MSPs were letting go of clients that were not that valuable. The survey found no relationship between churn rate and net margin, which could indicate MSPs are using client churn strategically to boost the bottom line.

The 2020 data also shows that MSPs with a vertical focus earn better margins than MSPs with a more general approach, a change from the 2019 data. The verticals most associated with higher profitability are legal with 43% of legal-vertical MSPs reporting profits of 20% or more, followed by MSPs in the government vertical (40%), finance (39%), and professional services (38%).

Survey respondents listed disaster recovery as a service, cybersecurity awareness, password management and security as a service as the most promising revenue opportunities.

The survey also asked about what tools MSPs are using to manage their businesses, including  remote monitoring and management, password managers, and network diagramming software.

There was a significant increase in the number of MSP clients using dedicated password managers, up to 78% in 2020 as compared to only 40% in 2019. In 2018, Word and Excel were the most common solutions for managing passwords with almost 60% using this solution in 2018.

The study found that most MSPs still document client networks manually with 60% using this approach. Forty-eight percent use network monitoring and 8% use an API. Many survey respondents said network diagramming was not a priority. 

IT Glue, a Kaseya company, provides simple and secure IT documentation for IT professionals.

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By Veronica Combs

Veronica is an independent journalist and communications strategist. For more than 10 years, she has covered health and healthcare with a focus on innovation and patient engagement. She led AIR Louisville, a three-year digital health project focused ...