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MSPs upbeat but wary of increased competition

Datto’s Global State of the MSP Report reveals widespread optimism, but also signs that the battle for customers is intensifying

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Interest across the channel in the managed service model has continued to rise, with the coronavirus pandemic only accelerating that trend over the past year.

Datto has made efforts to try to capture the mood of the market in its latest Global State of the MSP Report, with the main findings reinforcing the idea that this is becoming the dominant delivery model in the channel.

The firm found there was plenty of positivity among UK managed service providers (MSPs), with 98% agreeing that now was a good time to be an MSP and 81% reporting that they came through the pandemic with revenues either unchanged or improved. That sense of optimism could also be seen in the 97% of UK MSPs that expected revenues to increase over the next three years.

When it came to hunting out the potential problems, Datto found that revenue growth, competition and profitability were all issues that caused concern for MSPs.

On a technical front, security remained top of the pile for those MSPs looking to help SME customers with their top demands. Almost all (99%) of those quizzed by Datto for the report said they offered a managed security service. That can come from different sources, with UK channel players happy to offer co-managed security tools, partner with a managed security service provider (MSSP) or with some other form of security expert.

The impact of the pandemic could also be seen in the attitudes towards cloud, with 58% of UK respondents indicating that between 50% and 75% of their customers’ workloads were now in the cloud. Those included email servers, databases and application servers. In terms of the public cloud players, Amazon Web Services (AWS) leads the way, slightly ahead of Microsoft Azure, with Google Cloud coming in third.

Competition a worry

The global picture showed that increased competition was the main concern for MSPs, with it clear that there was a lot at stake for those that had gained “trusted adviser” status with a small to medium-sized enterprise (SME) customer. This is the first time competition has topped the list of global concerns, which Datto saw as a sign that the MSP market was maturing and there was pressure on partners to offer differentiated and relevant solutions.

Demand for security and an increasing shift by users towards the cloud were also seen across the world. The majority of those responding to the research agreed that those areas offered opportunities going forward.

“Businesses have had to rethink operations and explore new avenues for managed services,” said Tim Weller, CEO of Datto. “Over the past year and a half, MSPs were the unsung heroes for SMEs, enabling them to run their business while the MSPs themselves faced many of the same challenges of remote/hybrid work and economic uncertainty.

“This accelerated MSP and SME digital transformation. This research reflects that MSPs are focused on cloud migration, increased collaboration and investment in security solutions. With this new mindset, MSPs can support SMEs for the transformation to come.”

The research reflected the state of the market. David Carr, director at ATG, said MSPs were already responding to changing customer needs. “Ensuring all systems are fully secure is the essential foundation of our business,” he said. “Our clients are no longer fearful of putting their critical data in the cloud – there has been a culture shift as they have learned to rely on us to keep their data safe.

“As that trusted MSSP, it is our job to recommend services to clients which will enhance their productivity and processes, all in a secure way.”

Andrew Allen, chief executive at Aabyss, said the emergence of competition as the main global concern also gave MSPs some food for thought. “While the report revealed that MSP revenue will increase over the next three years, 34% of respondents cited competition as their biggest concern,” he said.

“It is encouraging that MSPs are striving to improve standards with greater technology adoption. However, the challenge is that technologists do not tend to be business leaders. Therefore, it is recognised within the MSP community that to remain competitive and grow revenue, there is a clear need for education in business management.”

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