Shocking MSP Income Facts: You'll Be Surprised 2024
MSP income and some of the shocking facts you may not be aware of is the topic of today's article.
The service provider industry is changing slowly as business now relies so heavily on technology related services however to this day, nobody needs a degree or license to start up an MSP. It still remains an industry sector that is not heavily regulated.
This will be a light hearted article on some interesting facts on MSP income and where it comes from and how much everyone actually makes on average.
While you are here, Take a look at some of our other Managed Service Provider Consulting related articles below that may interest you:
- 10 Tips on SOP's (Standard Operating Procedures)
- 5 Differences Between an SOP and a KB
- 5 Tips for Choosing a Documentation Platform
- 5 Tips for Creating Effective Client Documentation
- Internal Documentation Management - Biggest MSP Mistake
MSP Revenue Increase
Business has become ever more reliant on 3rd party IT related service offerings and total global MSP market gross revenue is on track to have increased by 25% over 2022.
Security Services
While I am quite skeptical of the sudden increase in “security experts” in the MSP space and even more concerned when I see traditional MSPs rebranding themselves as MSSPs which on the surface is a response to market demands, I do not see a corresponding increase in security skills to offset these claims.
97% of MSPs now offer some form of security service agreements.
Below is a table showing the security services offered and the participation rate of service providers against each service offering.
| Service Offering Type | Percent Of MSPs Offering Service |
|---|---|
| O365 And Google Workspace Security | 78% |
| Compliance Auditing | 70% |
| Password Naming And Management | 74% |
| Two Facto Authentication | 68% |
| Firewall And Router Management | 62% |
| VPN And Remote Access | 60% |
| Intrusion Detection And Response | 40% |
| Server/Desktop/Mobile Antivirus | 76% |
| Single Sign On (SSO) | 56% |
| Web Filtering Managment | 25% |
| Dark Web Leak Monitoring | 26% |
| Compliance And Regulatory Management | 28% |
| Investigation And Ransomware Forensics | 27% |
| Server And PC Patch Management | 42% |
| Ransomware Protection | 49% |
| Client Security Training | 84% |
| Security Audit And Pen Testing | 87% |
| Security Policy Creation And Management | 57% |
MSP Client Value Perception
60% of 1000 MSP clients surveyed indicate that they have experienced significant cost savings by engaging the services of a technology service provider.
I am actually a little surprised at how low that is and suspect it may be due to clients not fully comprehending the benefits service providers bring with them.
Internal IT Versus MSPs
Again I am surprised that the cost savings involved are only 70% when compared to managing an complete internal IT department. Take a look at the following article for a more in depth discussion on this.
Outsourcing All Or Part Of IT
With 30K organizations surveyed it has been found that 67% of all companies regardless of size outsource either all or part of their IT management as well as tech related projects.
While that is a significant chunk, it is still far from a saturated market. While some things have become easier there has actually been a significant increase in complexity as far as cloud computing and risk management are concerned.
Once businesses get to a certain size where they need technology support, there is nearly always that gap between being big enough they need external technology support and too small to be able to make having an internal IT department a realistic proposition.
Remote Support
Currently 54% of all survey responses indicate that 95% or higher of the work they do is remote support. I think there is a point where this trend will go the other way a little simply because of security and risk minimization.
Take for instance the significant increase in ransomware where events have a massive financial impact and there is going to be a growing push to harden security with more extreme measures. For instance domain controllers with no ability to be able to remotely access as an example. When a problem occurs on a primary server that cannot be accessed via the internet and cannot be remotely controlled, it leaves one final option and that is an onsite visit.
MSP Longevity
55% of service providers regardless of size have been in business between 5 and 12 years while around 28% have been in business less than 5 years.
New blood is continually circulated through as time goes on although the MSP industry continues its slow march towards commoditization of a significant number of services it provides.
This is helped by the emergence of very capable English speaking tech companies working out of places like the Philippines who specialize on integrating their personnel into western MSPs as their off the shelf help desk.
I have seen these guys work and they can integrate seamlessly with your team and the client is not even aware they are talking to staff outside of the US. Of course this puts downward pressure on agreement values and it becomes a fight to the bottom.
Positive Outlook For MSPs?
While we have been through a pretty weird couple of years and inflation went rogue recently, it looks like things are starting to look up a bit. Inflation seems to be slowing a little and the employment rate remains low.
98% of survey respondents indicated that now is a great time to run a managed service provider organization and feel that the largest risk to their business is increased competition in the marketplace with 30% citing that as their biggest concern.
88% of all service providers surveyed indicated that they expect their revenue to increase over the next 5 years and of those 76% expect growth of higher than 5%.
It is not all beer and skittles though, 10% of respondents had seen a drop in revenue in the previous 12 months.
Average Agreement Value
This one surprised me as I thought it would be quite a bit higher. Here is a table on the average yearly spend on service agreements for MSPs across the board.
| Percentage Of MSPs | Average Yearly MSP Spend |
|---|---|
| 100% | $13,000 (Average Across All MSPs) |
| 25% | $5,000-$10,000 |
| 28% | $10,000-$15,000 |
| 20% | $15,000-$20,000 |
| 12% | $20,000-$30,000 |
| 15% | Over $30,000 |
Size Of MSP Clients
74% of clients are between 20 and 210 staff. This also correlates to being the most profitable size and is the target demographic for improving income for MSPs.
This makes sense as with less than 20 staff, clients are really still going through growing pains and have not yet reached an appropriately mature stage while above 220 staff, they tend to really work those thumb screws really well as far as locking in far lower prices than you may otherwise accept.
The gross profit margin on volume blinds you to common sense along with the fact many organizations above this size are likely to have an internal IT department.
Annual MSP Income
Below is a table of the breakdown of income across all surveyed MSPs. Of the total yearly income, 58% of service providers attributed 100% of their income to recurring service agreements. 35% of the total income across all service providers came from ad hoc on demand hourly based work.
| Percentage Of MSPs | Average Annual MSP Income |
|---|---|
| 32% | Less Than $500K |
| 19% | $500K-$1 Million Dollars |
| 36% | $5-$10 Million Dollars |
| 9% | $10-$20 Million Dollars |
| 4% | Over $20 Million Dollars |
MSP Business Risks
Below is a table of risks put to survey participants who were asked to rate their current fears and what they believe to be the biggest risks to MSP income.
| Business Risk | Percent Of MSPs Indicating High Concern |
|---|---|
| Staff Recruitment | 26% |
| Obtaining New Clients | 25% |
| Retaining Existing Clients | 8% |
| Remaining Profitable | 30% |
| Litigation & Ransomware | 65% |
| Income And Revenue Growth | 27% |
Primary Service Offerings
Below is a table of the primary services offered to MSP clients. It is interesting to see that cloud based management is now the front runner compared to the old faithful managed service desk.
| Service Offering Type | Percent Of MSPs Offering Service |
|---|---|
| Cloud Based Services | 85% |
| Cloud Application Services | 83% |
| Backup And Disaster Recovery Services | 75% |
| Network And Internet Services | 78% |
| Managed Help Desk Services | 74% |
Conclusion
There are definitely a few surprises in these results and one thing is for certain, the move to the cloud is unstoppable. With 98% of MSPs have at least some of their offerings in the cloud and 78% of service providers intending on moving significant components of their operations onto the cloud within the next 2 years, it is quite clear that the bulk of MSP income is now coming from service offerings originating from online locations.
We have a number of other I.T strategy and consulting articles listed below that will provide you with more detailed information on a number of related topics:
https://optimizeddocs.com/blogs/consulting/consulting-index-page-01
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