27 Facts About Managed Service Providers (MSPs) 2024
Intriguing facts about Managed service providers will be the topic of today's article. You know some professions really struggle to appear glamorous or interesting. Thankfully when it comes to the MSP world, there is so much excitement, intrigue and fascination that this article pretty much writes itself.
Nothing is off limits here, I will be touching on subjects that are close to my heart such as backup solutions, financial intrigue and general consulting factoids.
I do sometimes find it odd that even though I have been at the front line of this fascinating world for about 30 years now, for some weird reason, I still have to invite myself to parties and whenever I bring up exciting topics such as upcoming VOIP technology or the the nuance of an adequate I.T risk mitigation strategy, I notice people in my vicinity giving each other knowing looks and informing me they need to get another drink even though their glasses still appear quite full. Blows my mind but it is their loss.
While you are here, Take a look at some of our other MSP Consulting related articles below that may interest you:
- Expensive Documentation Failures in MSPs
- I.T Consulting Services
- Increasing the Professionalism of Your MSP
- Interesting List of Apps Involved in Disaster Recovery Failures
- Interesting Reasons Most MSPs Fail
- Interesting Statistics on MSP Hardware Purchasing
27 Of The Most Intriguing MSP Facts
I am certain that if you can retain even half of the following MSP facts, you will improve your social life significantly. I have nothing more than anecdotal information on this however it cannot hurt.
Recurring Service Revenue
From the break-fix income model of yesteryear where having a small group of clueless techs actually helped your profit margin to where we are today where 74% of service providers now generate over 55% of their income via recurring service agreements meaning we are now paid more when things do not break.
Small And Medium Business
This is the sector where managed service providers are most in demand. It makes sense as large businesses above 200 staff tend to have their own internal IT departments. 75% of service providers reported their primary clients were small to medium businesses.
Healthcare Industry Is Our Biggest Fan
75% of healthcare organizations utilize the services of an external IT service provider making them the largest consumer percentage wise of MSP services.
Financial Industry Gets Second Prize
Coming in a reasonable distance behind the healthcare industry is the finance sector with 69% of financial organizations using some form of 3rd party technology services company to manage their IT needs.
Cloud Computing Services Revolution
I remember when I thought offering an outsourced helpdesk was cutting edge. That is now just an expected MSP offering these days. The most popular now however is Online cloud services with 72% of service providers now offering cloud services as their primary service offering.
MSP Prospects
The best advice I ever got regarding managing technical sales people is to focus 100% on the numbers. They can either achieve the number set for them if it is realistic or they cannot in which case they are not suitable for the sales position. Following that advice helped me quickly filter suitable sales staff in my own MSP.
I was always terrible at the sales process, never enjoyed it and could talk someone lost in the desert out of buying a bottle of water.
Sales however is without doubt the single most important part of any business to get right. I would on average go to a sales meeting with a potential new client perhaps once a month and of those sales meetings, I would be lucky to win one in five.
MSP Client Loyalty Experiences
The silver lining for me is for whatever reason I tended to hold onto clients for a very long time. Actually it was either or, either I would fire my new clients fast or they would stay with me for in most cases the life of my business unless their circumstances changed.
MSP Sales Meetings Ratio
Even with good retention rates, my ability to sign on new clients was pretty poor compared to the average. 75% of MSP business owners surveyed stated that they went on a minimum of 2 sales meetings per month with potential new clients.
I also was never very good at filtering out tyre kickers and firmly believed a lot of those meetings failed before they were even conducted.
Number Of New MSP Clients Per Year
57% of MSPs surveyed picked up between one and six new clients in a twelve month period, so the majority, which is why most service providers fail within the first 5 years. That amount hardly covers attrition due to things out of your control such as clients being purchased or closing down.
76% of service providers added less than 1 client per month over a 12 month period while the remaining 24% added more than 1.
Below is a graph of the number of clients MSPs, on average collect over a 12 month period. This does not take into account client attrition and so many no doubt are at a net negative at the end of the year.
| New Clients In 12 Month Period | Percent Of MSPs |
|---|---|
| 0 | 3.5% |
| 1-4 | 54.5% |
| 5-10 | 21% |
| 11-23 | 15% |
| 24-38 | 4% |
| Above 39 | 2% |
The issue with low numbers when it comes to sales for service providers is it is a bit like a snowball rolling down hill. Because you do not get very much experience out there selling your offerings, it means you are never going to hit that critical mass of getting good sales experience in a short amount of time.
Look Of Desperation At An MSP Sales Meeting
So you end up with very few initial sales leads meaning the ones you do get, you are scrambling to sign them on meaning you are more likely to agree to outrageous pricing that will not be sustainable. The potential client now has the upper hand and you end up often with a client that is only interested in bleeding you dry which is actually worse than no client at all.
If you can get into the upper levels of the number of prospects below that means you will have a steady stream of opportunities and will not be tempted to drop your trousers just to sign them up. If you have abundance then it is more likely that you will raise your prices which is exactly the mindset you want.
Take a look at the table below and see where you fall. Work on bumping those numbers up wherever you are currently and do not make the mistake I made of going to sales meetings desperate. Potential clients, especially the ones you do not want, can always smell desperation on you.
| Prospect Meetings Per Month | Percent Of MSPs |
|---|---|
| 0 | 3.5% |
| 1-5 | 54.5% |
| 6-11 | 21% |
| 12-23 | 15% |
| 24-34 | 4% |
| 35-48 | 2% |
| 49-60 | 15% |
| Over 60 | 4% |
Largest MSP Market In The World
If you guessed the USA then congratulations. We account for 42% of the global MSP market.
Most Commonly Used MSP Service Offering
Remote monitoring And Remote Control are the most common recurring agreement offerings provided by managed service companies with 92% of all service providers offering this as a monthly service.
Legal Industry And MSP Use
There is still plenty of room for growth for MSPs who want to target the legal profession with only 43% of legal organizations engaging with service providers beyond calling someone when a Personal computer, router or digital phone system among others stops working.
My experience with the legal industry has left me a little jaded. I am sure there are some great legal firms out there that are not stingy who do not ignore your advice and do not forget to pay their bills, I am just saying I have never met one.
This makes me wonder if it is cause and effect in play here where it is actually MSPs giving the industry a wide berth rather than the other way around.
Backup And Recovery Services
With 82% of all service providers offering some form of backup and recovery strategy including cloud backup solutions, it is no surprise it is the second most profitable and widely used service provider offering.
Hospitality Industry And MSPs
The hospitality industry certainly lags behind in their use of managed service providers with just 22% of these organizations using a trusted technology advisor. This may well be due to quite a lot of these businesses having quite simple systems where they buy something off the shelf such as a Point of sale which is set and forget these days.
They may well not require the level of support that would make it worthwhile.
Government And Public Services
I never managed to crack this gravy train however plenty of government organizations utilize the services of MSPs with 37% of these organizations engaging in a service agreement. My experience was that they tended to go for the larger MSPs and I found the entire tender process lacking in excitement and joy.
Managed Mobility Services
59% organizations are engaging MSPs to manage their entire complement of mobile devices. Plenty of off the shelf management solutions these days too such as Meraki or IBM MaaS360 that can handle this task really well.
It has been a while but last time I checked, RMM tools such as Connectwise Automate or Atera still struggled with adequately managing mobile devices however things may well have changed.
Educational Organizations
46% of educational organizations use MSPs in some way which means there is still plenty of growth potential in this sector.
MSP Labor Costs
A good rule of thumb when it comes to calculating if you are heading in the right direction is to check total revenue against staff wages.
For every $10 spent on staff wages you should be bringing in at least $30 revenue.
Net Profit Margin
It is pretty important as an MSP to keep track of your profit margin after everything else has been taken into account and that includes everything from hardware, staff training and renting office space.
Once all expenses have been accounted for, you should be aiming for 20% profit margin for the business. By keeping track of this figure, for a start you are not guessing if you are making a profit and second you are less likely to be shocked when looking at your bank account at the end of the month.
Average Prospect Close Rate Of MSPs
The average successful closing rate of MSP sales staff across the board is 35%. That means out of 4 initial sales calls, just over 1 is expected to be successful.
As a side note as an MSP owner, you should absolutely be keeping track of your sales staff and how they compare to the industry standard. If they dip below that 35% consistently then you cannot really consider them a competent sales person.
Someone competent should always be above average, in this case above 35%. If it is permissible in your state then my recommendation is to write a minimum level into their employment contract. Something that states they must be above 35% a minimum of 10 months out of 12.
Behold The Truth Teller
Do you really want to know how well your managed service business is doing? The one report that will strip all the hope and dreams away and leave you with the truth is the effective hourly rate report.
I can tell you from experience, most managers and owners avoid it like the plague because it has a nasty habit of wiping away that good feeling you have when you have no clue what is actually going on in your business.
I remember working for an MSP many years ago and part of their documentation improvement project was to run the effective hourly rate report so that I could create a front and center flexible asset that would visually indicate to the support desk how valuable the client was using 10 stars in a client summary flexible asset I had created.
I was also a little suspicious when looking at agreement values versus the amount of hours that seemed to be spent on some of these clients.
Well, this company was busy as you could be, lots of clients and a support desk of around 18 staff. Once I completed the effective hourly rate report, I was in shock. Most of their clients had effective hourly rates under $30, some were as low as $10.
I had a meeting with the owner and explained what I had found and he brought in the CFO and I will never forget what he said “Yeah they are the same numbers we got last month too” with a slight look of worry on his face.
They thanked me for my effort and asked me to keep it to myself. A month later the business was sold to a massive Asian MSP and my own thought was that they probably sold it at the exact right time.
Cost Of Poor MSP Documentation
Lost time due to preventable delays because of bad MSP documentation strategies in completing tasks has a direct cost of $14,000 per technical employee averaged out with a loss of opportunity cost of $35,000 per technician on average. Nothing comes close to the potential cost savings to an MSP as undertaking an overhaul of a poorly planned documentations strategy.
Average Ransom Paid In An MSP Breach
The average ransom demand payment made by MSP insurance companies is $800,000. Of the 7,000 claims paid out by MSP insurance companies, greater than 99% were classed as small to medium business with less than 1% being enterprise.
Below is a table that lists the most common reasons for claims paid out all the way to the least common reasons and I have to admit some of these were a bit of a surprise although I did expect ransomware to be the top reason. Unfortunately they are also the most expensive payouts as well. The categories are actual categories listed by insurance companies and some of them may appear to overlap and often a claim would be made for more than one event. This lists only the primary reason listed.
| Reason For Insurance Claim | Percent Of MSPs |
|---|---|
| Ransomware | 40% |
| Email Hack | 15% |
| Directly Hacked | 12% |
| Micellaneous | 7% |
| Staff Mistake | 8% |
| Phishing | 5% |
| Theft | 4% |
| Virus Or Malware | 3% |
| Lawsuit | 3% |
| Privacy Breach | 2% |
| Intentional Employee Damage | 1% |
Conclusion
Certainly some interesting and intriguing facts about managed service providers.
We have a number of other IT service desk provider 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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