News in the Channel - January 2023

MSP

The biggest challenges facing MSPs in 2023

This year looks set to be challenging for MSPs, but providers can still succeed if they evolve their provision, including returning to the break-fix model, says Chris McKie.

Managed service providers (MSPs) have had a tumultuous three years as the pandemic brought myriad threats as well as new opportunities. Many had to adapt their services – and the way they are delivered – overnight as the world went into lockdown, and again as hybrid working became accepted. For those hoping to finally get back on an even keel in 2023, Kaseya’s recent Datto Global State of the MSP Report may make for insightful reading. According to the survey of 1,800 MSPs worldwide, providers will have to keep evolving fast to succeed – and the break-fix model, which was previously declared dead, is making a comeback, albeit with a twist. Break-fix is back Some MSPs are finding gateways to new business in a spin on the traditional break-fix model. They get a foot in the door with larger companies by fixing a problem for internal IT departments that are initially reluctant to work with new vendors. For instance, they offer a compliance audit; the results lead to the MSP helping the customer via a co-managed service. This paves the way for a more established relationship. While this strategy means revenue generated from break-fix has increased – 35% of revenues in the past year came from break-fix or project-based work – sustaining revenue growth and profitability are both major headaches for MSPs, with 28% ranking them as pressing issues. Many MSPs also mention difficulties associated with sales and marketing, specifically finding the tools, time and strategy to generate quality leads – a factor which contributes to the challenge of remaining competitive. Without a solid brand, an MSP may only be competing on price; some boost the success rate by leaning on their technology partners for marketing and sales enablement support, with tools ranging from pre-built campaigns and pricing engines to social media services and events. The good news is that there is a huge opportunity for new offerings. Many MSPs are planning to add new services in 2023, primarily around

collaboration software (26%), storage design and implementation (25%), business intelligence or analytics (23%) as well as new security services. The cloud is still an area for growth. The pandemic prompted much faster cloud adoption, and with the challenging economic climate, the trend continues as businesses seek to take maximum advantage of cost-efficient cloud technologies. About half of MSPs expect that at least 75% of workloads will be in the cloud over the next three years – up 25% from last year’s report. This opens opportunities for MSPs who are increasingly delivering cloud migration, especially for email servers, databases and application servers. There are also opportunities in providing additional security services. Nearly all MSPs already offer managed security services, and there is an evolution toward solutions that help mitigate and monitor for attacks as well as recover from them. The top services currently offered are email security (76%), followed by password policy management (71%), security framework and compliance auditing (69%) and two-factor authentication (67%). While combating ransomware and phishing remain priorities, several areas are expected to grow, with threat detection and response, dark web monitoring, compliance monitoring and privileged access management taking leading spots. MSPs are increasingly looking toward tools that not only address issues after an attack but help monitor networks to mitigate risks. Overall, the world of MSPs is healthy and growing, with three out of five stating they increased revenues over the past 12 months and 82% expecting to grow over the next three years. In line with this, 95% of survey respondents believe that now is a good time to be an MSP. However, with growth comes greater competitive pressure. MSPs will be forced to become better marketers to stand out. And, given the manifold potential growth areas, as well as challenges in hiring, the number one priority will be to increase operational efficiencies – most likely driven by adopting tools that are easy to use, manage and deploy.

Chris McKie is VP, product marketing and security at Datto, a Kaseya company. He has more than 15 years of cybersecurity experience, McKie leads the security solutions product marketing team at Datto and Kaseya.

The good news is that there is a huge opportunity for new offerings. “

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datto.com

kaseya.com