STATE OF THE INDUSTRY CONT . integrated tool stack that leverages AI and automation are the keys to driving profits north of 30 %.
“ Private equity ’ s recognition of the industry was a big deal , because any time investment flows in , things happen . Now every MSP owner is thinking about enterprise value ... and their exit . That ’ s all driven by this tremendous inflow of capital from private equity .” - Josh Kotler , Managing Partner Sansom Street Capital
and a senior analyst and facilitator for Service Leadership , notes that data from Service Leadership shows that only about 25 % of MSPs are best in class , which means achieving service gross margins over 50 %, total blended gross margins of over 42 %, and subscription recurring revenue of 50 %– 60 %.
But is the tide turning ? Says Kolter , “ MSPs now understand , in a way they didn ’ t five or six years ago , the value we deliver to SMBs . As a result , one of the trends is per-user , per-device pricing is going up .”
And fewer MSPs are operating at a loss , according to Service Leadership . Their 2024 Q2 data showed that 14 % of MSPs reported a loss , down from 19 % in Q1 2024 .
But as in any industry , Pica says , “ you ’ re always going to have the haves and the have-nots . But that average of what ’ s available , what I call the ‘ profit poverty level ,’ is beginning to rise .”
Kaseya believes that driving down an MSP ’ s cost of goods sold and driving up efficiency through a deeply
The rollout last year of two all-in-one bundles , Kaseya 365 Endpoint and Kaseya 365 User , “ will have more of an impact on this industry than even RMM had back then ,” Pica says . “ If Kaseya can make [ MSPs ] more efficient and reduce [ costs ] within that stack by 20 %– 30 %, in some cases 40 %, and build all the automations into it ,” they can turn their attention to delivering services rather than getting bogged down managing disparate tools .
Expansion Ahead
The industry has proved resilient in adapting to sweeping , continuous changes . “ If you listened to all the pundits , we would have died — this channel — many times in the last 30 years , but it ’ s stronger than ever ,” Sorensen says . “ I think we ’ re just ready to take off on the next jump .”
Melby believes that MSPs that embed themselves deeply within their clients , understand how the businesses operate , and solve critical issues will create a value proposition that ’ s hard to replicate . For those MSPs , “ profit margins will be significant .”
And despite the consolidation that has occurred , Pica says the industry is expanding : “ For every MSP that gets bought , there ’ s probably three or four new ones that have been incubated . It provides our industry [ an opportunity ] to expand because those big companies now [ are ] tapping on the mid-market enterprise space . It allows MSPs to control a much wider swath of the market . And a rising tide floats all ships .”
Look At You Now !
If there ’ s any doubt that the MSP industry has reached a tipping point , look no further than the recent MSP Titans of the Industry Awards Gala held this past December in Beverly Hills , California . For the first time , MSP business owners were recognized at a red-carpet awards ceremony for their achievements . Continue reading throughout the following pages for all the details on the winners and the awards gala that people are still talking about !
Colleen Frye is Executive Editor of MSP Success . A veteran of the B2B publishing industry , she has been covering the channel for the last 18 years , most recently as managing editor of ChannelPro . Her work has been published in a variety of media , including TechTarget sites , InfoSecurity Professional magazine , and Application Development Trends .
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