Recurring services key to MSP success, Datto finds

MSPs are increasingly adapting their business models to include more managed services, the latest research from Datto has found, with 80% reporting that recurring services now drive a portion of their revenue.

Surveying more than 1,600 MSPs around the globe, Datto’s ‘State of the MSP’ report highlighted an “industry shift” from service providers solely modelled on ad-hoc services to becoming more strategic advisors to their SMB clients.

Specifically, 44% of survey respondents revealed that more than 50% of their overall revenue now comes from recurring services.

“SMBs in particular struggle with increasing IT complexity, an explosion in security threats, greater compliance demands, and intensifying skills shortages. More than ever, companies are turning to trusted IT partners to help solve these challenges,” commented Alastair Edwards, chief analyst at Canalys. “Canalys research shows that more than 80 percent of channel partners around the world now offer some form of managed service.

“To stay ahead, IT service providers must evolve their business, shifting towards more recurring revenue and greater industry specialisation. Partnerships with the right technology companies and platform providers will be critical to success.”

To do this, Datto found that MSPs are expanding their portfolios to include services that aren’t typically included on recurring contracts, such as Networking as a Service, as SMB clients increasingly look to managed services for the upkeep of their IT infrastructure and networks.

Additionally, 56% of respondents said they tailor their services for a specific industry, with healthcare the most commonly catered-for sector for the second year in a row.

To keep pace with this growth in managed services, 71% of IT service providers also plan to add to their staff in the next 12 months. However, hiring suitable people remains the number one paint point for MSPs in Europe.

According to Datto’s report, 45% of European respondents said it would be harder to recruit new talent this year - compared to just 30% globally – citing a potential “nervousness” in changing jobs due to Brexit.

Security concerns also remain another top priority for MSPs and their clients, with ransomware and cybersecurity almost doubling as a pain point, from 14% in 2017 to 30% in 2019.