Revenue Trends by the Numbers for MSPs

With more than 1,800 managed service providers (MSPs) surveyed worldwide, Datto’s State of the MSP Report provides a wealth of data and insights on topics ranging from what keeps MSPs up at night and how they find new clients to the technology that enables their business growth. Our survey efforts revealed several findings around revenue trends for managed service providers.

Annual Revenue Trends

• Recurring revenue growth: More than half of the MSPs surveyed shared that over 50% of their total revenue came from recurring [managed] services, a key marker of MSP maturity. While there will always be some project-based work, the recurring revenue model continues to grow. Twenty-six percent of MSPs reported that over 75% of revenue comes from managed services, and 2% shared that 100% of revenue comes from managed services.
• Contract sizes: Those surveyed revealed that 50% of MSP contracts are less than $15K per year. Larger contracts do exist as MSPs go upmarket. If you’re an MSP serving bigger businesses or providing specialized co-managed services, that might significantly increase what you make per contract. In fact, 9% of MSPs reported average annual contracts over $100K.
• Regional revenue variations: The revenue [growth] of MSPs does vary by region. In North America, the highest percentage of MSPs (43%) report more than $2.5M in annual revenue. In EMEA, 39% of MSPs saw yearly revenue surpass $2.5M, and in APAC, 26% of MSPs report more than $2.5M in annual revenue.

Annual Growth

The managed services industry has been growing rapidly in recent years as SMBs increasingly entrust their IT to an MSP. Individual MSPs are benefiting from that growth: Over the past three years:

• 22% of MSPs said that their total revenue per year grew by up to 5%
• 24% reported growth of up to 10%
• 19% of respondents saw growth of up to 20% per year
• 12% remained the same
• 42% of respondents experienced medium growth, with revenue increases of 6% to 20% per year, on average
• Only 3% of respondents saw a decline in growth by more than 5% annually

COVID-19 Pandemic Impact on Revenue Trends

When we initially conducted this survey, MSPs reported an expectation of 17% growth on average over the next three years. These responses, of course, were submitted weeks before the outbreak of COVID-19 drastically changed the global economy. Our follow-up survey revealed that MSPs are still expecting to grow through the crisis, albeit at a much slower pace than initially planned.

When asked how they expect the pandemic to impact 2020 revenue trends:

• Nearly 40% said they expected to reduce their growth projection by between 10% and 20%
• 23% said they expected to remain on plan or reduce their plan by less than 10%
• 11% are revising their growth projections upward, expecting revenue to increase during the crisis compared to their original plan

A recent CompTIA survey revealed that the rising unemployment rates might have less impact on MSPs than other businesses because many serve professional service clients that can work remotely during the pandemic.

Download Datto’s State of the MSP Report to learn more about revenue trends and how best to grow your managed services business.

 Rob Rae is Senior Vice President of Business Development, Datto.

 This guest blog is part of a Channel Futures sponsorship.