MSPs need to cut down on customer churn

Most managed service providers seem to be taking a Kevin Keegan approach to customer management with almost as many being lost as gained.

The former Newcastle manager might approve of a model where the average European MSP gains five customers a month and loses four because the net gain is still a positive. But it does raise a worrying sign about high levels of churn.

SolarWinds MSP has issued a report carried out by The 2112 Group, looking at the health of the managed services sector in both the US and Europe and it conclusions are a mixed bag.

On the one hand the average profit margin on a typical managed service contract in Europe is nudging 23%. But only 11.9% is reinvested into the business to bolster the operation.

There are also signs that when it comes to security the vast majority (81%) provide network and (79%) endpoint protection. But only 5% have decided to stand out from the crowd and go a step further and provide a SOC.

The 2018 Trends in Managed Services report indicated that broadly managed services continued to drive profitability for partners and there were opportunities for future growth.

The average channel partner gained 24% of their revenues from managed services in Europe and for those firms that identified as primarily being an MSP that increased to 38%.

There were also signs that those that those service providers that decided to invest in sales staff did see the benefit. Providers with three times the average number of salespeople, which works out as four in Europe, on average—tend to see 25% growth per year.

If MSPs improved their customer retention skills and reduced the current churn of customers then there are opportunities for growth.

“Competition is fierce among managed services providers. To develop—or keep—an edge, it helps to compare yourself against the competition,” stated John Pagliuca, senior vice president, SolarWinds MSP.