MSPs deserve more recognition

Managed service providers (MSPs) provide crucial support to customers and deserve to be recognised for that with higher margins.

Compared to some of the other services used by small and medium-sized enterprises (SMEs), notably legal and accountancy, the channel is paid less and yet serves just as important a role.

Fred Voccola, CEO of Kaseya, is flying the flag for the MSP community and believes that things need to change and a decade ago started the firm on a mission to shake up the economics of the industry.

“We have been on a journey for the last 10 years. And there’s one mission that we have been on, the one North Star, one guiding light that we’ve been going after, and that is to fix what we believe is a wrong in the MSP industry,” he said.

The fundamental problem the firm is looking to address emerges when the MSP is compared to providers of other outsourced services.

“If we think about the customers of MSPs, small to mid-size businesses around the world, most of them have three outsourced service providers that they use. They use their legal providers, they use financial/tax providers for counting audits tax stuff, and they use their IT and security providers the MSP. Without question, the MSP is the most important and most strategic business partner of all of them for SMBs because without the MSP, their business systems, their industrial systems, they not only do not work, but they’re not protected or secured from the huge macroeconomic existential threat that’s coming from ransomware gangs that are targeting SMB,” he said.

“First of all, the MSP’s job is 10 times harder than the solicitors’ and the financial providers’. That’s not disrespectful to the lawyers and the accountants. It’s just the MSP does up IT [which] is a lot harder and it’s getting harder. Here’s something that we think is an injustice – the average profit margin of an MSP in the UK and worldwide is between 10% and 12%. The average profit margin of the law firms is 37% and of accounting tax firms is 35%. That’s not right. What an MSP does is so much harder and so much more valuable. Why on earth are they are their profit margins a third as much, so our mission as a company has been to address them,” he added.

The vendor is playing its part by introducing more margin-rich products and pledging to be partner-first in everything it does, with the hope that the next few moves it makes will redress the imbalance in margin levels.

The firm recently launched its Kaseya 365 offering, which it describes as the first move in a four-step process to improve the position of MSPs.

Kaysea 365, launched eight weeks ago, already has 4,000 MSPs globally covering five million endpoints tapping into the service, which provides a range of subscription offerings, including patch management, antivirus MDR EDR, anti-ransomware rollback and detection, as well as backup.

“Kaseya 365 is our subscription [offering] which we think is the first step of a four-step process to fundamentally change the unit economics of the MSP industry forever,” he said.

Voccola is looking to incrementally improve margin for MSPs through each development it brings to market, with more planned for later this year.

“Our platform IT Complete if a customer is powered by Kaseya and they’re spending half as much for their software kit that provides them about five to 10 more points of profit margin,” he added. “The second thing is through the Kaseya platform, and all of the AI-based automations that it provides, we can help facilitate the engineers to be 20-30% more efficient. That puts another five to 10 points of profit margin.”

He added that other support, in the form of playbooks, peer groups and strategic advice about pricing, service delivery and M&A activity, also helped further points of margin emerge for partners.

“An MSP powered by Kaseya should be able to be at 30% to 37% profit margin. that changes the world for MSPs. That’s our mission and that’s what we’re trying to do,” he said.

Voccola said MSPs were entrepreneurial, usually SMEs themselves, and worked incredibly hard and deserved recognition.

“That’s the economic driver of our modern economy. We feel it and it’s tough because we see how much work these freaking guys and gals do. It’s kind of [unfair] that they’re not able to make the amount of money and the amount of profit that’s reflective of the value they’re providing,” he said.