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Kaseya boss on fixing MSP economics
Managed service providers continue to be undervalued for the services they deliver, but the firm’s CVEO is keen to change that situation
Having recognised that managed service providers (MSPs) are failing to earn the money and respect they deserve, the efforts of Kaseya have been focused on righting those wrongs.
Fred Voccola, CEO of Kaseya, has spoken before of the low margins MSPs operate on compared with solicitors and accountants, who are also offering services to a small and medium-sized enterprise (SME) customer base.
A sense that the people who protect data, deliver innovation and get tasked with managing complex security, software and infrastructure demands are still not being recognised is one that continues to drive Voccola to try to remedy those issues.
“The small to mid-sized businesses are really the engine [of the global economy] ... what’s allowing small businesses to save the global economy? Think about it,” he said. “It’s technology that only the enterprise was able to use 30 years ago; it can be consumed by small business.
“What that represents, which is great for MSPs, is because technology is the reason that SMBs are having this massive success,” said Voccola. “They’re now dependent on that tech, which means it must be always available and always secure. That’s where the MSP comes in.”
He said the use of IT and the dependence on MSPs to deliver and support it had not translated into economic rewards for the channel. “The average profit margin of an MSP in the United Kingdom is about 9.5%, US is around 10%, in Western Europe it’s about 9.4%.” said Voccola. “The same customers that are hiring the MSP, they hire two other service providers at scale, they have solicitors, law firms and accounting firms. The average profit margin of a law firm or a solicitor is around 40%; accounting firm about 35%.
“We have a situation where the MSP, which is a hundred times more important than the law firm or the solicitor to their client and to our society, not to mention what they do is a thousand times harder ... and they’re making a third or a quarter of the financial rewards. That’s a problem.”
Enhancements
The vendor’s recent DattoCon event outlined a number of enhancements to its 365 platform, but the driving force behind those fresh additions is to put more money into the pockets of MSPs.
“If you’re running a 10% margin business, you can’t make the investments required that you want to make, and especially given what MSPs have to do,” said Voccola. “They’ve got to invest big dollars or big pounds, and it’s very difficult to do that when you’re a 10% business.
“We are changing the fundamental unit economics of the MSP industry so that problem does not exist,” he said. “Here’s how we’re doing it with Kaseya 365: we are providing an integrated platform that gives the MSP everything they need at a fraction of the price, but more importantly, because we own all of the software, we can integrate very deeply, which means we can give automations to the MSP.”
Time and money
Voccola said the firm could make life more profitable for MSPs from two different angles: through the cost of its technology, and by freeing up time through automation and consolidation.
“The MSP has two problems,” he said. “The unit economics are broken in two ways. One, the average MSP pays about 25% of their revenue for the software and hardware kit to deliver the services. And the reason they pay so much is because they’re using 15 or 20 different point solutions.
“The second thing is MSP engineers,” said Voccola. “First off, they’re overworked. Second, they’re overworked, and third, they’re overworked. And that creates problems for the MSP. One of the problems is, because they’re overworked, they can’t generate more revenue. The reason they’re overworked is that about 70% of what they do are manual things that could be automated. Kaseya automates them because we can, because instead of 19 things from 19 companies that don’t talk to each other, you can’t automate.”
He said it was able to charge less than its competition, and automation allowed MSP engineers to get anywhere between 30-50% of their day back.
“What we are doing is fixing the fundamental problems of the industry so that MSPs can be a 40% profit businesses like they deserve for the value they provide,” said Voccola.
User 365
Kaseya has been updating its 365 platform and the user focused security and data protection tools the second announcement, following the launch of the Edge offering, with two more in the pipeline.
“Kaseya 365 User is everything to prevent, respond and recover to threats to user security, user identity management and user data preservation, everything to manage the user,” he said.
The firm also extended the scope of its Partner first Pledge, introducing a backup concierge service to make sure partners pick up on revenues from providing that support to users.
“We’re giving it to all of our MSP partners for free. It will be fully rolled out throughout Europe by the end of February,” said Voccola.
“Backup is often one of, if not the largest financial revenue generating component of an MSPs offering,” he said. “It also represents one of their largest expenditures. About 1/3 of MSPs that we work with have told us they are not good at properly selling and positioning and getting their customers to buy the type of backup and disaster recovery solution, they need help with that.
“About two thirds of MSPs tell us they are very concerned that they might not be pricing their backup properly, configuring it properly, and they might not be making money up,” said Voccola. “So, we’re building a backup concierge. So every, and I mean every Kaseya MSP, will have a dedicated backup and backup and disaster recovery expert that will work with them to help them price and package backup so they get every one of their customers to do the proper backup solution.
“We’re never going to charge this, and we think this can put another five to 10 points of profit margin and revenue growth into every MSP effort,” he said.
