Recurring revenues increased sharply for MSPs during Q2 of 2021, according to a new study released last month by Channel Futures. The second quarterly benchmark survey collected insights from 200 MSPs and MSSPs, in order to get a pulse on the top managed services trends and opportunities in play.
The survey revealed signs that the IT channel is starting to bounce back with “cautious optimism,” as many MSPs see increased demand for managed services with businesses continuing to pivot due to what is becoming, for many, a permanent shift in the way we work.
Sharp rise in recurring revenues signals growth in demand for managed services
Among the key data points that surfaced during the survey process was that recurring revenue increased sharply for many channel partners in Q2. When asked by how much recurring revenues grew, about 18 percent of respondents said their recurring revenue increased more than 20 percent in the second quarter — up from 12 percent in Q1 of 2021. Additionally, 24 percent said recurring revenue was up by at least 11 percent to 20 percent, compared to 15 percent reporting that level of growth in the first quarter of the year.
During Q2, MSPs reported adding vendors for services that address:
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- Backup and disaster recovery (28 percent of MSPs)
- Cloud storage (23 percent)
- Managed security (22 percent)
- Data analytics (21 percent)
Other notable areas where vendors were added by MSPs included data centers (16 percent); IaaS (15 percent); and RMM (11 percent). These were followed by colocation services, managed compliance services (HIPAA, PCI, etc.), managed phone services, managed print services, and managed SD-WAN (all 10 percent).
Despite growth, MSPs face marketing and HR hurdles
As part of the quarterly survey, Channel Futures also looked at challenges MSPs are currently facing and two areas emerged – marketing, as well as acquiring and retaining the right talent to support the needs of their customers.
According to the survey responses, many MSPs report that marketing is becoming more competitive as the MSP ecosystem matures. Attempting to address the cybersecurity needs of their customers, while maintaining a strong portfolio of managed services and executing on digital marketing strategies, is creating an identity crisis for many MSPs. Of those surveyed, 11 percent reported that marketing was a top challenge in Q2, compared to 6 percent in Q1.
MSPs are also facing significant challenges when it comes to hiring and retaining talent. Last year, as the pandemic took hold, companies were quickly hiring to fulfill the needs of their customers. MSPs that grew quickly are now having trouble keeping their employees busy and are turning to marketing to help with customer acquisition.
At the same time, there is a lot of competition for talent. IT pros who now have the flexibility to work remotely are not looking for just any job, but for the best fit in terms of compensation, flexibility, and other key factors that are important to them. This means that MSPs also need to be especially savvy in appealing to current and prospective employees.
Cautious optimism expected to shape Q3
The key take-away from the Channel Futures’ Q2 survey is that while digital transformation is continuing to drive growth and opportunity, MSPs remain cautious and, as such, are being conservative in their forecasting. Channel Futures found that while strategic spending is expected to increase for many, the industry could likely see a pull-back, as uncertainties around COVID-19 and its variants persist.
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