Has the MSP Business Model Expanded Beyond Managed Services?

Managed IT service providers (MSPs) are evolving their business model beyond managed services, according to a new CompTIA study.

The trade association and research firm interviewed 400 MSPs about for its 2022 Trends in Managed Services study. Results showed that the pandemic forced many MSPs to significantly transformed. Moreover, respondents expressed a mix of optimism and worry about the future.

On one hand, 53% of MSPs expressed that they feel optimistic or very optimistic about their business. However, 25% of MSPs said they are either pessimistic or very pessimistic about the state of their own businesses in the next year. Last year, only 4% of respondents told CompTIA that they felt uneasy about the future.

Their reasons for concern varied from macroeconomic crises to channel conflict to their skillsets. Macroeconomic crises scored the highest, followed by supply chain issues and cash flow.

CompTIA’s Carolyn April

“Like many businesses MSPs were buffeted by two years of pandemic-induced economic upheaval,” said Carolyn April, senior director of industry analysis at CompTIA. “Some MSPs saw this as an opportunity to get creative and find new ways to provide value to customers, but others struggled to hold on.”

It’s impossible to overstate the impact of COVID-19 on IT teams, both in-house and outsourced. The pandemic drove mass adoption of cloud, and in most cases, turned outsourced IT into a cost-effective business model.

And based on CompTIA’s survey results, most MSPs appear to have navigated COVID-19 well. The majority (64%) of respondents said they “came out on par or ahead” in 2021. However, an alarming 32% said they “came out behind” in 2021.

Source: CompTIA

Some firms, CompTIA found, expanded their business model beyond managed services. In the 2021 survey, a whopping 44% of firms said more than 75% of their revenue came from managed services. This time around, 37% of respondents landed in that category.

Source: CompTIA

MSPs in the “hybrid” model included “traditional, non-recurring revenue streams,” such as projects and product sales. Moreover, 30% of pure-play MSPs also took requests for non-recurring work.

“If the pandemic has taught businesses anything, especially smaller ones, it’s that the need for a ready-to-go plan B, C, or sometimes D, is not theoretical,” CompTIA wrote.

MSPs also reported challenges around skills. Respondents noted a need for giving their staff technical training (44%), and 37% said they struggle hiring skilled people.

“The skills are out there, but it’s a jobseeker’s market today and MSPs are competing not just with other tech firms for new hires, but companies in every industry category,” April said. “Smart MSPs are investing in their existing staff by providing internal training and access to certifications and other credentialing avenues for professional development.”