MSPs Looking Beyond SME Customers to More Attractive Targets

A tide of private investment is giving MSPs the confidence to expand beyond their existing SME customer base. Thanks to private equity and venture capital, MSPs now are setting their sights on much larger targets, said N-able CEO John Pagliuca.

“Now MSPs are not just walking in and talking to a founder-led small-to-medium enterprise. They’re now walking in and talking to Fortune 1000 companies. They’re walking in, talking to public companies or some of the big banks. It’s not just that founder-led dentist office or doctor’s office. It’s a CIO or IT director because MSPs now [are] becoming more robust and processes are more mature. The technology they’re leveraging is more mature. Now they’re able to have more of a business conversation,” he explained.

“Some of the MSPs that I’ve been talking to and tracking over the years, they’ve tripled the size of their average customer. What used to be maybe $5,000 a month customer, is now $15,000, $18,000, $20,000 per month. They’re now attracting and able to win larger and larger, more reputable firms. That’s growing the market for the channel, for MSPs.”

MSP SME Customers ‘Can’t Keep Up’

The CEO said “smart money” investors were attracted to the predictability of the recurring revenue model.

Pagliuca was speaking to Channel Futures in the U.K. about the launch of N-able’s MSP Horizons Report, in conjunction with Canalys, a Channel Futures sister company.

According to the global study, MSPs are on a solid growth trajectory, with 97% citing managed services revenue growth this year. More than 335,000 global channel partners are selling those services at $419 billion in revenue for fiscal year 2023.

N-able's John Pagliuca

“The interesting thing was, it wasn’t just a one-trick pony,” said Pagliuca. “It wasn’t security. Twenty-five percent of MSPs were saying, 'Even in areas like managed print, we’re going to continue to grow.’ Why? Because the needs of the SME are vast. And they’re presented with the same challenge that all of us have no matter what size of company, and that’s a labor shortage.

“So we’re seeing a confluence of a couple of beautiful trends coming together that are really creating this nice clear horizon," he added. "You have a labor shortage, and it’s an even more acute cybersecurity labor shortage. The world is getting more complicated. So these SMEs can’t keep up with it.”

MSPs Still Challenged by Customer Acquisition

However, the report shows that new customer acquisition, budgets and skills topped the list of challenges.

“Ten years from now, as the technology changes … even with AI, customer acquisition will continue to be two of the top three or four things that are top of mind,” said Pagliuca.

“On the on the low end, a lot of our smaller managed service providers just don’t have enough time or dedicated labor. We find with the small MSPs, they don’t have a dedicated or focused sales team. And they’ll definitely not have a dedicated marketing team. So they eat what they catch, and they’re not really hunting. [They’re] just seeing what comes downstream and they’ll bring it in.”

Pagliuca advises MSPs to focus on either a vertical or geographical segment to attract more customers.

“If you want to focus by geography, if you want to focus on vertical, that focus will get you to allocate some of your funds in the appropriate manner.”

N-able ‘Transforming’ Around Security, RMM

In 2024, N-able’s rallying cry is "transform," said the CEO.

“We’re looking to transform the company – and if we do it right, the industry – on a couple of different pillars,” he said.

“Where MSPs are winning today is helping their small-to-medium enterprise [customer] with compliance with security issues. So we’re coalescing around our security stack with our N-able MDR offering, but also just a better endpoint security offering, which we’re leading with a little bit more. We’re making security easy for MSPs.

“The other way is around our RMM platform," he continued. "We’ve had a project in the works for well over a year that we’re bringing to market right now. We have about 100 customers in beta and we’re going to give MSPs the power to manage across Microsoft clouds − plural − in one console. An MSP will be able to onboard [Microsoft] 365 for customers’ licenses and onboard their customers. Azure instances: Spin them up, spin them down, help with cost and visibility. This offer doesn’t exist on the planet. And we will have that as a standalone offering and coupled into our RMM.

“So we’re transforming our RMM platform with a much more modern approach to help the MSP deal with the modern SME," said Pagliuca.