'Challenging Results' for MSPs in Channel Futures' Exclusive Quarterly Survey
Recurring revenue, cloud-related and security solutions sales all yielded interesting results among our respondents.
June 4, 2021
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The sentiment among the MSP professionals we surveyed pointed overwhelmingly to security. When we asked in which sectors MSPs added vendors in the first quarter, more than a quarter (29%) cited backup and disaster recovery (BDR). Managed security also came in at 29%, with cloud storage coming in close behind at 24%. Other notable mentions included data analytics (17%); data center (14%); and IaaS, managed email and help desk (all 12%).
Not surprisingly, expanding customer bases and hiring challenges came in at the top of the list, at 29% and 24%, respectively. MSPs cite staffing and training as their biggest challenges. As we look into the third quarter and the year beyond, it will be interesting to see where the challenge of the IT skills gap, and training and retraining employees nets out.
We wanted to know how these smaller, privately held companies in the channel are performing. So we asked how recurring revenue in the first quarter of 2021 compared to the year-ago quarter. About one in eight (12%) respondents said their recurring revenue increased more than 20% in the first quarter — an encouraging nudge upward. About 27% said recurring revenue was up by at least 11%. That shows there’s a good portion of the community having a pretty successful year.
We know that Microsoft, Google and AWS had a strong first quarter in terms of cloud-related sales. In mapping this to the channel, it seems that providers had a strong showing as well. When we asked how cloud-related sales in the first quarter compared to the first quarter of 2020, 31% of respondents said sales were up at least 10%. More than one in four (28%) reported no change, which indicates they are holding steady.
When we asked how security sales in 2021’s first quarter compared to 2020’s, 14% of respondents reported an increase of more than 20%. Thirteen percent reported an increase of 11%-20%; one in four (28%) said 1%-10%; and a whopping 33% said their sales remain relatively unchanged.
This is a strong sales showing, with 28% reporting an increase of 11%-20%, and another 28% reporting an increase of 1%-10%. Twenty percent reported no change, a steady hold in the first quarter coming out of the hurricane that was 2020.
Twenty-eight percent of our respondents reported a significant increase (11%-20%, while 33% said 1%-10%. Seventeen percent said profit remained unchanged. Overall, this is encouraging as the third quarter looms.
Strong sales and marketing are critical to success, so it is worth noting here that 19% of our respondents reported an increase of more than 20%. This bodes well in terms of the general outlook for the MSP industry in 2021.
The revenue outlook for 2021 is positive for MSPs. Our data show that partners are expecting to flourish in terms of growth and profitability, with 15% reporting an expected increase of over 20%, with 26% reporting an increase of 11%-20%, and 32% reporting and increase of 1%-10%. This points to the fact that MSPs are uncovering new opportunities and turning an optimistic eye to the rest of the year.
The revenue outlook for 2021 is positive for MSPs. Our data show that partners are expecting to flourish in terms of growth and profitability, with 15% reporting an expected increase of over 20%, with 26% reporting an increase of 11%-20%, and 32% reporting and increase of 1%-10%. This points to the fact that MSPs are uncovering new opportunities and turning an optimistic eye to the rest of the year.
2020 was overwhelming as businesses struggled to keep their ships afloat. Now that we’re slowly emerging from the cluster that was COVID-19, organizations are adopting new technologies to adapt to the changing landscape. We wanted to know what those patterns look like, where profit outlooks stand, and the challenges partners still face.
Getting a Sense of the Industry with Our Benchmark Survey
Channel Futures recently launched a benchmark survey to get a pulse of the top trends and opportunities in the industry during the first quarter of 2021.
We mentioned in our last article that the results highlight an emphasis on security, and encouraging upticks in recurring revenue. We decided to take a deeper dive into some of the more intriguing data points. What we found gives a really good indication of the health and outlook of the industry.
In particular, in terms of recurring revenue, it’s a tale of two cities. Half of the respondents grew while half were flat or declined.
Challenging Results
Forrester’s Jay McBain
“Compared to cloud hyperscalers – Azure, Google Cloud Platform, AWS – that are growing 50% year over year and large SaaS companies – Salesforce, ServiceNow, Workday, etc. – growing at 30%, these are challenging results,” said Jay McBain, principal analyst of channels, partnerships and ecosystems at Forrester Research. “As the economy starts to open up, more companies announce back-to-work plans, managed services growing given the remote topology, and as major hardware vendors – Dell, Cisco, HPE, IBM, etc. – start the push into subscription/consumption models, I would expect these numbers to be significantly higher in future surveys.”
The results for the first quarter may have been challenging, yes. But, there is cautious optimism for the rest of the year. More and more, providers are willing to invest and plan for technology shifts. Because of this, we might indeed see higher numbers in future surveys.
In the slideshow above, we further break down our important benchmark survey findings. What will we discover as we head into the next quarter and beyond?
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