Despite the falling economy, business is looking up for top managed service providers. Indeed, top MSPs are generating better margins and more revenue per customer than ever according to the latest MSP Partners/Institute for Partner Education and Development (IPED) research into the state of the managed services market. Check out these highlights.
The performance of top MSPs is particularly impressive, considering the research was conducted at the end of 2008 and beginning of 2009 — when the economy was in a free-fall. Not only are top MSPs getting better, but they increasingly exhibit the same types of behaviors as other top MSPs, establishing clearly identifiable industry best practices. Both of these facts lead to an inescapable conclusion, efficient process and effective execution make the difference in successful managed services delivery.
The Gap is Getting Wider…
Best-in-class MSPs (defined as the top 20% in gross margin) earned on average a whopping 65% in gross margins in 2008 and had over twice the revenue per customer. In comparison, average MSPs earned 36.7% in gross margins. Even more compelling is that the gap between best in class and average MSPs increased from 2007 to 2008. Clearly there is plenty of money to be made for all MSPs in managed services, but the research shows that the best MSPs are getting better.
Clearly Identifiable Best Practices…
MSP Partners/IPED’s research identified 7 key performance indicators amongst top MSPs. These performance indicators range from areas of strategic investment (training, infrastructure, marketing, and services) to operational processes (effective selling practices, broadening service offerings and strategic planning). More than any other year, successful MSPs are demonstrating the same behavior in delivering managed services.
Conclusion: It’s Not About What You Sell But How You Sell It
Managed services is no longer an interesting idea around new technology — the business model is proven and the technology is sound. The research shows that managed services is continuing to grow in importance as a part of solution providers’ offering (85% of solution providers will have a managed services offering in 2009).
But despite managed services’ place in the limelight, success for MSPs in 2009 and beyond will be based upon efficient process and effective execution – how you sell, not what you sell. To learn more about managed services best practices or our 2009 managed services research, please visit www.msppartners.com.
Jim Hamilton is executive director of MSP Partners. MSPmentor is updated multiple times daily. Don’t miss a single post. Subscribe to our Enewsletter, RSS and Twitter feeds.
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Posted In: Guest Bloggers | Research | Sales
Tags: Institute for Partner Education and Development | IPED | Managed services research | Managed Services Secrets to Success | MSP Partners
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Jim: Great data points. Quick question: Has MSP Partners or IPED researched how MSPs are marketing their businesses?
Conventional wisdom says IT consulting firms and solutions providers often don’t understand marketing. But I sense that top MSPs have effective marketing, branding and PR programs in place.
If MSP Partners or IPED ever gathers that data, I’d love to see it.
Best,
-jp
Good question Joe. Our research clearly indicates that investment in, and execution of marketing programs is one of seven key performance indicators for top MSPs. At the same time, our research also shows that most MSPs don’t have a clearly defined marketing plan – or even a simple compelling message about why a customer should buy their services. The conclusion – effective marketing is a clear differentiator between best in class and average MSPs.
There are two courses at http://www.msppartners.com that cover MSP marketing best practices in significant detail:
1) Front Office Best Practices
2) The Critical Role of Marketing for a Managed Services Provider
Good question Joe. Our research clearly indicates that investment in, and execution of marketing programs is one of seven key performance indicators for top MSPs. At the same time, our research also shows that most MSPs don’t have a clearly defined marketing plan – or even a simple compelling message about why a customer should buy their services. The conclusion – effective marketing is a clear differentiator between best in class and the rest.
There are two courses at http://www.msppartners.com that cover MSP marketing Best Practices in significant detail:
1) Front Office Best Practices
2) The Critical Role of Marketing for a Managed Services Provider
I love the idea of the gap analysis between Best In Class and average, that short list of “success factors” is a great way to focus internally on actionable ways to drive profitability in your MSP model without trying to boil the ocean. Love it. Also – in my experience with last year’s data, and the IPED data in general, marketing surprisingly always makes that short list of KPI’s…those SP’s that invest in marketing effectively definitely have a leg up. j.
Can, i just say that i heartily agree, i ran a fast growing IT ompany here in scotland. When we started, we believed that being good at the technology was the only way forward. When i sold, i believed that how the marketing for the business and it was sold was the difference between us and our competitors.