Channel Watch

A Milepost on Partners' Road to Recurring Revenue

How fast are Microsoft partners transitioning to managed services, and what are the most critical components of a managed services offering? A survey reveals some critical details.

The drumbeat for channel partners to transform themselves into recurring revenue experts is steadily growing louder and stronger. Advice from Microsoft and other channel observers is for everyone to add some managed services to their practice mix (alongside other directives, such as developing intellectual property).

But how fast is that transition to managed services happening, and what are the most critical components of a managed services offering? Enter Kaseya with some critical details. One of the original sellers of shovels, er, remote monitoring and management tools, to managed services providers (MSPs), Kaseya for the last six years has conducted an annual pricing survey.

The headline number of the "MSP Global Pricing Survey" this year is that a slightly higher percentage of MSPs are clearing the 15 percent average annual monthly recurring revenue (MRR) growth threshhold over three years that Kaseya uses to categorize its fastest-growing partners.

That's good news, and probably statistically solid, given that Kaseya got more than twice as many respondents (920 from around the world) for the survey this year than it did the year before. The figure went up by 3 percentage points to 26 percent.

Deeper in the data-rich, 21-page report (available here) are some clues and benchmarks for how the managed services and recurring revenue revolution is progressing.

If you've been concerned that managed services aren't accounting for enough of your revenues yet, you can take heart from Kaseya's figures. Remember, respondents are committed enough to the business model to identify themselves as MSPs. And they reported that, on average, only 33 percent of their revenues came from managed services. Now, managed services was the biggest chunk, and it accounted for nearly twice as much in revenues as the next few categories (hardware/software resales, 18 percent; break/fix services, 17 percent; professional/project services, 16 percent).

A small group was doing substantially more of its business in managed services contracts. About 20 percent of respondents claimed to get half or more of their revenues from managed services contracts.

All of which is to say, no matter where your recurring-revenue mix stands, you may be on track after all.

Meanwhile, those looking to grow their recurring revenue pie in the year ahead could find some ideas from Kaseya's respondents.

The surveyed MSPs reported booming revenues in 2016 in backup and recovery, desktop support, server support and service desk. In the year ahead, they're expecting the market to support increased pricing around cloud services, network and connectivity support, server support, and backup and recovery, among other things. As for the top service need they're gearing up for in 2017? Helping clients address security risks.

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About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.