Cloud management and security services are key growth areas for MSPs, most of which have grown their businesses during COVID-19.
These are the key takeaways from Kaseya’s 2022 Global MSP Survey Report, which the company released this week. Nearly two-thirds of MSPs surveyed reported year-over-year revenue growth for their security services, making security the top-rated industry. Cloud management comes in second, with 51% of respondents citing revenue growth. The Kaseya survey surveyed over 1,200 MSPs and tech companies.
The results follow those of other studies that have identified security and cloud as the pillars of MSP companies and, unsurprisingly, the top IT spending priorities of their customers.
A focus on security is one of the factors likely to fuel the fastest growing MSPs. The majority of survey respondents reported monthly recurring revenue (MRR) growth of 6% to 15% over the past three years. But 15% of MSPs surveyed cited an MRR expansion of more than 20%. The survey doesn’t explicitly link security services to higher growth rates, but Mike Puglia, chief strategy officer at Kaseya, said security services are a hallmark of top-performing companies.
“In our experience, MSPs that focus on security, leverage peer groups, and dedicate staff to sales and marketing are most successful,” he said.
Additionally, MSPs have typically emphasized outsourced IT support in their marketing messages. But service providers that focus instead on cybersecurity and compliance — and how they meet customer needs — fare much better, Puglia said.
Kaseya’s research also revealed the resilience of PSM in the face of the pandemic. Fifty-one percent of respondents said COVID-19 had helped them expand services within their customer base, while 62% reported that the pandemic had accelerated the growth of MRO. The pandemic has opened up partnership opportunities to help SMBs revamp their IT infrastructure for a remote environment and embrace digital and cloud technologies to stay competitive, according to Kaseya.
The pandemic has also boosted sales in other areas. “Without surprise, [MSPs] has seen an increase in demand for security, business continuity and disaster recovery solutions,” said Puglia.
However, pandemic-related supply chain issues have negatively impacted MSPs. Thirty-five percent of MSPs surveyed said supply chain issues significantly affected their ability to sell offers, while 57% said the issue had affected their sales somewhat.
“While we live in a virtual world, there are physical realities that we have to deal with,” Puglia said, citing servers, workstations and networking equipment as examples. “All of them have been harder to find and the lead times are much longer.”
Reselling products remains a part of many MSP businesses, even as they increase the MRR of services. Only 11% of respondents to Kaseya’s survey said reselling hardware and software is not an integral part of their business.
Tercera Updates IT Services Investment Strategy
Tercera, an investment firm specializing in cloud professional services, is focusing on a handful of industry categories and ISV ecosystems as it enters its second year in business.
The company’s watchlist includes martech and e-commerce, IT service management (ITSM) and DevOps, and cybersecurity. In martech and e-commerce, Tercera will follow Adobe, BigCommerce, Commercetools and Salesforce, according to Tercera. Atlassian and HashiCorp are among the ISV ecosystems that Tercera will monitor this year in the ITSM and DevOps market. And in cybersecurity, the investment and advisory firm will track Crowdstrike, Lacework, Zscaler and Wiz, among others.
Tercera’s strategy is to take minority stakes in IT service providers and help them grow. The company seeks investment candidates in the $10 million to $40 million revenue range and makes investments of $5 million to $25 million, said Tercera CEO Chris Barbin.
Tercera is primarily interested in IT services companies, especially cloud professional services companies, associated with high-growth ISVs. The company invested in four such companies in 2021: BeyondID, a cybersecurity MSP and Okta partner; Hakkoda, a Snowflake partner; Terazo, an MSP and Twilio partner; and Zennify, a digital consultancy and Salesforce partner.
In addition to its three main investment categories, Tercera will also consider AWS partners. Barbin called the AWS ecosystem “very crowded,” but said his company would look to service providers with a strong vertical market focus. Zennify, for example, focuses on the financial services industry.
Chris BarbinCEO, Tercera
Tercera’s deal pipeline may prove to be fuller this year as the company has had time to publicize its approach, Barbin said. Tercera, however, has to contend with deep-pocketed investment firms aiming to buy IT service providers outright and at high premiums.
“There is a huge amount of capital in the market,” Barbin said, noting that investment firms sitting on giant funds are willing to overpay. Tercera, on the other hand, is looking for founders who could take cash now, build a bigger business, and then “take another bite out of that apple down the line,” he added.
- Cascadeo, a Seattle-based cloud IT transformation service provider, has entered into a strategic collaboration with AWS with the goal of accelerating enterprise and midsize cloud adoption. The company said the relationship represents a “significant investment” in its professional and managed services offerings. A number of partners have recently unveiled their efforts to increase their investments in leading cloud platforms such as AWS, Google Cloud Platform and Microsoft Azure.
- Mumbai, India-based Tata Consultancy Services has launched a 5G edge offering in conjunction with Microsoft Azure private multi-access edge computing. TCS’ Enterprise 5G Edge Suite – designed for a range of vertical markets – addresses use cases such as industrial automation, loss prevention, real-time video surveillance and autonomous vehicle management.
- Rackspace Technology, a multi-cloud technology service provider headquartered in San Antonio, TX, has achieved Snowflake Premier Partner status and reached the top 30 Snowflake Partners. Rackspace Technology’s partnership with data cloud company Snowflake aims to accelerate value for customers through data services expertise, simplified data management and analytics.
- Red Hat, an open-source software provider in Raleigh, North Carolina, has expanded its free, self-paced online training courses for partners in the areas of IT support, consulting, solutions architecture , administration and systems development. Training was previously only available to customers. The 17 free courses cover essential skills for Red Hat technologies, such as cloud computing, containers, virtualization, and automation. Courses include Red Hat System Administration I, Red Hat Openshift I, and Red Hat Cloud-Native Microservices Development with Quarkus, and the vendor said it will add courses throughout the year.
- Ermetic, a cloud infrastructure security company, has rolled out its Ermetic Synergia partnership program. The channel effort spans IT service providers, systems integrators, consultants, MSPs, managed security service providers, and ISVs. The company has identified Trace3, Marcum Technology, Cyberuptive, HI Tech Hui, SolCyber and Tecflair among its founding partners. Ermetic has offices in Tel Aviv, Israel; Palo Alto, California; and Boston.
- ConnectWise, an MSP software provider in Tampa, Florida, plans to integrate Intel’s threat detection technology into its remote monitoring and management software agent. The link will allow the company’s remote monitoring and management software to quickly identify and respond to security incidents, according to ConnectWise.
- Pythian Services, an Ottawa-based data, analytics and cloud services company, has named Joey Jablonski as Vice President of Analytics. His background includes stints as CTO of HPE’s Cloud Technology Partners business and subject matter expert for Analytics, Big Data and High Performance Computing at Dell.
- Upstack, a web-based platform that sells cloud services through sales agents, has named Kurt Walk as vice president of delivery for customer experience. He joins the New York company from Global Communication Networks, Inc.
- Chicago-based distributor Avant has named the company’s chief strategy officer Alex Danyluk as general manager of its Avant Analytics division.
Additional reporting by Kristen Gloss.