Last updated on July 12, 2024
Unlocking MSP growth: how MSPs can drive revenue and reduce costs
With the increasing popularity and growth of managed service providers (MSPs) around the world the market has become more competitive than ever.
For today’s MSPs, sustainable growth is not just about increasing revenue; it’s about building a resilient and future-proof managed IT services model that adapts to their customers’ requirements while operating efficiently and increasing profits.
One of the key challenges for MSPs is maintaining the delicate balance between growth and managing costs.
As the desire for managed IT services continues to surge, MSPs must be able to easily scale their operations. This often comes with the pressure of increasing infrastructure costs and resources.
MSPs must look to implement innovative and sustainable practices and best-of-class solutions that are easy to deploy and offer simplified management consoles, automation of billing processes, and management of internal resources to facilitate growth.
One such solution is Parallels RAS — and you can get started with a free trial now.
The demand for MSP services
Current market trends for MSPs are partly driven by the ever-evolving cybersecurity threat landscape, the increasing complexity of IT environments, and the growing demand for outsourced managed IT services across all industry sectors.
MSPs are witnessing a growing demand for managed cloud services, cybersecurity, and remote workforce support, all driven by the continued global shift towards remote work and digital transformation initiatives.
As businesses strive to remain agile, competitive, and secure, they rely on MSPs to provide scalable, cost-effective solutions.
MSP mergers and acquisitions
Mergers and acquisitions (M&A) of MSPs are seen as lucrative investments for some private equity firms, VARS and solution providers.
The acquisition of specialist MSPs can bring in advanced technologies and fresh solutions, accelerating innovation and competitiveness in the market and enabling companies to tap into new revenue streams.
A recent Canalys report predicts a consolidation trend in the MSP space, with approximately 20% of pure MSPs expected to disappear between 2023 and 2025 due to mergers and acquisitions.
These highly appealing MSPs possess specialized expertise and skills in managing and optimizing IT solutions and typically have strong client relationships built on long-term trust.
What’s more, the subscription-based revenue model of MSPs brings in predictable and recurring income, providing stability and long-term growth strengthening the acquirer’s financial outlook.
The drive to acquire MSPs and associated consolidation is often driven by the need for organizations to acquire new skills, expand their customer bases, and stay competitive in a rapidly evolving industry. Despite economic uncertainties, the demand for managed services remains strong.
The importance of monthly recurring revenue (MRR)
The shift from traditional resale of IT products to monthly subscription services (or from value-added reseller to managed service provider) for managed IT services and solutions is crucial for technology partners looking for more predictable and stable revenue streams compared to traditional product resale.
By offering subscription-based services, providers can establish ongoing partnerships to build long-term customer relationships rather than focusing on one-time transactions. This facilitates a deeper understanding of the client’s evolving needs and fosters trust, as clients rely on their IT service provider as a dependable partner.
MSPs can offer tailored solutions that address specific pain points and contribute to improved operational efficiency, adding value and solidifying the provider’s reputation as a knowledgeable and reliable partner.
As the client’s workforce expands or contracts, recurring billing can be adjusted accordingly, ensuring clients only pay for the services they actually use. Monthly subscriptions offer a more predictable and sustainable revenue model compared to sporadic product sales.
Moreover, billing on a per-user basis streamlines the invoicing process, MSPs can generate clear, itemized invoices detailing the services provided for each user.
This simplicity extends to reporting, where both MSPs and clients can easily analyze usage patterns, helping them make informed decisions about service adjustments or optimizations.
Continued drive towards virtual desktop services
Virtual application and desktop services continue to gain prominence with businesses looking to MSPs to provide secure, flexible, and scalable solutions, enabling employees to access applications and desktops from anywhere, driving the need for robust virtualization platforms and seamless user experiences.
Predictions for managed application and desktop services indicate even greater adoption as the boundary between office and remote work continues to blur.
MSPs will likely focus on optimizing the user experience, enhancing security measures, and integrating hybrid and cloud environments.
Overall, the MSP market is situated to thrive as organizations increasingly rely on outsourced IT services to navigate the complexity of running multi-cloud and hybrid platforms.
MSPs adopting VDI solutions for growth
As businesses increasingly adopt remote and hybrid work models, virtual application and desktop (VDI) solutions have emerged as a catalyst for the growth of MSPs. They provide strategic advantage to MSP organizations offering scalable managed services.
For instance, a VDI solution further empowers MSPs who already provide a suite of managed services, including managed Backup as a Service (BaaS), Disaster Recovery as a Service (DRaaS), Security as a service (SECaaS) and Managed IT services with more opportunities to easily add value and cross-sell to their existing customer base.
Virtual application and desktop services enhance the flexibility and scalability of a client’s IT infrastructure, enabling them (and/or their MSP) to adapt to changing business needs effortlessly.
This adaptability or flexibility aligns perfectly with the agility that MSPs are designed to provide. By offering virtual application and desktop services, MSPs can demonstrate their commitment to meeting all their client’s IT needs in a unified, centralized manner.
Virtual application and desktop services can also address security concerns by centralizing data and applications thereby enhancing data protection and reducing the risk of data breaches. These capabilities align well with MSPs’ existing service offerings and create a cohesive and efficient IT ecosystem for their customers.
The role of on-premises and multi-cloud
MSPs play a pivotal role in bridging the gap between today’s complex IT landscape of on-premises and cloud platforms.
The hybrid approach is becoming increasingly vital as organizations seek to optimize their operations and balance the rising costs associated with cloud storage.
MSPs can determine the optimal placement of data across on-premises infrastructure and cloud environments while providing a vital management layer.
By allocating workloads to the most cost-effective platform, whether on-premises or in the cloud, MSPs can optimize both their own IT spend and that of their customers.
The burden of administration
MSP administrative overhead heavily impacts the day-to-day business, with activities that include client onboarding, billing management, and day-to-day administrative operations, among other tasks. The associated time, resources, and skills requirements can become a significant barrier to growth.
Administrative costs can escalate due to the time required as well as the need for highly skilled personnel and specialized tools to handle the intricacies of managing multiple clients’ IT environments effectively.
These costs can pose a challenge for MSP growth, but investing in solutions which include deployment wizards, automation, management, and administration tools can help.
With the right solutions, MSPs can not only manage these costs effectively but also enhance their overall service delivery, positioning themselves for sustainable growth and maintaining a competitive edge in the managed IT services landscape.
Scaling solutions and the associated costs
One of the most critical aspects of an MSP service offering is the ability to provide scalable solutions that align with customers’ needs as they grow or encounter temporary spikes in demand.
This scalability is particularly crucial in the context of virtual applications and desktop infrastructure solutions, where flexibility and adaptability are paramount.
As businesses expand and evolve, their requirements for virtual applications and desktop solutions can change significantly.
Whether it’s accommodating a growing workforce, responding to seasonal fluctuations, or addressing unexpected events like the sudden need for remote work, MSPs must have solutions that can seamlessly scale to meet these demands.
Conversely, when a customer needs to decrease users, the ability to scale down helps to optimize costs and resources —not only for the customer but also for the MSP.
Leveraging concurrent user licensing allows MSPs to pay only for the actual number of users accessing their systems simultaneously, rather than maintaining a constant high level of license costs.
The ability to adapt to changing demands and easily address underlaying costs is essential for delivering cost-effective services. Conducting regular assessments of costs and resources are essential because licence and cloud storage costs can quickly escalate, impacting the bottom line and reducing profit margins for MSPs.
Challenges around retaining technical talent
MSPs face a challenge when it comes to recruiting and retaining technical talent capable of managing complex platforms and solutions.
The demand for skilled IT professionals is consistently high, and this competition for talent can present difficulties for MSPs.
MSPs can help to address the technical talent shortage by investing in intelligent solutions which include deployment wizards and offer ease of management and administration.
Automation can reduce the burden on experienced technical staff by allowing skilled professionals to focus on more complex and strategic aspects of IT management, leaving more junior technical staff to handle routine tasks.
Addressing the costs of in-house expertise and technical training
MSPs play a pivotal role in addressing the IT resource gap that many businesses face. This gap is often characterized by a shortage of the in-house IT expertise needed to effectively manage and administer complex IT solutions.
One of the primary reasons businesses turn to MSPs is the cost-effectiveness of outsourcing IT services compared to maintaining an in-house team with the required technical expertise.
MSPs offer a cost-efficient way to access ready-made managed IT solutions.
However, MSPs must ensure their technical staff are up to date with the latest technical skills, certifications, and best practices, ensuring that they can properly deploy, manage, and administer IT solutions for their customers.
Investing in employee training and development often comes at a cost, with vendors charging MSPs for mandatory training and certifications. There may also be an added requirement to keep these certifications current and up to date.
Training courses and certifications can be expensive, with vendors such as Citrix providing partners with a complex training catalogue compromised of many different training courses (https://home.pearsonvue.com/Clients/Citrix.aspx).
The impact of training and certifications costs are not only financial but also requires significant investment in the form of the time and resources required to take these courses and meet the required certification levels.
How Parallels RAS can help reduce costs and unlock MSP growth
Parallels RAS offers a comprehensive virtual application and desktop solution designed to address the challenges faced by MSPs in achieving sustainable growth.
It provides MSPs with a cost effective managed virtual application and desktop solution that is specifically built for easy deployment, management, and administration, making it a perfect fit for MSPs.
Ease of deployment
One of the key advantages for MSPs using Parallels RAS is its simplicity and efficiency in deployment. Parallels RAS enables fast go-to-market deployment due to its ease of configuration and maintenance —all from a single pane of glass.
Advanced features are included out-of-the-box, reducing the time and resources required to get up and running.
With little pre-existing knowledge, IT administrators can have Parallels RAS up and running in a few hours and a production implementation ready within days.
Single license model
Licensing is simple, with no required editions and including all features out-of-the-box. Parallels RAS offers a single license model, no matter where the workloads reside, and which features are used.
The Service Provider License Agreement (SPLA) concurrent user license agreement aligns with the needs of MSPs to build strong recurring revenue streams without complex regulation and unnecessary additional license costs.
Hybrid by design
Parallels RAS offers MSPs the ability to manage on-premises deployments, multi-cloud deployments, and hybrid deployments—all from one console, one licence covers the full hybrid use case.
This means that the Management Plane can be wherever best suits the organization. On-prem, public cloud, it’s entirely their choice.
Single management console
IT administrators can configure, manage, and run the whole solution from a single console — including across multiple sites and multiple cloud providers.
From that single console they can provision resources to users and deliver secure access, load balancing, custom branding, and reporting and monitoring, making the admin experience much simpler and, saving time and resources.
Free technical training and 24/7 support
The Parallels MSP Partner Program supports MSPs by providing free online technical training courses, ensuring that MSP partners have access to the latest technical training and certifications they need to deliver high-quality services and build knowledge in-house to deploy, manage and support Parallels RAS.
Partners are also provided with free 24/7 support, ensuring that they have constant access to expert assistance for any technical challenges they might face.
Find out how our partners use Parallels RAS to drive growth, for example see how Plextec Inc (MSP) fuels a 10% year-over-year growth partnering with Parallels RAS.
