Kaseya points to MSP business growth, move to value-based pricing

The annual growth rates for managed services have accelerated over the past year and many MSPs are moving toward value-based pricing, according to Kaseya research.

The recently released MSP Global Pricing Survey 2014 from Kaseya, an IT management software vendor, points to higher annual growth rates for managed services over the past few years and indicates that many managed services providers (MSPs) are moving toward value-based pricing, among other industry findings.

According to Kaseya, this year's survey, conducted among about 700 MSP businesses of various sizes across 30 countries, delved into the existing and emerging types of services offered by MSPs and service pricing and glimpsed at the breakdown of total revenue by source type.

Recurring revenue growth rates were measured over a three-year period and are suggestive of accelerating growth. For example, in 2013, 59% of respondents reported an average annual growth rate over the prior three years of less than zero to 10%. In 2014, that number is 47%. On the higher end of the growth rate, 41% of respondents reported in 2013 an average annual growth rate over the prior three years of 11% or more. In 2014, that number is 53%.

Turning to responses about general pricing models, Kaseya's MSP base looks to have shifted away from price/market match pricing and toward value-based pricing. In 2014, 25% of respondents reported using cost-based pricing; 59% reported using value-based pricing; and 16% reported using price/market match-based pricing. In 2013, respondents reported those models at 33%, 26% and 41%, respectively.

Inquiries about bundled or tiered managed services offerings in 2014 revealed that 19% of respondents offer a la carte (or per user/per device) pricing; 15% offer one tier; 34% offer two tiers; and 32% offer three or more tiers.

The Kaseya report found that among all regions, its users with higher growth rates are more likely to offer emerging services.

In North America, 25% of MSP businesses charge less than $40 per month on average for desktop support and maintenance, while 14% charge more than $80.

Server support, as you'd expect, garners a higher premium than desktop support. In North America, only 11% of respondents charge less than $100 per month. The findings revealed that 30% -- the majority of respondents -- charge more than $200 a month for server support.

Among the types of managed services North American respondents offer, desktop support (cited by 97% of respondents), server support (97%), network and connectivity support (96%), remote monitoring (95%), patching and updating (94%), and backup and recovery (93%) are almost universally offered. Other top 10 managed services include service desk capabilities (cited by 82% of respondents); desktop security (82%); mobile device and BYOD services (75%); and audit and discovery (75%).

Cloud services (whether infrastructure as a service, platform as a service or software as a service) are offered by about half of survey respondents, while cloud monitoring is offered by 30% and cloud application management (of users, access or content) is offered by 34%.

The Kaseya report found that among all regions, its users with higher growth rates are more likely to offer emerging services such as guaranteed client IT service levels, mobile device and BYOD services, and cloud application management than MSPs with lower growth rates.

The average revenue garnered by managed services was 37% of respondents' total revenue (among the 99% of Kaseya user respondents who are engaged in managed services). Hardware/software resale, meanwhile, represents 22% of total revenue among respondents who engage in that work. Break/fix services and professional services, meanwhile, each represent 15% of revenue among respondents active in that space.

In terms of survey demographics, 28% of respondents have the most customer accounts within companies with 25 or fewer employees. Almost 50% are skewed toward customers with 26 to 100 employees.

Thirty-six percent of respondents come from companies with fewer than 10 employees, an increase from only 4% in the 2013 survey, which suggests a downward shift in the size of Kaseya's customer base. Twenty-nine percent of respondents are at companies with 10 to 25 employees; 32% are at companies with 25 to 50 employees; 21% are at companies with 51 to 100 employees; and 11% are at companies with more than 100 employees. On average, respondents to this year's survey are from smaller companies than respondents to the 2013 survey.

North American users of Kaseya products represented the largest set of survey respondents, at 59%, or 398 respondents. Other world markets represented include EMEA, at 21% of respondents, Asia Pacific, at 17%, and Latin America, at 3%.

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