Once upon a time, small and midsize businesses (SMBs) viewed IT as a necessary evil and largely handled their technology needs in-house, adding network and endpoint management to the plates of an already over-taxed internal IT department. Over time, technology advanced and the challenges became increasingly more complex, so SMBs began turning to trusted and knowledgeable third parties for these tasks so they could focus their internal IT energies on their core business processes.
As more and more mission-critical systems moved to locally run and cloud-based digital platforms, IT has become the nervous system and engine for nearly every SMB, regardless of its particular niche or vertical or even size. And because SMBs today are so reliant on IT to do pretty much everything, they’re investing in IT at an unprecedented rate. SMBs now account for 40 percent of all IT spending, which is a 10 percent increase as a percent of revenue since 2016. That increase isn’t likely to slow down any time soon, and it is expected to grow far faster than the overall economy.
Those SMBs aren’t just spending to catch up; they’re recognizing IT’s essential relationship to their business functions and how critical it is to their own success. Of those expanding their investment, 55 percent are doing so to grow their business while 38 percent are aiming for efficiency gains to drive profitability.
Whether it’s a doctor’s office, a law firm, a florist or a restaurant, businesses rely on dozens of applications being accessed on an ever-increasing number of endpoints.
For many of these businesses, endpoints no longer refer just to the computer on your desk and the server in the office supply closet; today, you’ve got people updating inventory on their smartwatches, checking in patients on tablets, and sending files from their smartphones. Since 2017, the number of devices per person has increased 30 percent, and there is still room to grow for those existing device types as well as emerging categories, such as smart speakers and others we haven’t even seen yet.
The increase in the sheer volume of endpoints – not to mention their increasing variety – has helped push endpoint management from an edge case to a norm in just a decade. In 2010 only 10 percent of SMBs were engaged in active endpoint management (either self-managed or outsourced to MSPs), but by 2016, 59 percent of SMBs were managing their endpoints. That share is expected to reach 78 percent by 2020.
However, with any business opportunity, an untapped market rarely remains such for long. As endpoint management becomes standard operating procedure, the blue ocean has gotten murkier, and MSPs are now competing for the same accounts instead of focusing on virgin territory, which has driven the price per endpoint down for the first time ever.
Basic RMM growth is still a healthy 60 percent year-over-year, but a crowded MSP marketplace (160,000 firms expected by 2022) are fighting over that pie. That’s why MSPs must focus on other services they can market and deliver to their customers that not only differentiate them from the pack but also help them realize higher margins and exponentially larger growth rates.
Diversification may be easier said than done, but for MSPs there are logical service expansion opportunities that the SMB market is clambering for, and which MSPs are naturally best positioned to deliver.
Three key expansion opportunities for MSPs that their SMBs are either in the market for currently or will be shortly are:
- Backup and disaster recover (BDR)
- Compliance management
Collectively, BDR, compliance management, and security represent 400 percent year-over-year growth for the next four years. Today, however, RMM still delivers the lion’s share of MSP revenue at 57 percent.
Security is the biggest hot-button issue for SMBs, and it’s also the biggest margin offering for MSPs. SMBs know it’s important (87 percent feel they’re at risk of a cyberattack), but only one in three believes they are adequately protected.
MSPs can provide the security services SMBs need as a natural extension of their RMM business. Beyond offering basic services, such as patching out-of-date software and ensuring antivirus and antimalware protection is in place on every endpoint, MSPs have an opportunity to increase their value as a trusted security solutions provider by adding user identity and access control (including two-factor authentication) and content filtering and controls options to their portfolio of services.
Meanwhile, the BDR market is skyrocketing because SMBs value data second only to people. BDR applies to all aspects of IT (asset protection, compliance, business continuity and customer retention) and can easily become the second most profitable offering for MSPs.
And as SMBs realize compliance is another top priority, they’re increasingly turning to IT providers because at its core, compliance is a data issue. Plenty of SMBs haven’t yet adopted adequate solution for compliance issues, and it will eventually threaten their business and growth, whether it’s GDPR, PCI, HIPAA, or other global or domestic standards.
MSPs that are too intimidated or overwhelmed to expand into these areas and opt instead to stay on the sidelines while their peers or new players use non-RMM solutions to break into their existing accounts will miss out on this exciting market evolution. SMBs want these compelling and critical services, and if your customers aren’t able to buy them from you, they’ll look elsewhere.