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MSP Pricing Survey – 10 Tips for Higher Growth

The fourth annual Kaseya MSP pricing survey attracted almost 700 responses from MSPs around the world. The 2014 survey included questions on a broad set of topics including demographics, growth rates, services offered, pricing strategies, the prices charged for a variety of services, and price revision plans for 2015. We’ve described many of the findings in our series of MSP Pricing Survey blog posts over the past several weeks.

Based on the survey results, other market research, and conversations with leading MSP luminaries and advisors, here is a list of 10 tips for MSPs who would like to grow faster:

  1. Position a small number of service bundles/tiers with increasing levels of capability. SMB customers want more comprehensive services and see strong value in attractively priced bundled managed services.

  2. MSP-Pricing.ig.1
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MSP Pricing Survey – Pricing Managed Services

First Determine Your Target

Before pricing any service it’s important to determine the needs of your target market. Smaller companies have lower revenues in general and are constrained in their ability to fund expensive services. They look for low priced offerings providing basic levels of support. Nevertheless, all businesses are interested in getting the best value for their investments (read largest ROI) and most will favor higher value, versus a lower price, if the value price fits within their budgetary constraints.

If every client wanted the same outcome you’d expect price ranges for more popular managed services to be fairly narrow, but in reality, they’re not. Consider the prices charged by respondents to the 2014 Kaseya MSP Pricing Survey for desktop support – see chart below. The chart shows the average desktop device support and maintenance charge per month achieved by the survey respondents. The results shown compare responses from MSPs who’s monthly recurring revenue (MRR) had grown at greater than 10% per annum to those who grew their MRRs at less than 10%. As you can see the range of prices is quite wide, reflecting the different value perceived by different customer segments in different locations.

Average-desktop-device-support

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MSP Pricing Survey – Mobile Market Expectations

Are MSPs ready for the mobile management market explosion?

When it comes to mobile device and bring your own device (BYOD) management results from the 2014 MSP Pricing Survey suggest mixed opinions among Kaseya’s MSP customer base. On the one hand, almost half (48%) of the survey respondents have yet to offer Mobile Device Management (MDM) services. On the other hand, those that are offering MDM or BYOD services for a fee are obtaining between $2 and $15+ per device per month. For those who have found a market for these services the revenue opportunities are considerable. Over 25% offering MDM services and over 30% offering BYOD-related services are able to charge over $5 per device per month. 5% of the MDM service providers and 10% of the BYOD providers are charging more than $15 per device per month.

total-devices-supported

In 2014 the number of mobile devices grew to exceed the total population of the planet! This includes approximately 2 billion smartphones. Of course, the mere existence of mobile devices does not necessarily translate into a need for mobile device management – particularly among the small and medium businesses (SMBs), who are the primary recipients of MSPs’ managed service offerings. Yet when we asked SMBs about their use of managed services for mobile device and BYOD management about 26% indicated that they were already using such services and a further 31% indicated that they were planning to do so – see chart below.

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MSP Pricing Survey – Clouds Can Be Lucrative!

SMBs Have Adopted Cloud Services

There’s no doubt about it. Cloud services are a tremendous hit with SMB customers. Whether they are running applications in a public cloud or whether they are leveraging private cloud services from a managed or cloud service provider, the great majority of SMBs are increasing their use of cloud services* and MSPs are benefiting.

This trend does represent a double-edged sword. On the one hand, MSP clients may be reducing their needs for managed servers or managed application services such as email because they plan to move applications to a public cloud or software service provider, e.g. migrating from an in-house Exchange server to Exchange Online via Office 365. On the other hand, there is a growing opportunity for MSPs to both assist clients with their migration process as well as to offer related managed services. As time goes on we expect to see a broad range of cloud-related service offering, including:

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MSP Pricing Survey – Service Offerings Expand

MSPs are adding new service capabilities

One of the strongest trends in the managed services market, highlighted by our most recent Pricing Survey, is the increase in the number of different services (or bundled service components) now offered by Kaseya MSP customers. Our 2014 survey asked MSPs to identify which of a series of 17 services they offered. These responses were then compared to those from our 2013 survey which requested input on 11 categories of service. The results are shown in the chart below. The overall response indicates that more MSPs are offering more services. In fact, a greater proportion of MSPs are now offering all of the services we asked about in 2013. In addition, a significant number are offering the newer service capabilities we added.

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MSP Pricing Survey – Increased Hourly Rates

Worldwide Average Standard Hourly Rates Increased from 2013

The overall average standard hourly rates MSPs charge for their engineers and technicians went up by about $10 per hour between 2013 and 2014 according to the results of the last two Kaseya MSP Pricing Surveys. In our 2014 survey we asked about pricing for three tiers of technician support – level 1, level 2, and level 3 – whereas the previous survey simply asked about “average” hourly rates. However, despite various differences in the number and size of respondents between this survey and the previous one, the results were generally consistent. Rates in the United States and Australia were the highest followed by rates in Europe, Canada, New Zealand and South Africa. Hourly rates were lowest in India – see the table later in the post that highlights the differences on a regional basis.

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MSP Pricing Survey – Growth Leaders Sell Value

Strong value pricing trend

The fourth annual Kaseya MSP Customer Pricing Survey was conducted in September and October last year and it attracted almost 700 responses from MSPs around the world. One of the strongest results to come out of the survey is the significant movement towards value-based managed services pricing and away from cost-based or market-based pricing. The chart below contrasts the differences between the 2013 MSP pricing survey results and the more recent responses. the trend towards value-based pricing is clear. The results support the notion that managed services customers are increasingly interested in business value and linking their purchases to key performance indicators (KPIs), such as system availability, or performance levels, or business outcomes.

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MSP Pricing Survey – Sticky Bundles, Higher Fees

Bundling strategy increases value and stickiness

The message is clear, small and medium businesses are very interested in bundled services. A recent newsletter from AMI-Partners, I-Signal*, which reports findings from their research programs, indicates that SMBs are 3 to 4 times more interested in bundled services than in single services. They gain more value from bundled services and are loath to switch service providers unless they can do so without disrupting their existing business. The strong interest in bundled services supports the notion that SMBs are indeed more interested in value than price, despite their insistence to the contrary.

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Product Design in the IT Management Cloud Era

Product Design Image

I think many of us are more aware of the impact of product design than ever before. Recently, you may recall that the rounded edges of the iPhone 6 were widely considered newsworthy; even with mainstream television media! Apple has a long history of setting styles for product design and striking a balance between style and usability.

The advent of smart phones and tablets has resulted in millions of user-friendly apps being made available to the consumer market. As a result, there’s a lot of interest in work applications that are just as easy to use. Software for the IT management market is an area where applying modern product design principles can yield significant productivity and value for the companies using these products.

So what are the design principles that you should watch for as the next generation of IT management tools arrive? From a functional perspective, products need to help you centrally command your infrastructure, manage remote and widely distributed environments with ease, and automate everything. To deliver against these key functions, IT management products need to evolve based on the following four design principles:

Mobile First.

All aspects of the product should be designed so they can be used from a tablet or mobile phone – even if they will be used in a browser. By meeting this goal, it will be easy to deliver them within a web UI on a laptop or desktop. This is often described as Responsive Design. Basically, this means that what is available in the UI and how you interact with it will adapt to the form factor of the device you are using. If you have a laptop or tablet, you can expose more features. On a small device such as a mobile phone, navigation and other information is available, but not in your way. Another important aspect of a mobile first approach is to make sure that the apps have a native feel – so the iOS, Android and Windows apps should look and behave like they are native to the device.

Simplify everything.

You need to leverage powerful, policy driven automation, and be able to implement it simply. You don’t have the time to train your technical staff on highly complex products. Well-designed apps will take highly complex actions, but not expose this complexity to users so that they can be highly productive. For example, you should be able to quickly create policy and apply it reliably and at scale, with just a few clicks. One great way to simplify things is to be consistent in the features provided. For example, always include a Search driven approach to find things and take actions, and have it work the same way in every context.

Use pre-defined content.

Apps should deliver out-of-the-box building blocks to make simplification real. Part of the evolution towards a simpler, easier IT management solution is using content to deliver value quickly. Delivering configuration in the form of pre-packaged settings is an excellent example. Apps can include policy and profile definitions so that you don’t have to construct them before you can start using them. This applies to other app content. Apps can include prepackaged dashboard templates, agent procedures and automation scripts, profiles, and reports to deliver high productivity. Intelligent default values are probably the simplest form of content, and apps can make implementation much simpler by providing recommended choices by default.

Provide measurable impact.

You need apps that capture and present metrics demonstrating the positive impact of management apps on your business as part of the design. The whole reason for getting an IT management tool in the first place is to enable your business. It only makes sense that the app should provide the data to demonstrate value too.

By applying these principles, Kaseya is now building a new generation of IT management cloud apps that are really easy to use and maximize productivity, efficiency and quality for you. Our new Enterprise Mobile Management (EMM) app will reflect these principles in its beta release at the end of October. Kaseya customers can sign up to participate in the beta here. And this will be followed by reimagined apps for software delivery, patching, antivirus and antimalware. So stay tuned, we’ll provide you more specifics on these solutions in future blogs.

Author: Don LeClair

The Significant Value of MSP Advanced Monitoring Services

Kaseya Monitor

There’s no doubt that server virtualization has had a tremendous impact on the IT operations of many small and mid-sized businesses (SMBs). For example, the benefits* have included:

  • Reduced administrative costs
  • Improved data resiliency
  • Better application availability
  • Greater business agility, e.g. faster time to market
  • Increased disaster recovery readiness, and even
  • Higher profitability and business growth

However, a recent survey report from VMWare and Forrester** suggests that SMBs may not be achieving the ROI they originally expected from virtualization. It also points to the fact that while the majority of SMBs expect their virtualized environments to grow, they are not able to optimize their server installations and are experiencing difficulties in meeting agreed-to IT service levels.

In particular, many SMBs are challenged to optimize the use of their existing servers. A major problem is lack of skilled resources. Partly this is due to the tight budget constraints that prevail in small and mid-sized companies. Partly it’s due to the difficulty of finding and hiring personnel with the right IT skills. The result is that there is a significant opportunity for MSPs to step into the breach and help.

The Forrester report indicates that the average SMB operates a hybrid-cloud environment. About half of their workloads are virtualized and Forrester expects further virtualization to occur, including the virtualization of strategic applications. Other research suggests that a majority of SMBs are now using public cloud services as well as private cloud services, including significant up-take of software-as-as-service (SaaS) and Infrastructure-as-a-service (IaaS) offerings. Coupled with these changes operating budgets have been moving from IT to line-of-business managers over time.

Together these factors amount to a considerable set of challenges, particularly for IT in mid-sized organizations. For example:

  • In virtualized environments applications share the processing, memory, storage and bandwidth resources made available by the host server. When one application begins to hog any of these resources performance can be impacted for the other applications. To overcome this, virtualized server loads need to be rebalanced on a frequent basis e.g. monthly. As installations grow this can be time consuming and impose unbudgeted costs for IT departments with constrained resources.
  • To provide for IT service continuity during maintenance, critical applications performance, and rapid disaster recovery, many virtualized environments support the dynamic switching of applications between servers. The benefits are significant but there is also a substantial impact on visibility. In the past when each application ran on its own server, troubleshooting was comparatively easy. With dynamic switching, knowing where an application was running at the exact instant of a fault so that root cause can be determined, can be difficult to identify.
  • Managing the performance of public cloud services is also challenging. While IaaS services, such as Amazon EC2, offer management APIs, most SaaS offerings do not provide management capabilities. The best that customers can expect from many of these services is availability guarantees. However, many SaaS applications run in the same kind of virtualized environments as their on-premise counterparts, which means they can be subject to the same kind of co-resident application instance interference. Yes they are available but the performance can definitely degrade during peak usage periods.
  • One of the expectations from virtualization was that it would free IT resources to assist business counterparts make better informed technology decisions. However, judging by the results so far, this has been hard for many SMBs to achieve. IT resources have been reduced during the economic downturn. Plus there’s an expectation that virtualization and self-service private cloud capabilities should significantly improve IT productivity. Lacking resources, IT is now often placed in a position where it’s easier to decline a request than to support it. The result is that line-of-business managers may view IT as the department of “no” versus the department of “know”.

MSPs who offer advanced monitoring services and can take on the risk of providing availability (up-time)-based SLAs are in a great position to help. Firstly, they have the skilled resources that can quickly support the virtualization growth plans of SMBs and to help them optimize their server farm installations. Secondly, they have tools which enable them to track, monitor and manage critical application service levels across the entire infrastructure, including being able to keep track of applications as they migrate dynamically between different virtual machines and different servers. Thirdly, they can provide detailed reporting and analyses to aid discussions about the infrastructure investments needed to maintain SLAs and to inform business/IT decision making.

Tools such as Kaseya Traverse support proactive service-level monitoring, enabling MSPs (and enterprise customers) to get advance warning of pending issues (such as memory/storage/bandwidth constraints) so that they can remediate potential problems before they impact service levels. In addition, by tracking business services (such as supply chain applications) at the highest level, while still being able to drill-down to the appropriate server or virtual machine, Traverse allows MSPs to quickly and accurately identify route causes even in the most complex of environments. Add to that support for public cloud APIs, predictive analytics and a powerful reporting capability, and Traverse-equipped MSPs are primed to provide valuable support for today’s mid-sized companies and their hybrid-cloud environments.

By helping the IT departments of mid-sized companies meet their SLA mandates, MSPs can help free in-house IT staff to better respond to business requests, can bolster the reputation of IT within their own organizations, and can help provide the detailed intelligence needed for IT to add strong value in conversations regarding business innovation.

Learn more about how Kaseya technology can help you create advanced managed services.
Read our whitepaper, Proactive Service Level Monitoring: A Must Have for Advanced MSPs.

What tools are you using to manage your IT services?

Author: Ray Wright

References:

* The Benefits of Virtualization for Small and Medium Businesses

** Expand Your Virtual Infrastructure With Confidence And Control

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