Managed service providers (MSPs) offer a broad set of services to their customers, including configuring, managing, maintaining, monitoring and securing increasingly complex IT environments. In addition, they also have a business to run, employees to manage, technician utilization to monitor, profits to grow, expenses to keep in check … the list goes on and on.
In working with our partners on a regular basis, we notice that a significant number of them are missing a huge opportunity by not partnering with or joining available MSP programs their vendors may offer. Just like the list above, there are countless reasons why you should already be doing so. However, for the sake of time, let’s look at five of the top benefits of joining an MSP program today.
1. Better margins
It is not uncommon for our partners to earn in excess of 100% profit margin on the security solutions they are providing to their customers as part of their managed service agreements, which is probably a much higher percentage than what you are earning now if you are just buying annual licenses when your customers’ licenses expire.
Let me explain how in two words: aggregate pricing. Put simply, MSP programs typically offer pricing on an aggregate seat count basis, which means that you are paying for licenses based on the total number of clients you currently manage. This can be a significant difference as business grows and you move in to cheaper and cheaper seat bands. To figure out just how much margin you are missing out on ask your vendor how much it costs per seat in the lowest price band (typically five to 25 seats) vs. the cost per seat in the price band that represents your entire customer base. That number is the extra margin you are missing out on.
2. Predictable revenue stream
Compared to the feast-or-famine nature of revenue in a break-fix business model, predictability is one of the primary benefits of being a managed service provider. Joining an MSP program helps you further streamline and predict both the revenue from your customers, as well as your service delivery costs.
This one is a bit of a twofer since you can more easily calculate revenue projections and do forecasting into the future. You can also calculate cost projections and get a much better understanding of the health and future growth potential of your business. The icing on the cake is that the value of your business increases as well as your revenue streams–a critical component of your exit strategy.
3. Multiple recurring revenue streams
The great thing about being an MSP is that you are forced to heavily focus on automation and repeatability since controlling costs directly impacts your bottom line. Once you’ve joined an MSP program, you will generally have the ability to create multiple recurring revenue streams if they have a broad product portfolio. Once you have created processes and trained your staff around the tools provided as part of the MSP program it’s very easy to “turn on” any additional products your vendor may offer across your entire customer base. This can be done in a very efficient and cost-effective manner, with each of these products representing an additional recurring revenue stream and more profit.
4. Moving from CapEx to OpEx
There may be some tax and accounting benefits to joining an MSP program and moving from purchasing annual licenses upfront for your customers to paying for licenses monthly or quarterly — or moving from CapEx to OpEx. The main benefit is the ability to recognize deductions completely in the current period vs. recognizing them over the useful life of an asset (that is, if you buy a three-year license and deduct it over those three years).
Disclaimer: We are a cybersecurity company, not tax experts. Therefore, we highly recommend discussing this with your accountant or tax professional to weigh the pros and cons and how it may affect your business specifically.
5. Elimination of renewals
Lastly, a good MSP program will give you complete control over license management and provisioning from a self-service portal. This allows you not only to provision licenses when you need them (think evening or weekend deployment when you forgot to place an order three days in advance), but also to eliminate all the hassles, complexity and costs associated with renewals. In essence, since you have complete control over the licenses, an expiration date is no longer necessary–you can simply cancel the license when you need to.
If you’ve never figured out what it costs you to track disparate expiration dates across your entire customer base for every product, to request quotes from your vendors, to create invoices for your customers, to follow-up on payments from your customers, and to submit payments to your vendors just to renew a product, then you probably should! Most partners we meet who go through this exercise are shocked to find out they often lose money on smaller customers because they did not factor the costs of renewing into their pricing or business model.
Although there are so many more reasons to join an MSP program as soon as possible, these are our top five reasons you should be seriously considering becoming part of one whenever and wherever possible amongst your vendors. Talk to your security vendor today to discuss the programs they have available to improve your margin, profit and growth.