Fred Voccola, the CEO of Kaseya, has been very vocal about the undervaluation of managed service providers (MSPs) in the IT sector. He asserts that MSPs play a crucial role in the operation and support of Small to Mid-sized Businesses (SMBs), yet they do not receive the recognition or financial valuation they deserve.
Voccola emphasizes that MSPs are essential for the seamless operation of IT services, especially for small to medium-sized businesses that might not have the resources to manage complex IT systems internally.
By advocating for a reevaluation of how MSPs are valued and compensated, Voccola aims to highlight the substantial return on investment that these providers bring to businesses. His stance could lead to greater appreciation and potentially better market positioning for MSPs, ensuring they are seen as indispensable partners for SMBs – and equally, if not even more, important than the other outsourced services which businesses rely on such as Legal and Accounting services.
Profit Margins and Their Impact
Managed Service Providers face significant economic challenges, primarily reflected in their profit margins. According to Voccola, the average profit margin for MSPs globally stands at only 10-12 percent. This figure starkly contrasts with the profit margins of other outsourced vendors such as legal and financial service providers, which are typically around 37 percent for law firms and 35 percent for accounting firms. Despite the complexity and critical nature of the services MSPs provide, particularly in IT and security, their financial valuation remains disproportionately low.
The role of MSPs in supporting small to mid-size businesses is undeniably more complex and strategic compared to that of legal or financial service providers. MSPs not only ensure the operational efficiency of business and industrial systems but also protect these systems from significant cybersecurity threats such as ransomware. This level of responsibility and service complexity is often not reflected in the economic rewards received, highlighting a substantial disparity in how different outsourced service providers are valued and compensated.
Kaseya’s CEO points out that the job of an MSP is “ten times harder” than that of some legal and financial advisors, emphasizing the need for a reevaluation of how MSPs are compensated. The recent launch of Kaseya’s “Kaseya 365” is a move towards addressing these economic disparities, aiming to enhance the profitability and market positioning of MSPs through innovative subscription services and improved operational efficiencies.
Kaseya’s Plans to Enhance MSP Profitability
Fred Voccola continues to drive the company’s mission to significantly boost MSP profit margins and says his company has initiated a comprehensive strategy aimed at transforming the economic landscape for managed service providers by in part, introducing more profitable products.
The company says that the launch of Kaseya 365 marks the first step in a four-phase plan designed to fundamentally alter the unit economics of the MSP industry. In just the last two months, this new offering has already engaged 4,000 MSPs globally, covering five million endpoints. Kaseya 365 provides a range of subscription services including patch management, antivirus MDR EDR, anti-ransomware rollback and detection, and backup solutions.
Through the IT Complete platform, he says Kaseya aims to make software management more cost-effective, potentially increasing profit margins by an additional five to ten percentage points. Moreover, Kaseya’s integration of AI-based automation enhances engineer efficiency by 20-30%, further adding five to ten points to profit margins. Voccola says his vision is for MSPs powered by Kaseya to achieve profit margins of 30-37%, thereby revolutionizing their role and recognition within the industry. More developments are expected later this year to continue this momentum.
