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IT Glue 2021 Global MSP Benchmark Report , With Nadir Merchant of IT Glue

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In this episode, Dan talks with IT Glue CTO Nadir Merchant about the IT Glue 2021 Global MSP Benchmark Report.

The two explore the outlook for the MSP industry in 2021, the biggest opportunities for MSPs in the upcoming year - and more.

Download the report here:
https://www.itglue.com/resource/global-benchmark-2021/

And connect with Nadir here:
LinkedIn: https://www.linkedin.com/in/merch/
Website: https://www.itglue.com/

Speaker 1:

Welcome to the connecting it podcast. I'm your host, Dan Thomas Shefsky and joining me today is the CTO and GM of it glue Nadeer merchant. Uh Nadeer thanks for being with me again today.

Speaker 2:

Thanks for having me, Dan. I love being on the show.

Speaker 1:

Yeah, I know. We've, we've had John a few times and they've always been really insightful and, uh, we got something really cool to talk about today. Um, the it glue global MSP benchmark report came out, um, and it's got some really good information in it. And, uh, I want to dive in with you and start to go through this because I think it's, it's, like I said, it's got a lot of really good information that I think, uh, MSPs can benefit from. So we'd love to chat with you today around it.

Speaker 2:

I'm super excited. I love our benchmark survey. We've been doing it for four years now and we always get really good engagement and a really good broad view into what's going on inside our industry. So it's, it's great to get that insights and starting to get some better understanding of what's going on.

Speaker 1:

No, that's great. So let's get into a few questions around this, uh, you know, and kind of get your take on what the report was saying on a few of these things. So first one being is, is the general outlook for the MSP industry in 2021. What did the benchmark report come back with? Yeah,

Speaker 2:

So overwhelmingly it was positive. We saw that, um, MSP revenue is increasing again and they're back to, uh, pre pandemic levels, which is extremely compelling. Cause obviously last year was tough for many MSPs, especially those that were focused on, um, industries that were particularly hard hit. So we're seeing that increasing, we're seeing an increase in MNA activity. And then also we're seeing an acceleration of the Mo the top performing MSPs MSPs that have, uh, increased revenue and, um, profit margins of 20% or more are growing substantially faster than your average MSP or your, your, uh, lowest core tile of MSPs.

Speaker 1:

Yeah, you bring that up. And I was looking at the report and it said one of the top performers in their revenue, a lot of the, you know, the 24, 24% and 20% in between that one and 5 million. Um, is that pretty typical on these reports? Yeah,

Speaker 2:

That is pretty typical. We're seeing, um, that, that trend skew slightly higher over the last few years. Um, but that is, um, it it's roughly in line with what we've seen previous years. And so,

Speaker 1:

I mean, I think that's really important for the listeners that are on here. They're like, oh, I'm, I'm not a huge MSP or, you know, not, you know, the top of a lot of these, a lot of our respondents were in that, you know, let's say 250,000 to, you know, you know, 5 million brackets. So, I mean, it's a pretty big brains, but there's a lot of data that's real life, you know, from a small MSP to a pretty established MSP.

Speaker 2:

Yeah, absolutely. I hear that all the time when I'm talking to our partners and, you know, they say, oh, we're just a small shop. We need$2 million now. That's actually a pretty good size. Yeah. There are monster MSPs out there that do 20, 30 million, but the majority of them are in that kind of middle group. They're one, 3 million.

Speaker 1:

No that's. So let's, let's go into another area. And we talked a little bit, you just said about the pandemic a few times, you know, when you're talking about revenue in that, how has the pandemic altered the MSP marketplace? I'd love to get your thoughts on that. And, uh, I'll kind of go from there. Yeah.

Speaker 2:

So, I mean last year was really interesting when one thing said obviously a lot of economic activity thrift slowed to a crawl, right? So sales were really difficult. Churn was high, but not maybe as high as people initially thought, you know, we did a survey right before the pandemic or our normal survey in March, and we did a follow-up in late April last year, so we could see the difference in sentiment. And, uh, I think, um, the reality was, um, that happened was less than, uh, what people actually anticipated, which was positive. Um, but we did see a general slow down things like M and a just completely dried up for about five or six months started to increase a bit in September and October. And now we're really starting to see it accelerate again. Um, and again, you know, revenues, um, starting to see them come back as well as more industries open up and come back online.

Speaker 1:

So I want to talk about this with you for a second. I know it's not on our, you know, in the benchmark report, but they're not a lot of calls with MSPs lately. And it's amazing to me, you know, when the pandemic started, we saw pretty much like hospitality, you know, taking the bigger hits and, and now we're seeing hospitality come back pretty strong, uh, you know, starting to see that pickup. It's not where it was, but it's definitely in that acceleration mode. Um, now we're seeing things like manufacturing, you know, the supply chain, you know, um, you know, I'm, I'm in the big automotive area where I live and, uh, they're laying off people, you know, the shops are closing down and things like that. So, um, you know, we're starting to see from MSPs, you know, diversifying their business because if they only dealt with hospitality, you know, in the beginning they were paying the price. If you're only dealing with manufacturing, you're, you're starting to feel a little bit of the effects, but, you know, what is your take on, you know, diversifying your MSP business?

Speaker 2:

Yeah, I think it's extremely important. Um, I think that, you know, the situation also created a lot of opportunity to do that in ways that maybe MSPs wouldn't have been able to before, because so many more businesses are even more reliant than ever on technology. Uh, you know, obviously we've seen that that's been a macro trend for a very long time, but it's happening even more now, as businesses are forced to be remote, uh, they're forced to be, um, more aware of the risks in their business from these types of issues. So they're starting to, even if they don't need to be remote today prepared to be, um, in case, you know, there are other similar types of problems in the future, or, you know, other risks that, that forced them into requiring that level of flexibility. So new businesses now are, um, getting in involved with MSPs in a ways that they didn't before, whether that's through co managed it, maybe they had one, it person who could handle their office, um, when they could just walk it over a computer before, but they can't handle a remote situation. So they're leveraging an MSP for that, or maybe they have internal it, but, um, they can't handle all the security requirements, a in a more, uh, diverse world. So they're, they're leveraging, um, MSPs fast. So those are creating new opportunities for MSPs to diversify their business and protect themselves. Yeah.

Speaker 1:

Yeah. I mean, the call managers or seeing that grow all the way around the board, I mean, uh, the pandemic, if it accelerated anything, it, it really accelerated the co-manage because businesses were forced to do things that they weren't used to that MSPs kind of work. I mean, MSPs are programmed, they're set up to help you work remote or to help you, you know, pretty much work wherever you need to work. Um, and I think that's going to accelerate even with the supply chain, you know, as people have to look at their budgets that maybe it's going to go more leaning on those MSPs to do more for them and, and go a lot farther with their budgets.

Speaker 3:

Yeah. They liked the flexibility

Speaker 2:

That it offers. And, um, also the, the specialization that comes with it, right. Um, they can buy specialized expertise from an MSP that they maybe couldn't develop in house, you know, for example, compliance, right. If you have a, an MSP with that compliance, um, uh, part of their business, that's something that internal it, you know, a lot of them is smaller and can't just hire a full-time GRC person to implement their compliance. So they're leaning on, on MSPs to, to enable that for them.

Speaker 1:

So as we get into 2021, what are going to be some of the biggest opportunities? I mean, we talked about one, I think co-managed, uh, you know, that's going to be something, um, but you know, what's, uh, what's going to be the differentiation, uh, coming in 20, 21 as we go through the rest of the year.

Speaker 2:

Yeah. So security continues to be a hot topic. Again, this was a macro trend that we've seen for a long time, and it just was accelerated as a result of the pandemic. And we see that continuing, um, that that's where the MSPs tell us in the benchmark server that they, they see the biggest opportunity for growth. It's what we see in the marketplace. I think it's extremely critical. Um, small businesses more than ever are really concerned about their overall security posture and the risks that they're seeing out there in the world.

Speaker 1:

And I always see MSPs right on these. I mean, it's common, you know, when we go out there is, you know, biggest opportunities as they see, like, you know, they want to acquire new customers, but they struggle with the marketing aspect of it. Um, so when you go out there, you know, and it's something that we do a lot work with the customers to go out and market, but from your angle, what is like when I go out and do, you know, talk security, is there things that are best practices from a marketing standpoint? Because I feel like sometimes we maybe go too technical, uh, and we're, we're way over people's heads. And they don't, they think security is really complicated when we go down that road. Uh, any advice for people out there that maybe they can simplify, you know, their, their voice when they're out, you know, to make people actually have that conversation with them. Yeah.

Speaker 2:

I think too technical is exactly the right way of thinking about that. Um, I think that it's very easy for us as technical people. You know, I'm a CTO. I, I started my career as an engineer, a software engineer. I did that for a very long time. It's very easy for me to talk about dark web monitoring or the dangers of phishing, right. Um, uh, around endpoint protection, I'm going to SIM how important, how cool a SIM is, but I'm the CEO at a lawyer's office doesn't care about that, right. Or the managing director, or, um, you know, these type of people, all they care about is they want to make sure that their business is protected and they're protected from risk. So I think helping them understand the macro picture of the risk, um, how likely are you to be breached? What is going to happen if you get breached? You know, what are the types of, um, risks that when a breach happens, what are the types of outcomes or consequences of that breach, right? Because not all breaches are the same, right? When people talk about security, we're often used to thinking about, you know, firewall breach or a network breach, or, um, a user password breach, but they go, so beyond that, now you've got data leakage. Um, you've got, um, uh, dark web compromises, all these different types of breaches. So instead of talking about what are the types of protection that we offer against them, or what are the types of breaches, but what are the consequences of that happening? What happens if your employee gets fished? What happens if you get hit with ransomware and then helping them understand that you protect them from these things without necessarily getting mired in the details of how we protect them from these types of breaches.

Speaker 1:

Oh, really good. Uh, you know, I think that's exactly it. I mean, education, I mean, it's one of the things we say is you got to educate your customers on things they don't know, and, you know, don't get technical, but educate them on how you can help solve their problem and what could happen if something does happen. So, um, it really good advice there. I was pulling up before I get to the next question. I saw something on ticketing that actually was a kind of interesting, you know, it says end users, initiative tickets, uh, per client per month. And, uh, you know, the most popular one was around 101 to, you know, less than 50 was 23%. But the rest of the majority was in around that hundred and one to 250. Is that a common number you're seeing, you know, when you're out there or an MSP listening, you know, they're always kind of going by how many tickets do you close a month? Or how many tickets are you getting a month because it really impacts the profitability. Uh, what are you seeing, you know, when you looked at that report from that angle? Yeah.

Speaker 2:

Um, those numbers are in line with what, with what we hear anecdotally, and we see the numbers increasing over time, right? If you look back at previous benchmark surveys, they're screwing up, not massively, but they are growing anything. A lot of the driver for that is there's more alerts and there's more automation and noise coming in, uh, in some ways it's good because you're getting these things automated and you're not having a person getting a bad experience. And then, and then calling you or emailing you about it. So you're hearing what the early, but it does create more noise. And the ones that are not actionable create a lot of friction in their misbehaved because, um, they, um, they just waste a person's time. Somebody has to read it, figure out if they need to do anything. And then if they're closing it as won't do that three, four, five minutes, they wasted when they didn't need to be doing it. So, uh, that is a big area of focus on reducing the noise or improving the signal to noise ratio in those tickets that get created.

Speaker 1:

Yeah. Something that caught my attention is it said the popular ticket submissions, you know, email, which we all kind of thought of phone calling in. I thought the last two were cutting. Interesting. I mean the online submission form, I mean, opening a ticket online. I mean, it looks like it's kind of growing, but chat bots. That one was interesting for me. Um, yeah, I'm really

Speaker 2:

Excited about chat bots. I think this is a really interesting opportunity to change the way that MSPs, uh, provide service delivery to their customers. You know, one of the challenges with, uh, when an end user has an it problem is how do they actually, um, engage with it. It's frustrating for users to go and figure out its email address or figure out the phone number to get help. Right. Uh, but they, many of them live inside of their chat solution, whether it's teams or slack or whatever. So by, uh, changing the game a little bit, making it more accessible, it'll reduce the frustration that they have when they're an inter interacting with support and ultimately to higher satisfaction. Oh,

Speaker 1:

That's great. Yeah. I just, that one stuck out. I was like chatbots. I've never, you know, it kind of was interesting, so cool to see it, make the report and, uh, be interested to see if that grows, uh, between now and the next benchmark. Absolutely. So getting into some of the challenges, you know, we talked about biggest opportunities. We talked about the outlook. What do you think some of the challenges are going to be, uh, you know, as we continue to go in the second half of this year?

Speaker 2:

Yeah. So this is pretty interesting because the data showed us that, um, things really changed, um, before and after pandemic in, in this category, potentially more so than, uh, than any other area. Right? So things like for the last four years, lack of time was always the number one thing. Right. And, um, immediately after the pandemic, it went from 58% of MSPs telling us lack of time was their biggest challenge down to 60%. Like that's crazy. It's a huge amount of free time, which also created a really unique opportunity for them because many of us PS told us they use the downtime when they weren't being mired by their customers as much to improve their business, to work on their business. So we actually saw a substantial increase in tools like it glue people, either bought it loo to implement it, or they looked at their existing it glue. And then they spent time investing in improving the quality of their documentation, restructuring the documentation, same thing with PSA tools. We saw people really spend the time, you know, they had 15 years of data inside of their PSA, totally spent the time to clean it up. Um, hiring was another area that, you know, 57% said, uh, hiring was a huge challenge pre pandemic after it was only 20% now in both of those areas, they're starting to creep back up closer to normal. So lack of time is now up to 50, 46% are saying that that's a huge issue and same with difficulty hiring 46%. So we're seeing those ones, uh, creep back up. Uh, but probably the biggest change is in cybersecurity. And I hate to keep going back and we always talking about cybersecurity, but, you know, before the pandemic 44% said cybersecurity was, was, uh, was a threat. Um, and it increased up to 53% during, um, during the lockdown. So that is just a huge area that, um, people are continuously concerned about.

Speaker 1:

No, I mean, it's, yeah, it's definitely interesting. I mean, is, you know, the numbers and when you just, like you just said the cyber security going from the forties over to the 50%, I mean, it grows, um, you know, one of the things that kind of was looking at too is the end point server workstation, um, you know, and one of the things that really caught my eye was, you know, 2020 for end points, the average was 2001 74, 2021. It grew, you know, to 20, 2258. Um, but what went down was servers, what went down was workstations and is that the sign that, you know, we're moving more and more to the cloud and that more and more things are going to the cloud or, you know, what do you read on that? That's

Speaker 2:

Exactly what it is. I had the exact same observation now, when I first saw that data, um, more network devices, more cloud services, um, right. These things are really taking over and, you know, the, the numbers, um, are proportionately are still relatively small, but that trend is continued over the last few years. And again, accelerated last year. So when you look back at the, the longer data is that it is a very substantial shift, then what we'll continue to see that happen.

Speaker 1:

Yeah. I mean, I think that's a challenge, you know, a lot of MSPs are facing now is, is, you know, as well is that there are so many cloud applications, there are so many things that they're managing for their customers and you're watching the impact on that. So it'll be really interesting to see how, you know, what overcomes and how they do that, you know, through going through the rest of this year. And,

Speaker 2:

And of course, mobile is a big part of that too, right? Let's not forget mobile. So many MSPs now are managing mobile because businesses are thinking, I don't need to put a computer there. I can have people use the phone or they can use a tablet and they can do all of the things that they used to do on a computer. So now MSPs are being asked to manage those and make sure that they're using it being used appropriately.

Speaker 1:

And I know you mentioned hiring here not too long ago when you were going through it, but why do you think MSPs are really struggling in terms of hiring good techs? Um, you know, because I think that's one of the things that we see a lot of times is I can hire a tech, but I can't hire a good tech, you know, why, what do you think's driving that right now? I think

Speaker 2:

It's just the growth in, um, technology adoption that people are adopting technology or businesses are adopting technology much faster than we can produce talent, right. Um, people need to go and they need to get certified. They need to go get field experience, um, to, in order to really develop their skillset. And that takes a lot more time than it takes for somebody to go and buy a new server, go buy a new SAS solution or buy a new, um, uh, infrastructure service. Right. I can go in and spin up 50 VMs and Azure it in five clicks, but it takes, uh, you know, two years to train somebody to go and manage all of that. So I think that is the big driver on the

Speaker 1:

Sure you don't. One of the other things I was looking at in here is, is, you know, one of the biggest challenges. And if you look back, you know, on Q1 of 2020 in Q2 of 20, you know, 20 as well, price pressure was like, you know, 36, 35%. And now, you know, in 2021, you know, it dropped almost 10%. So I feel like, you know, what was a big thing in 2020 was price pressure, you know, having to have the, you know, the best price and it being competitive. I feel like maybe COVID really adjusted it to where people are valuing the service delivery. Um, and it was really interesting to see that that went down as one of the biggest challenges.

Speaker 2:

Absolutely. Yeah. And this is because businesses are just starting to realize how important it is for them, how important technology is for their business. Right. You know, all of a sudden, um, you know, the, the world shifted and they were like, oh crap, I can't exist without my technology. Right. Whereas before it was like often viewed as a cost center. And again, that's a macro change that's been happening for a long time. And it was just, you know, we hit the rocket ship on that one. Uh, and it's, it's a really big difference. And it's a big opportunity for MSPs to really shift and becoming a strategic advisor because now those businesses are looking at them much more seriously trying to think, how can you help me be successful? How can you help me navigate in the new world?

Speaker 1:

Yeah. And one of the last biggest challenges that I, I mean, I kind of relate to this one in some respects, I don't relate to the one of the numbers, but, you know, it says lack of time, you know, in Q1 of 20, 20, 58% said, they, you know, it was one of their challenges was lack of time. And then, uh, the pandemic hit in, in the Q2 survey, uh, it was only 16% and now we're back in 2021, things are opening back up and now it's back to like 46%. Uh, so I feel like I can relate to this one, uh, you know, time is always, we're getting pulled in so many different directions and, you know, best practices. I mean, I know coming from the it glue side of things, you know, documentation, having things readily available, um, making sure that you can be as efficient as possible, but it really seems to be something that MSPs consistently talk about is that lack of time.

Speaker 2:

Yeah. It, it's extremely hard. Right. Um, we're all getting inundated all the time. Customers always need more help, but I, you know, I think, you know, I like to, um, I like to lean on the, the practices espoused by true methods and Gary Pika, you know, he's one of the godfathers of this industry and you know, his, his attitude towards this is if you don't have enough time, you're not charging enough because if you don't charge enough, you can't invest enough in your business in order to give you the time. Right. So you end up spending all of your time firefighting and working on what's urgent and not what's important. So, you know, build out that, um, that pricing strategy, so that will, you can invest enough in your team in order to be able to do both, to be able to give you time to work on what's important. And also, uh, what is urgent.

Speaker 1:

No, that's really good, uh, really good information to be sharing. And, you know, as we kind of wrap this up, because, you know, this has been a really good report. We hit on some of the key things in it. You know, what would you say is kind of a closing summary of the benchmark report? And then obviously we're going to encourage people go download this benchmark report. Um, you know, and maybe in the Dera we can, they go to the it glue website? Can they download it? Yeah.

Speaker 2:

So everybody can download it at it. glue.com forward slash benchmark report 21. It's about a 30 page reports are highly encourage everybody to go check it out. There's all the data's in there. So you can see all the numbers of these trends that we kind of talked to. Cause we didn't give all the numbers on the show here. Um, but the big closing remark for me is what we see overwhelmingly in the report is that, um, optimism is up. Uh, recovery is well underway, uh, businesses almost back to normal and M and a is picking up again. Right? All of these things are very positive for the industry. They show that people are confident and businesses healthy, and that's really exciting to see.

Speaker 1:

Uh, no I'm really excited. I mean, we're hearing lots of excitement from MSPs, you know, on calls daily, you know, talking about how sales are increasing even more, uh, their phones are ringing off the hook, they got more and more business they're looking to hire. I mean, it's always a really good when you're on those calls in that, you know, people have their phones ringing off the hook, you know, because they got new business coming in. So that's a really good outlook for the way the rest of this year is going to go and always appreciate you coming on. I know you're a busy guy and, uh, but you've always got a wealth of knowledge that you bring and, you know, we, we respect that and so do our MSP partners that are listening today. Awesome. Thanks

Speaker 2:

Dan. Thanks for having me on the show. I love being on here.

Speaker 1:

Great. Okay. So today's podcast, you know, obviously we were talking about the it glue benchmark survey. I'm like, he's like Nadeer was saying go to the it glue website, download that report. And until next time, you know, you know, go on to your favorite podcast app, you know, subscribe to the, connecting it podcast. If you're on the iTunes store, give us five stars. And, uh, we look forward to hearing from you. So we'll talk to you all next week.