Four Key Trends From Datto's Global State of the MSP Report

Datto's Global State of the MSP Report highlights several important MSP trends that will impact managed service providers (MSPs) in the coming years. On the whole, MSPs have been able to enjoy steady growth despite the uncertain economic climate caused by the COVID-19 pandemic. The pace of cloud migration is accelerating, but client cyber security concerns are also top of mind. Here's a look at the four key findings in the Global State of the MSP Report and what they say about the road ahead for MSPs.

The state of MSP cybersecurity today

MSPs play a crucial role in IT security. Small and medium businesses (SMBs) rely on their MSP partners to help them bolster their cybersecurity posture as they digitally transform and cyber threats become more sophisticated. Now that malicious actors are increasingly targeting MSPs themselves, escalating their attacks during the global health crisis, it's more important than ever for MSPs to have a strong handle on cybersecurity best practices. The Global State of the MSP Report, an influential annual survey of more than 1,800 MSPs around the globe, shares four key MSP trends that will play a major role in MSPs' evolution in the coming years. 

Four key MSP trends from the Global State of the MSP Report

1. MSP growth drivers and what's keeping MSPs up at night

MSPs are in growth mode, in large part because SMBs are increasing their spending on MSPs by 15% per year. Certain characteristics make MSPs more likely to enjoy this kind of growth, however. When MSPs generate a higher portion of their total revenue from managed services and set specific revenue and growth goals, they can roughly double their rate of growth compared to the baseline level. MSPs also face some challenges that are keeping them up at night. Economic uncertainty due to the global health crisis is top of mind, and they worry about downstream impacts from the COVID-19 pandemic affecting their revenue, cash flow, and receivables. The uptick in cloud migrations during this period may partially offset these losses, so the overall outlook is mixed. Client cybersecurity is another key concern for MSPs, perhaps because of several well-publicized attacks in which cyber criminals used MSP credentials to gain access to their clients' systems. Since these kinds of supply chain attacks represented one of the top data breach trends of 2020, MSPs are right to see client cybersecurity as a top priority in the current environment. Clients themselves may also be demanding better cybersecurity measures from their MSPs, further elevating their priority level. 

2. How COVID-19 has impacted MSPs

Before the pandemic, MSPs reported that they expected to see 17% growth on overage over the next three years. Although COVID-19 changed their forecasts, they still expect to grow during the crisis – albeit more slowly than originally anticipated. When Datto asked MSPs how they expected the pandemic to affect their 2020 revenue, nearly 40% said it would reduce their growth projections by between 10% and 20%. About a quarter of MSPs (23%) reported that they expected to remain on track or reduce their growth projections by less than 10%. Surprisingly, 11% of MSPs reported that they actually expected to see a bump in revenue beyond their original projections. Like other companies, many MSPs quickly transitioned to remote work during the pandemic. According to a recent CompTIA survey, 67% of respondents said they are likely to seek third-party help to improve their remote work capabilities in the wake of the global health crisis. Since MSPs originally reported that work/life balance and hiring were among the top worries keeping them up at night, this finding from CompTIA may reflect their recognition that improving remote work capabilities will help them improve employee satisfaction and well-being. Flexible work arrangements could help MSPs retain talented staff, too.

3. Cloud migration is on the rise

Cloud migration remains one of the top MSP trends as the pace of digital transformation accelerates. MSPs expect to move critical client workloads to the cloud now or in the near term. Thirty-eight percent of respondents said that they expect to see a moderate decrease in on-premises servers, and 19% expect to see a significant decrease within the next three years. On-premises hardware won't exactly become obsolete, however – 43% of MSPs say that they anticipate on-premises workloads to stay the same or even increase during that time frame. Cloud migration has also played a key role in the managed services that MSPs offer. Cloud productivity services topped the list of current managed service offerings (75%), while networking and help desk services took second place (73%) and business continuity and disaster recovery (BCDR) solutions came in third. As for the services MSPs plan to offer in the coming year, cloud-based infrastructure design and management holds the number one spot while security management software/tools (25%) and intrusion monitoring (22%) came in second and third, respectively. Given that client cybersecurity is a chief concern for MSPs, it's not surprising to see MSPs prioritizing security among the services they plan to roll out.

4. Two-factor authentication is a key client cybersecurity tool

MSPs rely on three tools to keep their clients safe: antivirus (61%), two-factor authentication (60%), and firewalls (58%). Although these are all key solutions in the MSP client security toolbox, two-factor authentication comes in especially handy in preventing an attacker from gaining access to a client's systems using stolen employee credentials. As such, two-factor authentication (and, ideally, multi-factor authentication) is an important credential security best practice for any MSP. If a malicious actor attempts to gain access using stolen employee credentials, two-factor authentication will promptly notify those employees that someone has tried to access their account. With a swift heads up to the IT team, they can keep the attackers from getting a foot in the door. Adaptive multi-factor authentication adds even stronger security to the login process, leveraging biometric information and contextual factors to ensure that the right users are accessing the right data at the right time. 

With effective client cybersecurity, MSPs can ensure future growth

MSPs are growing even during the pandemic, and they are exploring cloud solutions that will enable future expansion. Concerns like client cybersecurity still cause MSPs to worry, however, which is why they are prioritizing security among the services they'll be offering within the next year. Multi-factor authentication tools are among the most effective solutions MSPs can deploy to keep clients safe. With the right security measures in place, MSPs can fully capitalize on the growth opportunities that await them. Learn how partnering with LastPass helps you provide even more value to your customers.