10 Hot Technology Trends For The MSP Market: Datto Report

From how MSPs find new clients to the biggest trends in cloud and security, here are the ten biggest technology trends in Datto’s new Global State of the MSP Report.


For managed services providers (MSPs) wanting to skate to where the puck is going, Datto has unleashed its Global State of the MSP Report that shows where MSPs are placing their bets in cloud, security and driving revenue growth despite the coronavirus pandemic.

From how MSPs find new clients to the expectations of decreasing on-premises servers, Datto’s new report provides insights into the vision and strategy of 1,800 MSPs across the globe. The report also includes the top products and services currently being sold by MSPs, as well as the biggest trends in cloud, security and data protection and business continuity.

Datto conducted its research before COVID-19 but also conducted a second survey to find out if and how priorities had shifted. Looking at the makeup of the 1,800 MSP respondents, nearly 40 percent have been in business for more than 16 years with more than one-third having over 25 employees as well as an average client base of 122 customers.

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Here are the ten hottest technology trends that MSPs need to know in 2020.

Many MSPs expect to move critical client workloads off local hardware now or in the near future, according to Datto. Approximately 38 percent of MSPs said they expect a moderate decrease in on-premises servers, while 19 percent expect to see a significant decrease over the next three years.

However, on-premise hardware isn’t going away. Forty-three percent of MSPs expect on-premises workloads to stay the same or even increase in three years. Additionally, 44 percent of MSPs said they do not maintain a data center, instead opting to use a cloud provider for offsite compute and storage.

Just over 50 percent of MSPs use Microsoft Azure, followed by Amazon Web Services at 28 percent and Google Cloud at 22 percent. In terms of the biggest cloud challenge, 80 percent of MSPs pointed to various cost concerns around cloud migration.

Adoption of cloud services among MSPs is growing, especially around Microsoft services. MSPs said that 62 percent of their clients are currently using Microsoft 365 cloud services and they expect that 70 percent will be using them within two years. Windows server and desktop virtualization implementation is rising at an even faster rate, although a smaller percentage of clients are currently using those services.

Although 75 percent of MSPs have a managed security offering, they are more likely to offer it in partnership with a managed security service provider (MSSP) or other vendor due to the complexity of IT security.

Approximately 43 percent of MSPs offering managed security in partnership with a MSSP or another vendor, while 31 percent offer their own managed security services. Of the MSPs surveyed who did not offer managed security, 44 percent plan to offer it alongside a MSSP or a vendor within the next 12 months, while 25 percent plan to offer their own security services within the same time frame.

“I am excited by the trend of MSPs partnering with MSSPs to assure high value and a successful entry into the space,” said Datto’s Chief Information Security Officer Ryan Weeks in a statement. “IT security is a complex environment and surrounding yourself with experts is a great way to bootstrap your knowledge.”

The main manage security technologies are antivirus, backup and disaster recovery, email security, content filtering, patch management and endpoint detection and response.

Consistent Drivers Of MSP Growth

Datto said for the first time, it was able to identify two traits that set high-growth MSPs apart from their peers by using more than 800,000 data points from the 1,800 MSPs surveyed. The two consistent MSP growth drivers are: generating a higher portion of total revenue from managed services, and setting specific revenue and growth goals.

MSPs that set specific growth goals for their business and increase the portion of their revenue from managed services grow faster than their peers. In fact, for every 10 percent of total revenue derived from managed services, MSPs add 0.25 to 0.75 additional points of annual growth to their businesses.

By increasing the percentage of managed services revenue stream from 20 percent to 70 percent, it improves annual growth by one to four points. A higher portion of revenue from managed services also helps MSPs improve their business resiliency by maintaining steady cash flow and revenue during economic downturns.

“While project work and one-time hardware sales may be temping, there’s no better way to grow and strengthen an IT practice than by shifting as much business as possible to the managed services model,” said Datto.

Top Products And Services Offered By MSPs

Datto broke down the top products and services offering by MSPs around the globe.

The most popular offering by MSPs today is cloud productivity services, such as Microsoft Office 365 and Google’s G Suite, with a whopping 75 percent out of the 1,800 MSPs offering cloud services. “Businesses continue to migrate away from on-premises productivity tools,” said Datto.

There was a second-place tie for the No. 2 spot between technical support and helpdesk, and networking offerings such as Wi-Ii, switching and routing. Approximately 73 percent of MSPs offer both networking and technical support. In fourth place, 70 percent of MSPs offer business continuity and disaster recovery (BCDR).

“Most MSPs will offer all of these as the core of their SMB IT service,” said Datto. “However, the growth of co-managed IT means more specialized MSPs are targeting a segment of the client IT environment in partnership with in-house IT teams, and/or partnering with other IT firms.”

Services MSPs Are Planning To Offer

In terms of upcoming services MSPs are planning to offer within the next year, cloud-based infrastructure design and management – such as Microsoft Azure and AWS -- took the top spot at 29 percent.

Approximately 25 percent of MSPs are planning to offer new security management software and tools within the next year, while 22 percent expect to offer intrusion monitoring in keeping with client IT security concerns.

“Challenges may have changed in the wake of the pandemic, but technologies and services have not,” said Datto. “In our follow-up survey, MSPs reported the top opportunities through 2020 were the improvement of remote access solutions, security, and cloud migrations. In other words, trends identified in our initial survey will likely be accelerated in the wake of the pandemic.”

Datto said VoIP, business continuity, Azure migrations, hardware sales, and business resilience solutions are also expected to drive revenue as clients continue to recover.

Top MSP Security Offerings

The top security offerings for the 1,800 MSPs surveyed were antivirus, two-factor authentication and advanced firewalls such as Unified Threat Management (UTM) and next-generation firewall (NGFW). Approximately 61 percent of MSPs sell antivirus, followed by 60 for two-factor authentication, then 58 percent around advanced firewalls.

Datto said it’s worth noting that patch management and remote monitoring filled out the top five. “[This] shows that a robust security offering requires more than just antivirus,” said Datto in its report. “Since cyber attackers leverage vulnerabilities in software and operating systems, it is essential to stay on top of patching and other updates.”

Some of the other top security offerings by MSPs including patch management, remote monitoring and management, advanced endpoint security, anti-spam and end-user training and education.

MSPs who participated in Datto’s report said that, on average, 70 percent of their client’s servers are protected with some type of backup solution, while only 55 percent are protected with a full business continuity solution. Additionally, 38 percent of client endpoints are protected, according to the MSPs.

“This could simply point to the fact that not all servers need the fast recovery capabilities that business continuity and disaster recovery solutions deliver,” said Datto. “On the other hand, it may represent an opportunity for MSPs, as some of these clients might be better suited with full business continuity and disaster recovery (BCDR) protection.”

Endpoint protection also represents a growing opportunity for MSPs as more clients work from home.

How MSPs Are Finding New Clients

The top three social media platforms used to engage clients and prospects are LinkedIn, Facebook and Twitter. LinkedIn continues to lead the way with 68 percent of MSPs using it to engage and find clients, followed by Facebook at 54 percent and Twitter at 42 percent.

In terms of the top three sources of finding new client prospects and opportunities are word of mouth, sales calls and prospecting, and vendor referrals. Recommendations and word of mouth led the way at 63 percent, followed by sales calls and prospecting at 42 percent, then vendor referrals at 38 percent.

The other top ways MSPs are finding new clients is via internet search like Google, lunch and learn or similar events, advertising, third-party review websites as well as news articles.

Size, Geography And Yeas In Business Matter

Datto identified several variables outside a MSPs control in terms of growth or decline.

Larger MSPs, in terms of both employees and client count, are generally growing faster than smaller MSPs. Larger MSPs can benefit from increased efficiencies of scale, typically have PSA and RMM systems in place to support their growth, are more likely to have managed security and cloud management offerings, and benefit from larger than average client and contract sizes than smaller MSPs.

The number of years in business is negatively correlated with growth, according to Datto. This means that smaller upstart MSPs are generally growing faster than older MSPs. However, the number of clients and employees offsets this number, so larger MSPs that have been growing consistently do not see a similar drag.

Individual MSPs based in the Americas are growing fastest than the rest of the world. After the Americas comes Europe and then Asia-Pacific.

COVID-19 Effecting Growth In Many Ways

Prior to the COVID-19 outbreak, MSPs globally were projecting to grow their revenue by about 20 percent per year on average over the next three years. Those projections have been adjusted downward by 11 percent for the remainder of 2020, meaning MSPs are still expecting to grow through the crisis, but at a much slower pace than originally planned.

When MSPs were asked how they expect the pandemic to impact 2020 revenue, nearly 40 percent said they expected to reduce their growth projection by between 10 percent and 20 percent. Approximately 25 percent of MSPs said they expect to remain on plan or reduce their plan by less than 10 percent. Interestingly, 11 percent are actually revising their growth projections upward, expecting revenue to increase during the crisis compared to their original plan.