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Services-led Partners Driving Twice The Gross Margin Vs. Product-led Peers

‘All these big MSPs are starting to have two-thirds of their revenue being services-led because you double profitability compared to the traditional resale model,’ said Bob Skelley, CEO of The Channel Company at XChange 2019.

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A Higher Service-Led Mix Translates To Higher Profits

The average gross margin for a solution provider is 22 percent if their total revenue is around 80 percent product resale and 20 percent services, the survey showed. That gross margin climbs to 28 percent when services account for 34 percent of total revenue with 59 percent being product resale. For a solution provider whose services sales account for 68 percent of total revenue, gross margins skyrockets to 45 percent.

“That 45 percent gross margin is more than double the 22 percent margin of the traditional model,” said Skelley. “The impact of your services mix versus resale mix drives gross margin profitability. … All of these big MSPs are starting to have two-thirds of their revenue being services-led because you double profitability compared to the traditional resale model.”

 
 
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