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What percentage of an MSP’s revenue comes from managed services?

Q and A With Medha Cloud

On average, 60% to 80% of an MSP’s (Managed Service Provider’s) revenue typically comes from MSP. This percentage reflects the recurring revenue generated through contracts for IT management, monitoring, and support. However, the exact figure varies depending on the MSP’s business model, client base, and service offerings.

Factors influencing the percentage of revenue from managed services

Business model

MSPs focused primarily on MSP will derive a higher percentage of revenue from these recurring contracts. Others may supplement revenue with project-based work, such as IT consulting, system upgrades, or cloud migrations.

Service offerings

Comprehensive service packages, including 24/7 monitoring, cybersecurity, and infrastructure management, tend to generate more recurring revenue. MSPs offering niche or specialized services may see a different revenue split.

Client size and contracts

Larger clients with extensive IT needs often sign higher-value contracts, contributing significantly to an MSP’s revenue. Small and medium-sized businesses (SMBs) may opt for smaller, less comprehensive packages.

Additional revenue streams

MSPs often earn supplemental revenue from:

  • Hardware and software resales: Selling IT equipment or software licenses.
  • One-time projects: Implementing IT solutions or handling complex migrations.
  • Consulting services: Providing strategy and planning support for IT initiatives.

Market maturity

In mature markets, MSPs often derive a higher percentage of revenue from MSPs due to the prevalence of recurring service models. In developing markets, MSPs may still rely heavily on project-based revenue.

Why revenue from managed services matters

Financial stability

Recurring revenue from managed services ensures predictable income, allowing MSPs to invest in better tools, resources, and talent.

Service focus

A higher percentage of revenue from managed services indicates the MSP’s commitment to long-term partnerships and proactive IT management rather than transactional relationships.

Scalability and growth

Managed services revenue grows as the MSP adds more clients and expands service offerings, creating a scalable and sustainable business model.

Conclusion

An MSP earning 60% to 80% of its revenue from managed services demonstrates a focus on recurring, long-term partnerships that prioritize proactive IT management. Businesses should evaluate this percentage alongside other factors, such as expertise and service quality, when selecting an MSP.

Looking for a managed service provider with a proven commitment to long-term success? Medha Cloud offers tailored IT solutions to help businesses thrive.

Sakthi Nikesh
Sakthi Nikesh
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