Breaking Boundaries: The Most Disruptive MSPs in the Channel

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Summary

The channel market encompasses businesses that rely on a variety of intermediaries, such as distributors, resellers, brokers, consultants, and other channel partners, to bring their products or services to the customer. The market has traditionally been characterized by legacy vendors working with large channel partners that served the enterprise, but has since morphed into a multifaceted, indirect sales channel serving small and midsize customers as well. However, a new wave of managed service providers (MSPs) has disrupted the status quo, transforming the landscape with innovative products and services, aggressive growth strategies, and novel marketing tactics. This report delves into the importance of these disruptive companies and the impact they are having on reshaping the channel.

What does it mean to be a channel disruptor?

Ask any “techie” what it means to be a disruptor and you’ll get unlimited answers that may not correlate with one another and cause you to question whether there is a true definition. Omdia’s channel research experts and the editorial staff from Channel Futures ‒ Informa Tech’s media and events platform dedicated to serving companies in the channel industry ‒ teamed up to take on the daunting task of defining what it means to be a “disruptor” in the channel. By our definition, channel disruptors are: “Companies that are investing in leading-edge solutions, maintaining above-industry growth rates and bringing innovations that enable clients to realize their goals and beat the competition.”

For technology suppliers and vendors, channel disruptors offer an opportunity to accelerate sales growth and quickly enter new markets. Understanding the attributes of a disruptor could also factor into a vendor’s partner program development to support such organizations through sales incentives, market development funds (MDFs), lead generation, technical support, marketing assistance, and other financial incentives.

Attributes of disruptive MSPs

MSPs that are perceived as disruptors tend to invest in innovative technologies, achieve high growth rates, and successfully execute go-to-market strategies. Below are some of the top attributes the Channel Futures channel disruptors exhibited:

• Innovative products and services: Disruptors are not just releasing new products but are also redefining service standards by leveraging the latest technologies to meet customer demand.
• Significant financial growth: These MSPs are experiencing exponential revenue growth and outpacing their counterparts, which is indicative of market acceptance and scalability. Between 2021 and 2022, disruptors experienced substantial recurring revenue and EBITDA growth ‒ 24% and 26% year-over-year (YoY), respectively (see Figure 1).

Figure 1: Average recurring revenue and EBITDA Source: Channel Futures (an Informa Tech company)

• Workforce additions: To support their growth and remain competitive, disruptors are expanding their employee base by investing in highly skilled talent, which is a scarce commodity in the industry. They are also making these additions organically and inorganically (merger and acquisition ‒ M&A). Most disruptors acquired talent from new hires (72%), while 19% used a combination of new hires and M&A to add new talent (see Figure 2).

Figure 2: New hire methods Source: Channel Futures (an Informa Tech company)

• Going the M&A route: To fast-track growth and extend their market coverage, these MSPs are adapting to the evolving channel landscape, plagued by frequent M&A activity, by adjusting their business strategies accordingly. Notably, 25% of disruptors acquired one or more companies in the last 12‒24 months, while 39% are expecting to do so in the next 12 months, a 14-percentage point increase (see Figure 3).

Figure 3: M&A activity Source: Channel Futures (an Informa Tech company)

• Successful marketing tactics: Beyond technology and services, disruptive MSPs are using an effective blend of traditional and modern marketing techniques that resonate with their target audience. Over 70% of disruptors are using targeted emails and webinars in combination with networking and referral programs to acquire new clients.

Figure 4: Techniques used to acquire new clients

Source: Channel Futures (an Informa Tech company)

Who are the most disruptive MSPs?

After establishing a clear definition for “disruptor,” the team used it to identify which MSPs fit the bill by analyzing the key attributes and characteristics of channel partner applicants from our Channel Futures MSP 501 ‒ the world’s largest and most comprehensive survey and ranking of pure-play MSPs and IT companies that provide managed services in the technology industry ‒ to create a derivative list of companies (see Table 1). To develop the list, the team took the MSPs from the 2023 MSP 501 ranking that generated at least 90% of their revenue from managed services, professional services, and recurring cloud revenue, and considered other key parameters, outlined in the Attributes of disruptive MSPs section above.

Table 1: MSP 501 channel disruptors

Source: Channel Futures (an Informa Tech company)

Final thoughts: Disruption starts with differentiation and ends with dominance

To maintain a competitive edge and capitalize on the latest market trends, channel partners must break from tradition by aggressively pursuing opportunities to differentiate themselves. There are numerous ways to do this, including introducing new products and/or services, M&As and strategic partnerships, and developing effective sales and marketing strategies. The companies that are best suited to lead the charge by taking risks will ultimately reap the most rewards. This is the essence of being a channel disruptor ‒ having the ability to blend technological prowess with astute business strategies, ensuring not just channel dominance but also setting the benchmark for future industry standards.

Vendors and technology suppliers that want to partner with these disruptors must understand what motivates them and build strategic initiatives that appeal to them. Today’s disruptors can quickly become tomorrow’s most dominant channel partners, so the opportunity must be seized swiftly. Vendors often have a difficult time identifying these types of partners because they are focused on serving the larger players in their network. This list of disruptors gives vendors an opportunity to identify such players and allows their field reps or channel account managers to nurture relationships with these prominent organizations.

Appendix

Further reading

“2023 MSP 501 Channel Disruptors: These Companies Are Shaking Things Up” (September 2023)

Managed Service Provider (MSP) 501 Survey Insights – 2023 (August 2023)

Fastest-Growing Managed Service Providers (MSPs) Survey Insights – 2023 (August 2023)

Sources

OpenAI’slarge language model (ChatGPT) was used to co-create minor portions of this report.

(September 2023)

Author

Devan Adams, Senior Principal Analyst, Omdia Channel Research and Consulting

[email protected]