10% MSP profit margin "dangerous", Kaseya's Fred Voccola tells MSPs at DattoCon in Sydney

Kaseya CEO Fred Voccola addressed a packed Kaseya DattoCon Asia Pacific in Sydney today, where he rammed home the MSP software consolidation message and said Kaseya aimed to increase its headcount in Australia to 500 by the end of 2025.

Voccola claimed typical MSPs were operating on “dangerously” low margins. “If a business is running a 10 per cent profit margin that's enabling an entire industry, an entire part of the economy, to exist, that's really dangerous, because if you're running a 10 per cent profit margin, you can't really invest," he argued.

"Most MSP's technians are overworked, and the MSP would love to hire four, five, six, 10, 20, 50 more engineers to alleviate the workload. But you can't, because when you run a 10 percent profit margin, there's no wiggle room. If you lose one or two or three or four or five customers, the business is at risk of potentially failing.”

This was part of Voccola's pitch for Kaseya 365 User, the user security suite announced late last month, and Kaseya 365 Endpoint (previously Kaseya 365), the suite it announced in May. 

Buying a tightly integrated toolset such as these from one vendor would lower MSP’s costs, Voccola said.

He claimed that MSPs typically use about 17 non-integrated products from multiple vendors. “That's 17 different screens and tools from different people,” he said. This approach was more expensive, required MSPs to deal more vendors and made automation harder, he said.

“If you're using multiple products from multiple vendors, they're not integrated. They might have APIs sharing some data, if you're lucky, but that's about all,” Voccola claimed. “It has to be built from within to integrate technology in a meaningful way so that you can automate the processes.”

“That can only be done if one company owns that technology, so you eliminate the dependencies that exist when you build deep in-app, meaningful integrations.”

To press home his point, Voccola pointed to IT Complete, Kaseya’s “do-it-all” security and management platform.

“We own all of it. We're not reselling third party products. We're not OEM-ing other product. What that allows us to do is to really deeply integrate these products, very similar to how Microsoft did it with M365 or what was called Microsoft Office, way back when they did it.”

"Monster" compliance opportunity

Voccola noted increasing pressure globally on small to medium size businesses to prove compliance with security regulations.

“It is going to be very prohibitive and very expensive if small to mid-sized businesses are not compliant with those standards,” he said.

“I think we're 12 to 18 months away from that being the next big revenue opportunity across the board, across vertical industries.”

In the next few weeks, Kaseya will provide automation between its compliance and RMM solutions to “automate remediation when a customer comes out of compliance with various standards.”

“That is a monster financial opportunity for this room over the coming years and it's also going to completely change how IT security is done,” Voccola said.

Eyeing the mid-market

SMB was the main customer segment focused on by Voccola on stage in Sydney today, but he also talked up the mid-market opportunity.

By the end of this decade, about 50 percent of mid-market firms – which he defined as having 100 to 600 employees – will “completely” outsource their IT and security, he predicted.

“This room can take that opportunity. Most of the large service providers – IBM, Tata, Deloitte, folks like that – they can't come and service that market,” he claimed.

Growth outlook

As challenging as business can be for some MSPs – Voccola noted the gap between what customers are prepared to pay and the cost of providing managed services – he compared the annual growth rates of MSPs favorably compared to those of some non-IT SMBs.

If Voccola is to be believed, more growth is ahead. “We believe the MSP community, the MSP market, will double by the end of the decade,” he said.

Meantime, as mentioned, Kaseya aims to increase its headcount in Australia to 500 in 2025.

The company also plans to follow on from its Kaseya 365 Endpoint and Kaseya 365 User launches with two more announcements in the next six months that will "complete the journey".