Fred Voccola was so confident that Kaseya 365 would change the economics for MSPs, he placed a bet with a partner during a meeting in London last January. The stakes were 500 quid (British pound sterling) to the charity of the winner’s choice.
“They were a big IT Glue shop,” says Kaseya’s CEO. But, he adds, “They were using every other vendor in the world. They had an RMM vendor, an AV vendor, an EDR vendor, a SOC/MDR vendor, a backup vendor.”
Voccola told the MSP that once he heard what they were announcing at Connect Global in April—which was Kaseya 365—he would be all in by DattoCon Europe in Dublin this June. The partner’s response was, “There’s no way. My engineers will not let me do it. They love the kit [software] that they use.”
Fast forward to Dublin. That partner presented Voccola with a bag of coins, acknowledging that making the switch to Kaseya 365 had almost doubled their annual profit. “The CTO is there too, and he said, ‘We’ve looked at the technology; we actually think it’s better. But aside from that, I was told by our owner and CEO, ‘you are doing this because if you don’t, we can’t compete,’” Voccola recounts.
He says he likes telling that story because of what he heard from that partner: “You have fundamentally changed my business forever.”
And that’s the goal—to change the economics of the MSP industry by boosting profit margin to be on par with the other professional service providers that small to medium-size businesses depend on, such as accountants and lawyers. Achieving that goal has been 10 years in the making, with an investment of around $12 billion in R&D and numerous acquisitions.
The rollout of Kaseya 365, an all-in-one subscription that gives MSPs the tools to manage, secure, back up, and automate all their clients’ environments at an exceedingly low price point, was a key step in Kaseya’s goal. Since the announcement, the rapid adoption of Kaseya 365 has even surprised him.
“I don’t think we thought it would take this fast,” he acknowledges. “I’d love to lie to you and be like, yeah, we planned it out, we knew it. That’s all bullshit.”
According to just released data from Kaseya, more than 4,000 MSPs have adopted Kaseya 365, with more than 5 million endpoints under management. For those MSPs, Kaseya says the total cost savings already totals $400 million annually.
Why MSPs Are ‘In A Pickle’
Kaseya 365 is only the first step in what Voccola says will be a four-part process to get MSPs what they need to move their profit margin from 8-10% to 30-35%.
He has been advocating to everyone who will listen that the unit economics for MSPs is broken. “For a managed service provider to generate a dollar of managed services, their gross margins, what it costs them between labor and software kit and hardware kit to deliver it, doesn’t leave a lot of room for profit.”
But it’s really a two-pronged problem, he says. “They’re not able to get the appropriate pricing for the value that they’re providing. [And] their costs to deliver a dollar of managed services are just simply too high.”
Exacerbating that is the digital transformation that small and medium-sized businesses started embarking on about 10 years ago, he says. “The challenge is, the MSP has to do about three times as much stuff as they had to do just six years ago to deliver that always available, always secure output that is demanded by the customers. That puts the MSP in a pickle, and we’re seeing the profit margins getting a lot of pressure.”
It’s a unique market opportunity that Kaseya identified, Voccola says. “If we were to develop a purpose-built platform that solves the two issues that are driving the unit economics down for MSPs by providing one platform that’s filled with AI-based automations that allow the engineers to be more efficient–generating more revenue per technician, if you will–and then we charge a third for it. Do the math on that. It puts the MSP profit margin into the 30% range.”
He adds, “if we do that, we’ve just solved the most important problem for an entire industry.”
Eyes On The Finish Line
Voccola says the finish line for this four-part strategic plan is in sight. Kaseya will reveal the final piece at Kaseya Connect Global in April of 2025.
But in the meantime, just like he relentlessly teased Kaseya 365 before the big spring reveal, he’s at it again. Voccola is promising the announcement at DattoCon in October “may be about an acquisition. It may be about enabling MSPs to do things they couldn’t do before. It may be about providing a huge amount of new capabilities to MSPs that not only allow them to become incredibly more efficient, but to generate additional revenues.”
This announcement will represent the second step in Voccola’s plan. Asked if it will enhance the ability to be a security-first MSP, something he continually stresses, he replies, “I think components of what we’re going to be talking about, 100%, yes. And that’s a theme [for Kaseya].”
That’s because the ransomware epidemic is changing the business community, he notes. “The disproportionate amount of impact that a very small percentage of human beings and cyber gangs can [have] on average people like you and I, I don’t think the world’s ever seen. And small businesses are the number one target. So everything that we do as a company is around enabling and empowering MSPs to fight that fight. They provide the defense for a huge part of the economy, and we not only have to equip them to do it, but we need to equip them with the ability to articulate to the SMBs how valuable and important it is and how much they should get paid for it.”
He adds, “What we will be announcing in October in Miami is continuing to help solve that problem.”
If Kaseya can continue to deliver on driving down the cost of goods sold and increasing tech efficiency through automation, Voccola is confident MSPs will be able to achieve 30-35% profit margin. Plus, he says, Kaseya “will be an incredibly successful organization as well.”
