Managed Service Provider (MSP)

MSPs are the operational outsourcers of the IT and SaaS world. Small and mid-sized businesses that can't justify a full internal IT team contract with an MSP to run their email, security, backup, endpoints, and increasingly their full SaaS stack. For SaaS vendors, MSPs represent a unique channel — they don't just resell software, they own the ongoing customer relationship and the monthly invoice.

How MSPs Make Money

The MSP business model is "per-seat, per-month, forever." A typical MSP charges:

• $100–$250 per user per month for fully managed IT (security, backup, helpdesk, patching).
• Bundled SaaS subscriptions (Microsoft 365, security tools, backup) at the MSP's blended markup of 15–40% over wholesale.
• One-time project fees for migrations, hardware refreshes, or compliance work.

An MSP serving 30 clients with 25 users each generates roughly $2–4M in annual recurring revenue. The largest MSPs (often called LSPs — Large Solution Providers) generate $50M+.

MSP vs VAR vs SI

All three are channel partners, but they differ on what they sell:

• MSP — Sells ongoing operational service. Owns the customer relationship monthly. Recurring revenue.
• VAR — Sells software plus implementation services. Project-scoped. Mixed transactional and recurring revenue.
• SI — Sells large project-based integration work across multiple vendors. Mostly transactional, large deal sizes.

The same partner organization sometimes plays all three roles for different customers, but the economic model is distinct in each.

SaaS Vendors and the MSP Channel

For SaaS vendors, MSPs are a powerful but high-friction channel:

Why they work: MSPs already have trusted relationships with thousands of SMBs who don't shop for SaaS directly. If your product fits the MSP's monthly billing stack, you can reach customers who would never come through your direct funnel.

Why they're hard: MSPs care about monthly billing reconciliation, multi-tenant management consoles, white-label options, and integration with their PSA (professional services automation) tools like ConnectWise or HaloPSA. SaaS products built only for direct end-customer use don't fit MSP workflows.

Real Example: Datto in the MSP Channel

Datto (now part of Kaseya) built one of the most successful SaaS-MSP businesses in history by designing for MSPs from day one. The product had multi-tenant dashboards so a single MSP could manage backup for 50+ clients from one screen, white-label options so the MSP could brand the experience, and tight integration with ConnectWise for ticketing. Datto reached $500M+ ARR almost entirely through MSP resellers before being acquired for $6.2B in 2022.

Should You Build an MSP Program?

An MSP partner program is worth building when:

• Your product solves an SMB IT problem (security, backup, identity, productivity, monitoring).
• You can deliver multi-tenant management and consolidated billing.
• You're willing to invest in PSA integrations and MSP-specific enablement.
• Your average deal size is too small to justify direct sales motion.

If your product is for end-business-user workflows (marketing tools, design software, analytics) rather than IT operations, the MSP channel is a poor fit. Look at affiliate or referral channels instead.