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The monthly recurring revenue (MRR) business model is gaining momentum among MSPs. Claire Fleming explains why businesses that adopt the subscription-based approach to IT security and management are poised for a predictable payoff – and that’s a good thing.

How long did you last this year? One week? A few days? A couple of hours? Did you give up before you even started? Before you respond, and no matter how you answer, let’s make one thing clear: You’re reading in a judgment-free zone.

New Year’s resolutions are often made with the best intentions. But most people who make them – 92 percent, according to a 2014 study by the University of Scranton – fall short of meeting the goals they set. Whatever the reason, staying strong is a lot like the thousands who squeeze in to Times Square on December 31.

The desire disappears shortly after the ball drops.

That’s why managed service providers (MSPs) should set one achievable goal for 2015: Embrace predictability. Generate monthly recurring revenue (MRR) with a subscription-based approach to IT security and management. The alternative, of course, is to continue tirelessly searching for revenue streams – no doubt a drawback of the traditional transaction-based model.

Best-selling author John Warrillow devoted his keynote address to this very topic last September at the MAX 2014 U.S. Customer Conference. Specifically, he explained why it’s a smart business strategy for MSPs.

Warrillow’s words: “The more subscription-based revenue you have, the more valuable your company.”

Cloud services enable adopters of the MRR model to thrive. But before discussing the tools, it’s important to understand what makes the model itself beneficial.

The advantage of recurring revenue is the predictability it provides: MSPs can anticipate reliable monthly income and budget accordingly for expenditures, which allows for greater growth potential. But that’s not all. Far from it, in fact.

The ability to forecast with increased accuracy enables MSPs to reduce the amount of risk they stand to incur. They also increase the customer’s lifetime value – a critical metric for evaluating a company’s performance as a subscription operator compared to the competition.

Those factors, as Warrillow noted, increase a company’s value.

There’s statistical evidence to support migrating to the MRR model, too. According to Successful Cloud Partners 2.0, a May 2014 report by the International Data Corporation (IDC), “Top half recurring revenue partners (those partners with more than 35 percent of their revenue from contractually recurring sources) reported 1.5 times the gross profit percentage and over 1.8 times the revenue growth of partners on the bottom half.”

It’s no wonder IDC dubbed recurring revenue “the new killer key performance indicator.”

This is where cloud services play a significant role in transformation. Granted, making overnight wholesale changes may not be in your digital DNA. If this is the case, take gradual steps toward achieving the goal. Selling backup as a service (BaaS) and disaster recovery as a service (DRaaS) is a good place to start; the revenue stream created by these services is typically tied to the volume of data being protected. And these days, there’s no shortage of it.

A company’s intellectual property is its most prized possession. Few businesses, if any, can afford to have their data misplaced, stolen or compromised.

Your customers want peace of mind. You can deliver it.

“We are living in a society willing to exchange money for time,” Warrillow said. “Because people subscribe, it changes their behavior. It makes them more loyal to you.”

What more post-New Year’s incentive do you need?

Try MAXBackup free for 30 days

Claire Fleming

Marketing Manager at LogicNow
Claire Fleming is a marketing professional with more than 10 years of channel experience. Fluent in French, she is currently running global marketing campaigns for LogicNow’s MAX RemoteManagement and MAX Backup.
Claire Fleming