Blog: How can an MSP use Encryption Security to improve Revenues & Profitability?

Almost everyone considers encryption a sunk cost. You almost never see any type of Return On Investment (ROI) calculation when it comes to Key Management Server (KMS) systems. Acquiring a KMS system usually falls into the Capital Expense financial category when it comes to budgeting.

Let me change your thinking about KMS systems!

Here is a simple financial calculation based on a fictional MSP business. Let’s assume that as an MSP you charge your end customer $50 per month per managed VM. If you are managing 50 VMs for your customer your gross revenue for that customer is $2,500 per month.

However, you have costs, too. Hardware, VMware licenses, IT experts, administrative costs, etc. Let’s just guess that this might add up to $1,250 per month, or half of the gross revenue. Your margin after direct costs might be $1,250.

This example is probably extremely generous in terms of your gross margin. I suspect that your costs are probably higher and margins much lower. But let’s run with this example where gross margins are 50% of revenue.

Imagine that you become a Townsend Security MSP Partner and pay $5 per month per encrypted VM on a usage basis. You charge your customer $8 per month per encrypted VM netting $3 per month gross revenue per encrypted VM. The direct costs are very minimal. Your hardware and infrastructure costs are minimal. There are no minimum KMS license fees. There are no extra charges as you expand your use of the KMS. And very minimal IT Expert costs due to the encryption and KMS automation provided by VMware.

You probably just gained an additional $150 in gross margin from this customer.

That represents a whopping 12% increase in overall gross margin! It is not often that adding one simple service to your business offering can net that much gross margin gain.

This is, of course, a very simplified example. However, I believe that many of our MSP partners are recognizing larger gains as they add VMware encryption to their set of offerings. One MSP partner told me that it is a “no-brainer” for the customer to sign up for the small additional cost per VM for encryption due to its low cost. You can have that experience, too.

Source: How Can an MSP Use Encryption Security to Improve Revenues and Profitability?

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