TAMPA, Fla., February 13, 2025 – Service Leadership, Inc.®, a ConnectWise company and the leading source of empirical data on IT solution provider (TSP) performance worldwide, today released findings from the Q4 2024 Service Leadership Index®. The latest Q4 data continues to show that managed service revenue growth has slowed to pre-COVID levels, but managed service provider (MSP) profitability remains near historic highs. In Q4, value-added resellers (VARs) experienced strong product revenue growth but struggled with services revenue.
The Service Leadership Index, celebrating its 20th year, is the largest and longest-running industry benchmarking platform, which collects data from partners in 10 Predominant Business Models™ (PBMs™) worldwide every quarter. This data provides significant insights into the global TSP industry.
"The Q4 Service Leadership data offers invaluable insights into the dynamic and differentiated landscape of the MSP and VAR industries," said Peter Kujawa, EVP & GM, Service Leadership & IT Nation. "These findings serve as a compass for industry professionals, empowering them to make informed decisions and fuel growth within their businesses. Despite the current managed service revenue growth slowdown for MSPs, it is noteworthy that MSPs continue to achieve strong profitability."
Managed service revenue growth in North America, Australia/New Zealand and Europe showed a continued slowdown, with worldwide managed service revenue growth at only 1.0% for Q4 2024, the lowest of the year. However, Australia and New Zealand had the largest quarterly increase of 2.8% managed service revenue growth rate in Q4 2024. This was followed by Europe at 2.5% and North America with only 0.2%.
The decline in managed service revenue growth across the three regions was first observed in North America three years ago, after the COVID-era peak in Q3 2022. In Australia/New Zealand, the highest point was observed in Q1 2024, followed by a similar decline to that of North America. In Europe, while growth peaked in Q2 2023, a strong Q3 2024 played a significant role in reversing the downward trend, and this slight uptick continued into Q4 2024.
Despite the deceleration in revenue growth worldwide, MSPs profitability has shown resilience, but was down slightly from Q3. Key findings include:
- The average adjusted EBITDA for MSPs worldwide decreased from 12.2% in Q3 to 11.1%, but adjusted EBITDA in Q4 was higher this year than 10.3% in 2023.
- A Q4 trend of more MSPs operating at a loss worldwide. In Q4, 18% of MSPs reported a loss of an increase from 14% in Q3 2024.
A significant factor that contributed to reduced profitability in Q4 was a material drop in product and project/professional services revenue. This drop in projects had the most significant impact in North America and Australia/New Zealand. As a result, the reduction in projects led to a drop in average project services gross margins, from 23% in Q4 2023 to 12.9% in Q4 2024, due to lower project team utilization.
VARs experienced a second consecutive quarter of strong total revenue growth of 18.5%, up from 9.3% in Q3 2024. This growth was primarily driven by non-recurring product (primarily hardware) growth of 22.4%, yet project/professional services revenue growth declined -8.5 % in Q4. Additionally, there was a negative managed services growth increase of -0.2% in Q4. Even with material increases of non-recurring product revenue, VARs posted a profit average of 5.7% adjusted EBITDA, up from 4.9% in Q4 2023 a year ago.
Kujawa will be delivering the opening keynote at IT Nation Connect Europe (March 10-12 in London) where he will delve further into these findings, as well as host a breakout session.
About Service Leadership, Inc.
Service Leadership, Inc.®, a ConnectWise company, is dedicated to providing total profit solutions for IT solution providers (TSPs), directly and through industry consultants and global technology vendors. The company publishes the leading vendor-neutral, TSP financial and operational benchmark: Service Leadership Index®. This includes private diagnostic benchmarks for individual TSPs and their business coaches and consultants. The company also publishes SLIQ™, the exclusive web application for partner owners and executives to drive financial improvements by confidentially assessing and driving their Operational Maturity Level™. For more information, visit service-leadership.com.
About ConnectWise
ConnectWise is the trusted partner for MSPs, helping them run and grow their businesses with the Asio™ platform—built for unmatched scale, AI-driven automation, and an open ecosystem. From PSA and RMM to cybersecurity and data protection, ConnectWise delivers the complete technology stack MSPs need. Backed by the IT Nation community, we empower MSPs with the tools, knowledge, and support to thrive. Learn more at connectwise.com.
Media Contact
Keith Giannini
Inkhouse for ConnectWise
connectwise@inkhouse.com
