Most profitable TSPs pay less than less profitable TSPs, the latest Service Leadership report reveals
ConnectWise solution, has released the findings of its Service Leadership Index 2023 IT solution provider compensation report for technology solution providers (TSPs). It studies specific compensation data and the pay strategies of top-performing TSPs.
Examining the compensation data of TSPs over the past 12 months, the report reveals information about the W2 (T4 in Canada, P60 in the U.K., Income Statement in Australia, and Gross Earnings in New Zealand) compensation of billable, sales and management positions common to TSPs. The report also includes analysis of headcount ratios between the various positions in both lower- and higher-performing TSPs as well as compensation trends over time including % increase in 2022 and budgeted % increase in 2023.
The 10th edition of the report, but the first since 2016, was brought back based on demand for current compensation data, especially due to wage inflation and staffing challenges in 2020-2022. In an effort to help partners make more informed decisions with their largest business expense, the compensation report provides guidance about what is actually occurring in their markets with compensation.
A critical part of a TSPs higher performance strategy is using appropriate compensation levels and mutually beneficial incentive compensation strategies. To aid in compensation planning, the report provides unequalled depth of insight and analysis to companies seeking to find out how their compensation compares to their peers in the industry. Having an understanding of peer compensation and what the top performers are paying is critical in running their TSP.
Combined with the Service Leadership Index quarterly financial performance benchmark for TSPs worldwide, Service Leadership is able to correlate compensation data to TSP profitability performance. This includes an analysis of how top performing companies pay differently than lower performing organisations.
“Nowhere else will TSPs be able to find this kind of TSP specific data and analysis on the market pay in over 50 common TSP positions,” says Peter Kujawa, VP, service leadership & TSP evangelist. “Owners and principals now have the data they need to determine if they are paying their employees what they should be in order to retain employees.”
The report revealed that more profitable TSPs tend to pay less for staff and non-owner manager positions than less profitable TSPs. Across all departments, the Best-in-Class (BIC) pay approximately 9% less than the Median and 13% less than the Bottom ¼ (the least profitable TSPs).
Peter Kujawa
The report also showed that there was a close correlation between TSP profitability and the percentage of variable compensation paid for both staff and management. For staff positions, the BIC allocated 9.6% of Total Annual Earnings (TAE) to variable compensation while the Bottom ¼ paid only 5.8% of TAE. For planned TAE increases in 2023, the BIC MSP’s will be more selective in who they will provide the highest percentage increases to and will use those increases for their highest performers and employees with crucial operations roles according to the report.
Since 2005, the Service Leadership Index (S-LI) has been the largest, most detailed, and most accurate TSP benchmark in the IT industry, worldwide. This year marks the 18th year of benchmarking to objectively identify best practices and “set the bar” for TSP owners and executives, including in 102 countries.
To receive a complimentary Executive Summary and learn how to purchase a full copy of the report, click here.
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