One of the most frequently asked (and arguably least important) questions is “how big is the managed services market?” They ask this question because they are interested in managed services and want to develop a MSP program. The reason they have to have an answer is even more interesting, in my opinion. Vendors need data in order to justify to their superiors that chasing MSPs is really worth the investment. And yet, if you look at the enormity of the MSP community and how many vendors are already fully vested in managed services, it may seem odd that anyone would doubt that there is at least a huge party going on in the global managed services community.
Still, people like data. So, let’s take stock in our industry and see exactly how big the managed services world really is. First, it is only in the last few years that analyst and research firms started to produce any meaningful market growth and size studies on managed services. Today, there are some decent studies that approximate where the market is in terms of revenue.
How Much Money is Being Spent on Managed Services?
According to Gartner, the 2013 IT spending forecast stands at around $3.7 trillion. Of that amount, approximately $926 billion is being spent on IT services. Now, because Gartner isn’t providing a great deal of visibility into that IT services segment, we have to do a little deductive reasoning to figure out how much is being spent on managed services.
According to Markets and Markets the 2013 spending on managed services is around $142 billion; projected to grow to $256 billion by 2018 (CAGR of 12.4%). We see here that taking two different analyst reports the $142B in managed services spending is in relation to $926B of overall IT services. But, how do these firms define managed services?
Defining Managed Services
The problem with defining managed services, or put another way, with analysts defining a profession in which they are not providers of the services can present many problems. First, practitioners should be in charge of defining their profession. This has been a central theme of the MSPAlliance for many years. Second, because there are so many differing (often competing) definitions, it makes it more complex and challenging for the customer.
For example, a recent Research and Markets study defined Application Service Providers (ASP) as “vendors of advanced telecommunication equipment and providers of value added managed services.” A more inaccurate definition I have never seen. The firm goes on to say that “managed service providers are partners to ASP and comprise of Independent Software Vendors (ISV), Telcos, VAR and System Integrators.” Again, this definition is not at all accurate in terms of what the majority of MSPs, or for that matter, what the ASP (or now commonly referred to as SaaS, or cloud), communities are doing.
How Many MSPs Are There?
Inevitably, after the “how big is the market” question, vendors will ask how many MSPs there are. Unfortunately, there are no studies that I am aware of where this question is addressed. However, we can use some anecdotal evidence to help provide a clearer picture.
Before 2009, there were estimated to be roughly 140,000 to 200,000 “service providers” in the world. Were these all fully matured MSPs? Not remotely (pun intended). However, in the years prior to 2009 most of the channel had begun the migration to managed services and away from being break/fix or reactive VARs.
After 2009, the landscape changed significantly. While it is true that we lost some MSPs, it is generally accepted as true that for every 1 MSP lost 2 new service providers were created. These new service providers, however, were not exactly like their predecessors; many were “born in the cloud” companies, offering cloud based services that were mostly resold cloud products from other providers. Regardless, it is still believed that there is at least 100,000 legitimate managed service providers in the world, each at different maturity levels.
To the person who asks me how big the market is, I typically respond and say it’s big and it’s expanding. For a long time (before we had research reports telling us the size of the market place), MSPAlliance and its members were fully invested in managed services as the right thing to do. Nobody needed to tell us, we just believe it. Moreover, there were plenty of naysayers who predicted the quick demise of managed services. They were wrong!
Our profession is growing. WIth any profession experiencing rapid growth there are issues that must be addressed. And, we are addressing those issues as a profession. The point to remember is that our industry is in good shape and continues to expand with no signs of slowing down!