Written by Ray Wright
The market for managed services represents the fastest growing component of the overall IT services marketplace. On a global scale, Markets and Markets research agency has it growing at about 12.5% CAGR to reach $256 Billion by 2018. With a rough assumption that the United States represents at least 60% of the market today, that’s around $100B this year. The total number of companies now offering managed services in the US is thought to be around 50,000. Dividing the market size by the number of firms gives us an idea of the average MSP revenue – approximately $2m. This fits well with the statistics provided by various publications, who categorize their lists of MSPs by annual revenue. Still, a large majority of MSPs end up falling into the lower revenue categories. So where should these MSPs being focusing on opportunities for further growth and profitability? How can they differentiate their services?
Providing managed services to small businesses is quite an attractive opportunity for the large numbers of small MSPs looking to grow their revenues, however, the resulting competition for these deals can be quite intense, especially in bigger cities and municipalities. At the other end of the spectrum, competition for larger opportunities can be just as competitive because larger deals often attract bigger competitors. However, with mid-size companies that have significant needs and healthy budgets, there’s much more scope for an MSP to differentiate itself through higher value services and to win more profitable deals as a result. Plus there’s a significant opportunity. It’s estimated that less than 30% of mid-size enterprises use managed services today.
The challenge for MSPs targeting mid-sized businesses is that IT is getting ever more complicated:
- MSPs are monitoring and managing clients’ infrastructures in a challenging world of distributed applications and ubiquitous networking that’s heavily reliant on the internet.
- If this wasn’t challenging enough, cloud, in all of its manifestations creates additional challenges such as monitoring and managing public cloud services (IaaS, PaaS, SaaS).
- Mobility, which has been a major challenge to support for some time, has evolved to include BYOD and even BYON, where the business apps still need to be secured and managed, but you need to do it without invading individual privacy, disrupting personal use or impacting personal data such as photos or contacts.
- Big data requirements are beginning to have an impact – with real-time, high performance IT services becoming ever more critical to the customers.
