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6 Big Trends Shaping the Managed Services Market
Written by Bobby DeMarzo March 31, 2021
The single most-often asked question of us is, “What are the trends shaping the managed services market?” It’s a question asked of us every day regarding the health and well-being of companies that deliver managed services to customers of all sizes.
With so much of today’s IT being consumed via managed services on a recurring or subscription basis, monitoring the state of the MSP market has become our industry’s pastime. It won’t replace baseball anytime soon, but it is still fun watching the day-to-day market gyrations of our MSP 501 and the greater managed services market. So below are answers to some of the most pressing issues of the day when it comes to the MSP market.
What’s Not Changing?
Well, there are some things that aren’t changing, perhaps for the better. Over the past few years, security and cloud have been the main growth drivers for most MSPs. Based on our ongoing conversations with the MSP 501, along with our managed services research, we don’t see that changing any time soon. We will be the first to admit those are very broad category definitions which deserve more detail, but for anyone who wants to know where MSP leaders exude the most confidence, it would be around cloud and security solutions.
Do All MSPs Think and Act Alike?
Don’t lump all MSPs together. Another major trend we are examining is the distinction between small, medium and large MSPs in terms of their market outlook and behavior. We’re finding some very real differences in the opinions of leaders of small, fast-growing MSPs and those of much larger organizations.
Let’s dig a little deeper on this point. When we asked the MSP 501 about their top revenue producing solutions, about one-fifth cited infrastructure-as-a-service. However, the number of large MSPs driving IaaS sales to new heights with storage and server technologies was nearly double that of smaller partners. Of course, one could argue that IaaS is a better fit for enterprise customers. But either way it does show a sharp contrast. The same is true for MSPs who said data center services. So, no, not all MSPs move in the same direction.
What’s Going on with the MSP Market and IT Security?
Even though IT security overall is one the fastest-growing segments for MSPs, there are some variations. While MSPs of all sizes are seeing similar growth prospects for endpoint, network and managed detection and response, the same cannot be said for identity access management. When it comes to that segment of IT security, nearly twice the number of large MSPs see identity access management as big source of growth.
Are MSPs Focused on Midmarket Opportunities?
We are huge fans of middle market — you know, those companies with 100 to 1,000 seats that make up the backbone of the U.S. economy. But it’s in this customer segment that differences among MSP business models get really interesting.
While the majority of MSPs serve customers that are similar to their size — e.g., small MSPs overwhelming sell to small businesses — there are some huge market gaps. This has major implications for vendors, tech suppliers and distributors who look to their MSP partners for revenue growth. The data show the upper end of the midmarket is not being served well by the channel. This a total missed opportunity, as senior IT leaders from midsize companies prefer to partner with and purchase from MSPs and solution providers. Only 17 percent of the small organizations surveyed as part of the MSP 501 said they sell to midmarket companies with 501 to 1,000 employees.
What was even more shocking is the revelation that only one-quarter of the midsized MSP 501 companies target the larger upper tier of the midmarket. And guess what? Even the large MSPs are not as focused on the midmarket as they could be. The result is a missed channel opportunity to address the midmarket
What’s Going on in the Education Vertical?
The market which that received the most attention during the pandemic has been education. Vendors and channel partners have helped many K-12 schools, colleges and universities respond to needs for remote learning, security management and infrastructure updates, and much more. While the 2020 MSP data predated the pandemic, it did show that many small MSPs need to step up their sales and marketing focus on the overall education market. Many MSPs said they were not selling into that sector — another missed opportunity. Even their midsize brethren were leaving money on the table when it comes to serving higher education.
Are MSPs Just Selling to IT Managers or Engaging with Line of Business?
We’ll leave you with one last observation that addresses the heart of an ongoing debate in the IT industry. Some senior channel leaders believe tech budgets and influence have shifted to line-of-business managers. On the other of the debate are those who believe IT managers still hold the vast majority of the tech spend for products and services. Each side has a point with significant evidence to show that LOB professionals are worthwhile sales targets for tech spend. But midsize and large MSPs need to develop a better game plan to address line of business. Nearly half of the MSP 501 companies we spoke to said they did not have a line-of-business focus at the time of our survey. Those that did, however, are reaping rewards and new sales leads.