High growth forecast for key managed services
Many key elements of the global managed services market are forecast1 to grow at double-digit rates. For example, Mobile (MDM) and BYOD managed services are expected to grow at around 27% per year through 2016. Private cloud services – where a service provider offers managed co-location or dedicated instances – are expected to grow at 22%. Public cloud services, as a whole, seems to be growing at around 17 to 18%, but within that, SaaS is growing at 19.5%, managed security services at 22%, and systems infrastructure and IT Ops management at over 40%. One of the fastest growth areas is office suites in the cloud, which is approaching a growth rate of 50% per annum. All of these represent significant opportunities for MSPs to support their small and medium size business (SMB) clients’ cloud migration plans and their IT service deployment, management, mobile computing and security needs.
Good news for MSPs
In fact, increased managed services and cloud services spending by SMBs will fuel much of the demand for the wide variety of services MSPs provide. According to the latest research from Markets and Markets2, the annual growth of the SMB managed services market will exceed 20% over the next five years. Furthermore, AMI-Partners3 forecasts that SMBs will spend $140B on cloud services in 2014 growing to $285B by 2019, an average growth rate of over 15% a year. Therefore despite estimates that overall SMB IT spending will grow only in the low single digits, SMB spending on cloud and managed services will account for an increasing portion of SMB IT budgets and will grow at a much faster clip.
Adoption of cloud and managed services drive changes in customer requirementsM
The overall growth in the managed services market represents a significant opportunity for MSPs but it’s important to note that customer requirements are also evolving – and quite quickly. Customers of cloud services are benefiting from lower costs, greater agility, and better service availability. Recognizing these benefits, they have become more willing to accept standardized managed service approaches and to transfer more responsibility for elements of their infrastructure to their trusted MSP partners. Most have already migrated from limited break/fix-type contracts to more comprehensive offsite monitoring services. And while some would prefer the assurance of having service provider staff onsite, the savings realized by using offsite staff are quite significant. The high growth of both cloud and managed services indicates recognition that IT, in all its manifestations, is becoming more complex. There’s an increasing willingness to outsource more infrastructure management responsibilities; some to cloud providers who provide commoditized “whatever” as a service (XaaS), and some to hosters and MSPs who deliver customized or specialized service solutions geared towards meeting specific SLAs and customer key performance indicators (e.g. high availability with critical app response time guarantees).
Changing customer attitudes foster acceptance of a broader set of services
MSPs are now able to successfully offer more comprehensive services without the traditional push-backs about outsourcing IT and loss of control. Pay-as-you-use pricing, standardized interfaces and features, lack of infrastructure to support, agility and rapid time-to-value, are together outweighing concerns about security and performance. Freeing up internal resources to work on innovation and development, while employing MSPs to maintain the IT infrastructure, is more often seen as a competitive advantage. The net result is that MSP customers want simpler IT solutions and are contracting with service providers to manage away the complexity.
Bundled services increasingly popular
Another important change is that SMBs are increasingly interested in bundled services. Many want to further reduce complexity by doing business with fewer suppliers and by minimizing payment and support management costs. In fact, bundled services are perceived as having a much higher value than discrete services – a preference for Plat du Jour versus Chinese menu pricing strategies – as it were.
This fact was highlighted recently by AMI-Partners. They asked SMB companies about interest in bundled and integrated cloud services. The results mirror the situation with consumers of telephone, Internet and cable TV services. SMBs prefer the idea of bundled services over single services by a significant margin, depending on the nature of the service. For SaaS services, the ratio is four to one in favor of bundled services. For Infrastructure as a Service, the ratio is over three to one.
Pricing MSP services for growth and profitability
These topics and much more are discussed in detail in our webinar Pricing MSP Services for Growth and Profitability. The webinar highlights the results of the Kaseya 2014 MSP Pricing Survey which was completed in September 2014.
- Forbes: Gartner Predicts Infrastructure Services Will Accelerate Cloud Computing Growth
- Market and Markets, Managed Services Market – Market Forecast and Analysis
- AMI-Partners I-Signal
Author: Ray Wright