Managed Services Growing, but still Work to be Done: Study

There are still challenges around implementing and executing around a managed services business model, but even a decade after managed services became a common concept, the model continues to grow.

According to a new study on Trends in Managed Services Operations from industry group CompTIA, half of all channel firms provided managed services in 2012, up from 40 per cent in 2011. And those ranks are set to continue to swell, with “nearly two thirds” of those surveyed saying they intend to begin offering “some level of managed services” over the course of 2013.

And while it’s no an all-or-nothing affair (“The incidence of pure play MSPs is pretty low,” notes CompTIA’s Carolyn April), managed services are a growing part of the mix for many of those solution provides. According to the study, two thirds of channel companies see managed services making up an increasing portion of their revenues over the next five years, and 17 per cent of those surveyed expect managed services to represent more than three quarters of their revenues over that same time frame.

The company notes that the “typical” managed service provider is a hybrid – mixing managed services into their existing products and solution business, gaining the benefits of managed services recurring revenues to add to their existing project revenues.

But when profitability on managed services can be so much higher than margins on hardware, why the slow-but-steady approach to introducing managed services into the mix? According to CompTIA, finances and staffing issues are the big reasons many solution providers tread slowly.

“It’s difficult from a financial perspective to make a big turn like this overnight,” said April, in a prepared statement. “They have to keep that part of the business that’s paying the bills running while they slowly phase in managed services.”

And this no surprise to anyone who’s ever started making a journey towards managed services, but the study notes that companies continue to struggle to how to compensate sales staff for managed services sales. CompTIA notes that “there is no industry consensus on how to compensate sales staff,” and says that many MSPs choose to issue small commission cheques every month that represent that month’s managed services revenues, while others pay a share of the total contract value at the time the contract closes.

The cloud question remains something of a limiter to entry into the managed services field – among those who are not offering managed services, CompTIA notes that 40 per cent say they are “waiting to see the impact cloud computing has on the managed services market,” and opinions remain sharply varied on what (if any) impact the move towards the cloud is going to have for MSPs.

There’s good news and bad news for the existing MSP in CompTIA’s study. While more solution providers are looking to break into the market, some of the tried and true challenges (the ones you’ve likely already tackled head-on and defeated, right?) remain roadblocks in their path. As a solution provider already invested in managed services, you’ve already developed the policies, procedures, systems, and expertise needed to seamlessly offer managed services to your customers, and to do so in a profitable way.

So what remains for the existing MSP is the opportunity to continue to grow your existing managed services business while these would-be peers are still putting together their offerings. You can refine, perfect, and automate your processes while these newcomers are still inventing theirs. You can focus on growing your business through better sales processes and marketing strategies while these newcomers are still defining themselves.

And we here at MSP Help Desk will do everything we can to help you accomplish those goals. All the best for a successful, prosperous, and well-managed 2013!