- The managed services market is expected to grow from USD 180.5 billion in 2018 to USD 282.0 billion by 2023, at a CAGR of 9.3% during the forecast period.*
- The global managed services market is expected to reach USD ~245 billion by the end of 2022 with 11% CAGR during forecast period 2016-2022.**
The world is witnessing a paradigm shift in terms of recent trends and technologies redefining the way business is done. The fact that business models face an extreme pressure from regulatory, macroeconomic and other critical market forces, have necessitated increased focus on operational efficiency and effectiveness.
But, this might make the businesses feel the burn on their revenue, capital and cost. As such, they are increasingly turning to managed services to address these obstacles to focus their time on activities more valuable to their business.
What are Managed Services?
A Managed Service Provider (MSP) bears the responsibility for the functionality of an organization’s IT services and infrastructure, so the business can focus on its core competencies.
Thus, in managed model, the MSP partner takes on, runs and transforms an organization’s business operations and processes to increase its productivity and operational efficiency.
The demand for managed services is largely driven by various factors, some of which include:
• Volatile, unpredictable macroeconomic environment.
• Increased pressure to innovate while keeping pace with technological advancements.
• Need to meet demands of regulatory compliance.
• Lack of internal and deep technical expertise.
But, the market is constantly evolving, bringing new trends and opportunities. MSPs must be aware of these trends to able to leverage maximum out of it. Here, we have listed top 7 managed services market trends that every MSP must be aware of in 2019:
Top 7 managed services market trends
1. Improved stake on security and growth in cyberattacks
The end clients of an MSP generally believe that the latter will take care of the security of their information and data. The previous year has seen an increase in the number of cyberattacks. This has forced companies to adopt a ‘security-first’ thinking.
MSPs, thus, put more efforts to secure service infrastructure of their end clients. It’s not only about having security solutions in place, but also to defend and recover against any attack. MSP business models which take this into consideration can lead with a strong differentiating point in 2019.
2. Cloud, automation and outsourcing
Bill Martorelli, principal analyst at Forrester Research talked about three trends at the NexGen 2018 Conference and Expo held in Anaheim California, that can impact MSPs.
Cloud: Cloud is increasingly being used to build new platforms for enhancing customer engagement to meet digital transformation needs of the enterprises. Application of multi-cloud environments is seeing a huge growth, wherein customers are relying on one cloud heavily, while using the other sporadically. Here, MSPs can avail the big opportunity by offering consumption-based pricing models.
Automation: The increasing amount of automation in IT environments can replace a substantial amount of work. MSPs can expect the workloads to decrease with every contract, as most of the operations become automated. Here, by including automation solutions in their key offerings, MSPs can make a competitive advantage.
Outsourcing: Martorelli identified outsourcing as the third factor that will impact MSP market. An increase in the outsourcing activities will result in MSPs reducing their dependence on traditional SLAs (Service-Level Agreements) and more on XLAs as termed by him. XLAs will focus more on customer and employee satisfaction than uptime.
NexGen 2018 was focused on managed services and MSP professionals.
3. Introduction of telcos and ISVs (Independent Software Vendors)
Telecom Service Providers or better known as telcos, are making use of their existing scale and IT savviness to shift beyond data services and voice to selling managed offerings.
They already work on the subscription model and hence, know a lot about it. As telcos enter the managed services space, the existing MSPs will feel the pressure to try new things to increase revenue the year ahead and beyond.
4. Emerging technologies like IoT and Blockchain
Emerging technologies like Internet of Things (IoT) can create big opportunities for MSPs. Per a report, the number of IoT devices that are active is expected to grow to 10 billion by 2020 and 22 billion by 2025.
Organizations need deep skill set and understanding to use these technologies. Competitive MSPs can identify this gap and gain substantial knowledge on these emerging technologies. It can help them to increase their value.
In the upcoming years, SMBs are also projected to adopt AI, virtual reality, augmented reality and other latest technologies.
5. Increased Mergers and Acquisitions
The market can see an increase in the mergers and acquisitions related to tools that MSPs use to operate their businesses. This is because competitive providers will like to hold all aspects of successful selling under one roof and offer an integrated solution set.
As a provider, if you’re not providing something that the customer wants, you are ultimately creating an opportunity for him to walk away. If you cannot build a skill set, you buy it. Hence, the market is seeing more M&As of security solutions, IPs and other important skills.
6. Growth in as-a-service technologies
There will be an increase in as-a-service technologies like infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), software-as-a-service (SaaS) etc.
Such technologies offer a number of advantages in terms of scalability, cost, security as they are on subscription based billing model. An MSP can assist an organization to switch to these services easily and manage them.
7. Demand for outcome based services
Enterprise clients now look towards result-based outcomes with pre-defined or expected standards. This is one of the reasons why customers are going with full stack service providers rather than single-tower services. To meet this trend, MSPs would need to evolve their style of management and functions they provide. They must be able to offer consulting services to their clients in terms of measurable results.
There’s no doubt that an opportunity comes only to those who are prepared. A lot of legwork is required to build a successful MSP practice. They have to perfect every process from initial assessment to signing contract to managing services. By staying updated on the trends, they can ensure that they will be ready to capitalize on it faster than their competitors.