denisismagilov -

MSP growth is good but security and automation are challenges

Research from SolarWinds MSP takes a look at what is happening to managed service players on both sides of the Atlantic

The managed service provider (MSP) market is strong and in a position to take advantage of myriad growth opportunities, according to research from SolarWinds MSP.

The firm has shared the findings of its 2019 Trends in managed services report, which looks at what is happening in the US and Europe.

The headline-grabbing disclosure was that almost all of those quizzed described themselves as offering some sort of managed service, underlining the momentum in the channel towards that business model.

The report quoted figures from Mordor Intelligence, which forecast that global managed services spending will climb from $173bn last year to more than $296bn by 2023. That translates into an estimated compound annual growth rate of just over 11%, which is higher than most sectors in the IT market.

“Our research has revealed that 97% of respondents offer some form of managed services, which is a clear demonstration of the managed services transformation remaking the technology channel. It’s safe to say the state of managed services is strong,” said John Pagliuca, president of SolarWinds MSP. “This latest research also underscores the major growth opportunities we’re already looking to help our MSPs leverage, including automation, security and operations.”

The findings showed that, on average, European MSPs picked up an average of three clients every two months, but lost more than one in the same period. The top causes for losing a contract were that the company either went out of business or was fired by the partner.

Although security is clearly one of the top concerns for customers and a major requirement from any MSP, there still appears to be some way for the European channel to go before players become fully confident in supplying certain services.

“Our research reveals that 97% of respondents offer some form of managed services, which is a clear demonstration of the managed services transformation remaking the technology channel. It’s safe to say the state of managed services is strong”
John Pagliuca, SolarWinds MSP

The SolarWinds MSP research found that European respondents were least comfortable with providing biometrics, cloud access security brokers and digital rights management. Beyond that, there was also resistance to penetration testing, auditing and compliance management, and risk assessments.

Although there is clearly growth in the market, not everyone felt they were in a position to exploit it, with European partners listing a lack of resources and time, sales and security threats as the biggest obstacles they faced.

Many are looking to automation to make life easier, but again there are skills issues around the technology, with a quarter expressing a lack of confidence in using those tools.

The report concluded with a confirmation that managed services remains one of the strongest growing parts of the channel, but cautioned about the need for further evolution

“Managed services customers will continue to demand more of their partners,” it stated. “The best of the best MSPs will be rewarded for infusing their practices with a greater number of high-touch, high-value services that do more than cover the IT basics. The long-term strategy for successful MSPs must include complex offerings purpose-built to address clients’ business problems and goals, solutions such as IoT [internet of things] infrastructure services, cloud-based big data and business analytics, and business process outsourcing.”

Speaking to MicroScope last week, the CEO of Kaseya, Fred Voccola, said there continued to be growth in the MSP market and net new entrants was still higher than those finding themselves the targets of consolidation or shuttering the business.

Key findings of SolarWinds MSP’s research

  • The average European channel partner gets 25% of gross revenue through managed services.
  • For businesses identifying as primarily MSPs, the average gross revenue derived from managed services exceeds 36%,
  • The average profit margin on a typical managed services contract in Europe is 21% to 25%.
  • European channel partners estimate the share of their gross coming from recurring revenue engagements to rise from 30% in 2018 to 34% in 2019.
  • More than 65% of channel partners say they will add more managed services offerings next year
  • Fewer than one in four partners (23%) feel their managed services skills are at expert level.

Next Steps

Partners bank on MSP cloud services

Read more on Managed IT Services