Managed Services Continues to Grow

A new CompTIA study finds managed services is growing in the number of providers and the revenue it generates. Over the next five years, managed services will become the dominant revenue source for most solution providers.

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A new CompTIA study finds managed services is growing in channel density and generated revenue, reflecting an unrelenting growth curve that is projected to last through the end of the decade.

The Trends in Managed Services Operations study, released last week, finds one-half of solution providers say managed services is either exclusively or part of their product portfolio. The distribution is up 10 percent from the previous year’s study.

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Additionally, managed services accounts for more than three-quarters of the revenue of 17 percent of solution providers, and two-thirds see managed services as an increasingly important revenue source. However, the CompTIA study finds relatively low numbers of “pure-play” managed services providers.

“The managed services model is becoming more commonly practiced across the channel and generating demand among end users,” said Carolyn April, director, industry analysis, CompTIA. “It’s a steadily growing market that is not going away despite some uncertainty.”

The uncertainty comes from the economics underlying the managed services model and the impact of cloud computing on their business model.

The CompTIA findings are consistent with experiences expressed by solution providers and research conducted by The 2112 Group, publisher of Channelnomics. The forthcoming 2112 Channel Revenue and Profit report finds managed services are the most lucrative revenue source for solution providers, making the model highly attractive to newcomers and those expanding their businesses.

Yet, as the CompTIA study confirmed, many solution providers are risk adverse when it comes to managed services. Investment costs and the protracted returns of the fractionalized revenue model – fees paid on a monthly schedule – create a significant barrier to entry for many solution providers.

Surprisingly, solution providers tell CompTIA of difficulties in hiring. Staffing is a significant problem in cloud computing as the number of qualified technicians, managers and salespeople are low while demand is high. Managed services, which is far more mature, is suffering from the same challenge, the CompTIA study finds.

The CompTIA study finds that many solution providers offering managed services are taking a wait-and-see approach to cloud computing; rather than adopting cloud products, they want to see how the market shakes out before making a commitment. While this appears prudent, it could prove fatal.

Research conducted by 2112 and CA Technologies finds the general IT marketplace is transitioning at an increasingly faster pace, led by enterprises seeking new capabilities, followed by service providers (telecom) and service providers seeking to capitalize on new opportunities. The IT channel, this study finds, is approximately three years behind the cloud computing adoption curve.

Managed services could prove a gateway to cloud computing, as the two models share many attributes. Already, managed services tools vendors, such as Level Platforms, Continuum and Kaseya, are offering extensions that allow MSPs to manage cloud assets. Additionally, many remote monitoring and management vendors are working with software vendors to extend cloud application delivery through MSPs.

The CompTIA study concludes the channel will not sit out the services era, as two-thirds will offer some form of managed service before the end of 2013.


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