SMB 500 Investing Heavily in Managed Services

The heat from SolarWinds’ acquisition of N-able hasn't cooled and likely won’t as Autotask and LabTech Software partners gather next week for their respective confabs. Much will be talked about regarding SolarWind’s move, but what MSPs should be talking about is what comes next in managed services.

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Ingram Micro SMB 500SolarWinds set the managed services world on fire last week when it acquired N-able Technologies for $120 million. Many observers saw it as a game-changer: It consolidates N-able’s SMB technology with SolarWinds’ enterprise portfolio. It's not the only game-changer in managed services,though, and the change is mostly being driven by managed services providers themselves.

Buzz over the deal hasn’t dissipated. Bloggers and gadflies speculate over the significance of SolarWinds buying into the remote monitoring and management (RMM) segment, and what impact the acquisition will have on the managed services community. Chances are this chatter will continue next week when LabTech Software and Autotask Corp.'s Autotask Live communities gather in Orlando and Scottsdale, Ariz., respectively.

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Rather than looking at the SolarWinds entry reflectively, perhaps it’s time for MSPs to look to what they’re going to do for themselves in the rapidly changing technology marketplace. The entry of another competitor isn’t really material; what matters is where MSPs are placing their investments.

Research conducted by The 2112 Group and Ingram Micro for our joint SMB 500 program reveals managed services is the dominant business model and product offering by solution providers servicing the low-end of the market (businesses under 100 seats). Eight out of 10 of SMB 500 companies offer managed services as a primary business model.

There’s little wonder why: 2112 research finds managed services produces higher and more consistent revenue and profit than any other channel business model.

>> CHECK OUT: 2112's Profitability in the Channel report

But all is not well in the managed services community. According to 2112’s review of the SMB 500's projected growth, managed services will expand at a slightly lower rate than traditional value-added resellers (VARs). The projected growth change over the next three years has MSPs lagging traditional VARs by as much as 16 percent.

The good news: SMB 500 companies see managed services as the best opportunity for growth, bar none. Nearly six out of 10 say managed services have the best sales opportunity for their businesses over the next three years. No other technology product or service -- including security, networking, virtualization, storage or cloud computing -- has the same growth potential.

Moreover, SMB 500 companies are placing bets on managed services. Managed services development is skyrocketing over all other technology products and services, as three-quarters of SMB 500 companies say that’s where there are growth investments. Only security and storage come close to this level of investment, and they’re lagging by 20 percent and 25 percent, respectively.

It’s little wonder why SolarWinds is buying into the SMB RMM marketplace -- it's a growth segment. And it’s little wonder why companies such as LabTech Software, Continuum LLC, Autotask and Level Platforms Inc. see such potential for growth: The market demand and growth potential seems limitless.

The real question for MSPs isn’t so much about the moves their RMM and PSA vendors will make, or if further consolidation will happen, but rather what they will do to facilitate growth. The channel is seeing a convergence between managed and cloud services, and MSPs are being called on to manage hosted and cloud-based assets. More capabilities are being added to the managed services capabilities set, and its becoming easier to facilitate security, storage, endpoints, mobility and business applications.

It was said managed services would revolutionize the channel with scalable automation, predictable revenue and endless profits. Not only has that future materialized, it will continue. The caveat: MSPs must invest in expanding their capabilities beyond traditional RMM and PSA suppliers.

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