Professional Documents
Culture Documents
5 Annual
th
Trends in
Managed
Services
JUNE 2016
th
5
Annual
Trends
in
Managed
Services:
Section
1
1
SECTION 1:
Market
Overview & MSP
Demographics
Key
Points
Managed
services
comprises
the
second
most
popular
business
model
in
the
channel
today.
Three
in
10
respondents
ranked
managed
services
as
the
leading
generator
of
revenue
in
the
last
12
months,
second
to
the
44%
that
cited
IT
solutions
(e.g.
projects
with
elements
of
hardware,
software
and
services)
as
the
No.
1
revenue
source.
This
compares
against
a
list
of
12
other
potential
business
model
choices
including
VAR/reselling,
IT
support
and
help
desk
and
consulting
services.
The
market
is
also
maturing.
Forty-three
percent
of
MSPs
say
theyve
been
in
the
market
for
five
years
or
more,
with
another
45%
offering
these
services
between
two
and
five
years.
That
leaves
just
12%
of
MSPs
that
are
less
than
two
years
old.
Two
thirds
of
respondents
this
year
describe
themselves
as
a
skilled
expert
at
managed
services.
Thats
a
big
leap
from
CompTIAs
study
in
2012,
when
39%
of
MSPs
described
their
acumen
at
that
high
level.
And
theres
more
change
from
2012
when
52%
of
respondents
said
their
MSP
skills
were
competent
and
getting
better.
In
this
years
study,
that
number
dropped
to
33%,
reflecting
the
jump
in
MSPs
that
now
rate
themselves
full
experts
today.
Half
of
respondents
expect
the
managed
services
piece
of
their
business
to
undergo
high
growth
and
comprise
three
quarters
or
more
of
total
annual
revenue.
Another
45%
said
predicted
that
managed
services
dollars
are
increasing
and
will
make
up
half
or
more
of
total
revenue
within
the
next
two
years.
th
5
Annual
Trends
in
Managed
Services:
Section
1
2
The
MSP
market
is
also
consolidating,
especially
among
PSA,
RMM
and
BDR
software
vendors.
Consider
last
years
M&A
activity
alone:
SolarWinds
scooped
up
LogicNow,
Kaseya
bought
PSA
vendor
Vorex,
ConnectWise
completed
the
integration
of
its
own
PSA
arm
with
the
LabTech
RMM
division,
Autotask
acquired
CentraStage,
and
Continuum
bought
R1Soft
to
add
backup
to
its
products.
Individual
MSPs
also
are
merging,
as
evidenced
by
Carousel
Industries
purchase
in
June
of
fellow
Rhode-Island
MSP,
Atrion.
th
5
Annual
Trends
in
Managed
Services:
Section
1
3
th
5
Annual
Trends
in
Managed
Services:
Section
1
4
The
market
is
also
maturing.
Forty-three
percent
of
MSPs
say
theyve
been
in
the
market
for
five
years
or
more,
with
another
45%
offering
these
services
between
two
and
five
years.
That
leaves
just
12%
of
MSPs
that
are
less
than
two
years
old.
With
experience
often
comes
confidence,
and
that
quality
is
indeed
growing
among
todays
MSPs.
Two
thirds
of
respondents
this
year
describe
themselves
as
a
skilled
expert
at
managed
services.
Thats
a
big
leap
from
CompTIAs
study
in
2012,
when
39%
of
MSPs
described
their
acumen
at
that
high
level.
And
theres
more
change
from
2012
when
52%
of
respondents
said
their
MSP
skills
were
competent
and
getting
better.
In
this
years
study,
that
number
dropped
to
33%,
reflecting
the
jump
in
MSPs
that
now
rate
themselves
full
experts
today.
Despite
MSPs
buoyed
confidence
and
self-assessed
acumen,
their
transition
to
managed
services
has
been
a
slow
slog
over
the
past
decade.
While
largely
touted
as
a
channel
panacea
to
declining
hardware
sales,
a
full
pivot
to
managed
services
remains
a
target
th
5
Annual
Trends
in
Managed
Services:
Section
1
5
In
a
couple
areas
the
trending
data
has
changed,
however.
In
2012,
a
third
of
respondents
indicated
that
expanding
their
share
of
wallet
with
existing
customers
was
a
catalyst
for
them
to
pursue
an
MSP
practice.
This
year
that
percentage
climbed
to
nearly
6
in
10.
Thats
an
important
driver
because
the
managed
services
market,
despite
somewhat
slow
adoption
by
the
channel,
is
already
commoditizing.
This
is
mainly
due
to
a
raft
of
MSPs
competing
solely
on
price
in
order
to
secure
a
contract
closure
or
renewal.
One
of
the
only
ways
to
reap
more
dollars
from
those
customers
sold
undervalued
contracts
is
to
upsell
and
expand
the
number
of
services
that
they
are
consuming
especially
in
the
area
of
newer
technologies
such
as
cloud,
mobility,
big
data
and
Internet
of
Things.
This
past
year
also
saw
an
increase
in
the
number
of
respondents
that
said
the
desire
to
control
all
aspects
of
a
service
offering
was
driving
them
to
a
managed
services
model.
In
2012,
40%
of
MSPs
cited
this
reason;
today
its
climbed
to
53%.
In
a
cloud-based
world,
the
channel
is
beginning
to
view
itself
as
an
orchestrator
of
a
customers
entire
set
of
solutions
from
on-premises
infrastructure
to
cloud
offerings.
As
such,
they
are
angling
to
control
a
solutions
route
from
point
A
to
point
B,
procurement
to
onboarding
to
billing.
With
customers
on
recurring
revenue
contracts,
the
orchestration
role
is
more
of
a
natural
fit
than
it
is
in
a
traditional
reseller
scenario.
Expectations
for
managed
services
future
growth
run
high.
The
needle
is
already
trending
up,
as
recurring
revenue
is
becoming
a
larger
piece
of
the
services
pie
for
many
channel
firms.
Asked
to
breakdown
total
services
revenue
in
the
last
year,
respondents
attributed
57%
to
recurring
revenue
services
sales
compared
with
43%
from
non-
recurring
revenue
professional
services
engagements.
That
ratio
held
true
across
MSPs
of
all
sizes.
Over
the
next
two
years,
MSPs
are
clearly
expecting
that
gap
to
widen.
Half
of
respondents
expect
the
managed
services
piece
of
their
business
to
undergo
high
growth
and
comprise
three
quarters
or
more
of
total
annual
revenue.
Another
45%
said
predicted
that
managed
services
dollars
are
increasing
and
will
make
up
half
or
more
of
total
revenue
within
the
next
two
years.
What
gets
edged
out
as
managed
services
revenue
grows?
Product
sales
and
one-off
project
work,
not
surprisingly.
Roughly
a
third
of
respondents
said
these
two
business
lines
would
likely
decline
as
a
percentage
of
total
revenue.
One
outlier:
among
the
largest
channel
firms
just
14%
expect
a
drop
in
one-off
project
revenue
compared
with
a
third
of
small
and
medium
companies.
This
may
reflect
the
fact
that
larger
firms
can
afford
to
be
diversified
equally
across
a
number
of
business
streams,
without
having
one
totally
dominate.
th
5
Annual
Trends
in
Managed
Services:
Section
1
6
th
5
Annual
Trends
in
Managed
Services:
Section
1
7
SECTION 2:
MSP Internal
Operations
Key
Points
MSPs
are
feeling
a
lot
better
about
internal
operations
than
they
were
in
2012,
when
CompTIA
last
fielded
a
set
of
questions
on
this
topic.
In
fact,
the
data
show
a
dramatic
shift
in
self-assessment,
with
three
quarters
of
this
years
respondents
describing
the
overall
operational
efficiency
of
their
MSP
business
as
a
very
efficient/well-oiled
machine.
That
compares
to
a
third
reporting
that
same
level
of
confidence
four
years
ago.
On
average,
between
half
and
60%
said
they
were
optimally
efficient
across
such
functions
such
as
technical
processes,
sales
effectiveness,
MSP
pricing
structures
and
customer
retention.
On
average,
roughly
4
in
10
said
they
were
close
to
optimal
across
all
functions.
Respondents
were
least
confident
about
their
efficiency
in
maximizing
ROI
on
new
areas
such
as
cloud
computing
or
a
vertical
specialty.
More
than
4
in
10
respondents
said
they
have
operated
MSP
practices
for
more
than
five
years,
with
another
45%
having
done
so
for
between
two
and
four
years.
Conversely,
just
3%
of
respondents
reported
being
new
to
market,
with
less
than
a
year
under
their
belt.
Employee
retention
is
an
issue
for
MSPs.
Last
year
alone,
80%
of
MSP
respondents
said
they
have
had
one
or
more
technicians
jump
ship
to
work
for
an
internal
corporate
IT
department.
While
also
taxing
work,
internal
IT
in
many
circles
has
a
reputation
for
a
more
predictable
work
cadence,
which
could
be
a
major
reason
for
the
movement.
th
5
Annual
Trends
in
Managed
Services:
Section
2
2
th
5
Annual
Trends
in
Managed
Services:
Section
2
3
On
a
positive
note,
todays
MSPs
are
feeling
a
lot
better
about
internal
operations
than
they
were
in
2012,
when
CompTIA
last
fielded
a
set
of
questions
on
this
topic.
In
fact,
the
data
show
a
dramatic
shift
in
self-assessment,
with
three
quarters
of
this
years
respondents
describing
the
overall
operational
efficiency
of
their
MSP
business
as
a
very
efficient/well-oiled
machine.
That
compares
to
a
third
reporting
that
same
level
of
confidence
four
years
ago.
And
while
a
quarter
of
todays
respondents
took
a
more
tempered
view
of
their
business
operations,
deeming
them
efficient
in
some
areas
and
needing
work
in
others,
that
number
is
still
far
fewer
than
the
66%
majority
that
provided
the
work-in-progress
assessment
of
themselves
in
2012.
Why
is
operational
efficiency
so
important
to
an
MSP
business?
Clearly
its
important
to
any
business
type
in
any
industry,
but
unlike
other
channel
business
models
that
drive
revenue
by
maximizing
the
number
of
billable
project
and
break/fix
hours
that
staff
is
working,
the
MSP
model
ironically
reaps
more
when
doing
less.
Its
not
that
MSPs
are
lazy
in
fact
they
are
they
are
often
in
24/7
mode
--
but
that
remote
management
of
a
large
volume
of
customers
infrastructure
compels
automation
as
much
as
possible.
Inefficiency
in
such
an
environment
lack
of
automated
processes
and
no
uniform
approach
to
managing
multiple
customers
can
be
a
drain
on
the
bottom
line.
The
recent
boost
in
confidence
about
efficiency
likely
reflects
several
realities.
One,
todays
MSPs
have
simply
been
in
business
longer
and
with
that
comes
more
experience
coupled
with
trial
and
error.
Bottom
line?
The
committed
get
better
at
what
they
do.
More
than
4
in
10
respondents
said
they
have
operated
MSP
practices
for
more
than
five
years,
with
another
45%
having
done
so
for
between
two
and
four
years.
Conversely,
just
3%
of
respondents
reported
being
new
to
market,
with
less
than
a
year
under
their
belt.
Secondly,
its
important
to
note
that
the
majority
of
these
firms
did
not
start
out
offering
managed
services.
Most
are
resellers
or
solution
providers
that
decided
to
add
a
recurring
revenue
arm
to
their
business.
And
often
it
started
out
as
a
very
insignificant
piece
of
their
portfolio.
As
a
result,
the
MSP
piece
of
the
firm
may
not
have
gotten
the
full
attention,
resources
and
focus
necessary
to
achieve
well-
oiled
machine
status.
But
over
time,
as
managed
services
drove
a
larger
slice
of
sales,
closer
attention
to
operational
detail
got
paid.
Lastly,
as
MSPs
grow
in
size
and
complexity,
they
often
discover
that
they
need
third-party
help.
This
tends
to
trigger
evaluation
of
commercial
software
such
as
professional
services
automation
and
remote
monitoring
and
managements
platforms,
which
can
greatly
improve
internal
operational
performance.
While
very
few
smaller
MSPs
initially
deploy
these
tools
for
cost
reasons
or
simply
thinking
they
do
not
need
them,
as
they
move
upstream
in
size
their
objections
begin
to
fade.
Section
3
of
this
report
drills
down
in
detail
about
current
trends
in
MSP
adoption
and
use
of
commercial
PSA
and
RMM
platforms.
When
asked
to
self-assess
efficiency
across
the
individual
functions
performed
as
part
of
their
managed
services
business,
respondents
remain
balanced.
On
average,
between
half
and
60%
said
they
were
optimally
efficient
across
such
functions
such
as
technical
processes,
sales
effectiveness,
MSP
pricing
structures
and
customer
retention.
On
average,
roughly
4
in
10
said
they
were
close
to
optimal
across
all
functions.
If
there
is
one
place
to
single
out,
it
is
how
respondents
believe
they
are
maximizing
ROI
on
new
business
services
such
as
cloud
or
their
efforts
at
an
industry
vertical
specialty.
Forty-seven
percent
felt
they
are
performing
optimally
here,
the
least
positive
result
for
any
of
the
other
MSP
features
inquired
about.
Thats
not
surprisingly,
given
that
these
are
new
specialty
areas
for
many
MSPs
and
so
they
are
addressing
a
learning
curve.
th
5
Annual
Trends
in
Managed
Services:
Section
2
4
Operations
Challenges
Despite
the
fact
that
managed
service
is
a
well-established
discipline
in
many
corners
of
the
channel
and
a
familiar
part
of
the
industry
for
a
decade
or
longer,
many
firms
remain
in
transition.
And
with
transition
comes
an
array
of
challenges.
Many
of
the
hurdles
to
managed
services
adoption
involve
human
resources.
The
cost
of
retraining
both
on
the
technical
and
business
sides,
for
example,
along
with
employee
recruitment
and
restructuring
of
sales
compensation
plans.
The
latter
is
no
trivial
matter,
particularly
if
a
firms
sales
force
has
been
used
to
selling
products
and/or
project
work
and
paid
a
single
commission
based
on
a
total
sale.
They
grow
accustomed
to
large
checks,
though
commission
regularity
ebbs
and
flows
based
on
the
number
of
deals
they
land.
In
managed
services,
end
customers
on
contract
pay
smaller
amounts
on
a
recurring
basis
often
monthly.
MSPs
must
establish
a
comp
plan
that
somehow
accounts
for
this
incremental
and
predictable
receipt
of
revenue,
while
not
resulting
in
such
small
commission
checks
each
month
that
sales
reps
revolt.
To
avoid
that
scenario,
many
MSPs
will
pay
their
reps
upfront
commission
on
half
of
the
customers
contract,
then
pay
the
other
half
at
the
tail
end
of
the
contract.
Thats
just
one
model,
however.
th
5
Annual
Trends
in
Managed
Services:
Section
2
5
Across
the
board,
larger
MSPs
(100-1,000+
employees)
reported
being
less
challenged
by
many
of
the
activities
listed
above
than
much
smaller
firms
(2-9
employees).
This
could
be
a
pure
function
of
size
and
more
resources,
although
the
common
dictum
goes
that
smaller
companies
are
nimbler
and
able
to
shift
more
easily.
Recruiting
is
the
single
biggest
challenge
for
small
firms,
with
half
of
them
citing
it
as
a
major
hurdle,
compared
with
a
third
of
medium
and
large
MSPs.
Formulating
the
right
pricing
structure
was
also
an
acute
pain
point
for
smaller
firms.
Pricing
models
will
be
discussed
below
in
this
section.
Finally,
theres
the
matter
of
employee
retention.
Theres
a
harsh
reality
within
the
MSP
ranks:
the
job
can
be
fairly
grueling
if
youre
a
technician.
The
hours
are
long.
Remotely
monitoring
and
managing
hundreds
of
customers
on-premises
equipment,
along
with
those
workloads
they
have
in
the
cloud,
is
more
than
a
9-to-5
proposition.
The
need
to
meet
service
level
agreements
on
a
24/7
basis
only
ups
the
pressure.
Case
in
point:
Last
year
alone,
80%
of
MSP
respondents
said
they
have
had
one
or
more
technicians
jump
ship
to
work
for
an
internal
corporate
IT
department.
While
also
taxing
work,
internal
IT
in
many
circles
has
a
reputation
for
a
more
predictable
work
cadence,
which
could
be
a
major
reason
for
the
movement.
Another
potential
factor
behind
staff
attrition
hinges
on
the
fact
that
many
MSPs
are
not
pure
play
in
nature.
They
are
straddling
the
traditional
channel
business
models
of
products
and
project
work
and
the
recurring
revenue
models
of
managed
services
and
cloud.
This
can
muddy
the
roles
technicians
and
sales
staff
believe
they
play
within
the
organization
and
confuse
mission.
As
managed
services
becomes
a
priority,
its
more
likely
that
employees
will
be
able
to
move
with
a
singular
focus
and
culture
that
often
leads
to
more
work
satisfaction.
Now
continued
automation
progress
and
the
adoption
of
commercial
PSA
and
RMM
tools
do
help
alleviate
some
workplace
burnout.
And
those
mechanisms
free
up
network
technicians
to
work
on
more
strategic
projects
within
the
organization,
which
also
has
the
potential
to
elevate
job
satisfaction.
Finally,
most
MSP
employees
are
not
unhappy
in
their
current
jobs.
Seventy-seven
percent
of
respondents
report
the
average
tenure
of
their
current
staffers
at
between
three
and
10
years,
with
6%
claiming
an
average
tenure
of
10+
years.
Thats
veteran-status
in
the
MSP
world.
Its
important
to
note
that
there
is
an
art
vs.
science
approach
to
staffing
an
MSP
business.
Theres
no
ready-made,
universal
formula.
Items
to
consider?
What
is
the
optimal
ratio
of
technicians
to
customer
seats
monitored?
How
many
new
customers
whether
in
seats
or
as
percentage
increase
in
total
client
th
5
Annual
Trends
in
Managed
Services:
Section
2
6
base
--
does
it
take
to
prompt
a
new
tech
hire?
Figuring
out
these
things
out
takes
continual
tinkering,
influenced
by
the
types
of
services
an
MSP
offers
or
plans
to
offer,
particular
needs
of
the
customer
and
internal
budget
considerations.
The
data
found
an
even
distribution
of
MSPs
that
said
their
tech
to
customer
seat
ratio
was
either
one
tech
per
20
seats,
one
tech
per
30
seats,
or
one
tech
per
40
seats.
Twenty
percent
each
of
the
MSP
respondents
adhere
to
one
of
these
three
ratios.
Broken
down
by
company
size,
the
smallest
MSPs
were
most
likely
to
abide
by
the
1
to
30
ratio.
Twenty-eight
percent
of
them
staff
in
that
manner,
compared
to
19%
and
18%
of
medium
and
large
MSPs,
respectively.
How
many
new
customer
seats
trip
the
hiring
wire
to
add
a
new
technician?
The
sweet
spot
appears
to
be
the
addition
of
30
new
customer
seats,
a
threshold
that
was
cited
by
36%
of
respondents.
A
quarter
will
bring
a
new
staffer
even
sooner,
when
20
new
customers
seats
are
added.
There
is
a
population
of
MSPs
that
do
not
use
the
technician-to-customer
seat
ratio
method.
This
is
most
likely
a
function
of
how
they
charge
for
their
services
(e.g.
by
the
number
of
devices
managed
vs
customer
seats).
However,
the
sample
size
for
this
group
in
the
study
is
too
small
to
provide
definitive
guidance
on
what
percentage
of
new
customers
will
result
in
a
new
hire.
th
5
Annual
Trends
in
Managed
Services:
Section
2
7
SECTION 3:
Commercial
Software Tools
Usage
Key
Points
The
decision
to
use
commercial
software
to
help
run
a
managed
services
practice
confronts
most
MSPs
at
some
point,
especially
as
a
business
grows
and
scales.
For
years,
the
genre
has
been
defined
by
two
types
of
software:
professional
services
automation
(PSA)
and
remote
monitoring
and
management
(RMM)
tools.
But
now
it
also
includes
cloud
versions
of
these
tools,
along
with
business/disaster
recovery
software.
PSA
software
for
MSPs
is
analogous
to
back
office
ERP
or
CRM
platforms
for
end
user
companies.
The
software
allows
MSPs
to
manage
their
business
operations,
including
such
activities
as
resource
management,
automated
time
and
billing,
project
management,
report
generation
and
more.
Its
a
growing
market.
Grand
View
Research
forecasted
in
April
that
PSA-related
software
revenues
will
reach
about
$12.88
billion
by
2022,
up
from
$6.26
billion
in
2014.
Less
than
a
third
of
respondents
(27%)
said
buying
and
implementing
commercial
software
in
the
PSA/RMM
space
was
one
of
their
primary
priorities
when
they
first
started
out.
But
that
changes.
The
pattern
that
has
emerged
finds
as
MSPs
grow
and
add
customers,
headcount
and
services
offered,
they
begin
to
flock
to
these
software
tools
to
help
them
grapple
with
escalating
complexity
in
their
business.
Typically,
RMM
and
PSA
have
been
sold
as
separate
entities
to
the
MSP
community.
Thats
changing.
A
massive
wave
of
vendor
consolidation
in
both
markets
--
along
with
new
cloud-based
entrants
--
has
sparked
a
PSA-RMM
integration
trend.
th
5
Annual
Trends
in
Managed
Services:
Section
3
2
So
what
about
buying
and
implementing
commercial
software
in
the
PSA/RMM
space?
Ironically,
not
near
the
top
of
the
to-do
list
for
new-to-market
MSPs.
Less
than
a
third
of
respondents
(27%)
said
this
was
one
of
their
primary
priorities
when
they
first
started
out.
But
that
changes.
The
pattern
that
has
emerged
finds
as
MSPs
grow
and
add
customers,
headcount
and
services
offered,
they
begin
to
flock
to
these
software
tools
to
help
them
grapple
with
escalating
complexity
in
their
business.
And
there
are
myriad
reasons
to
seek
out
third
party
tools
that
span
internal
operational
needs
and
external,
customer-facing
value.
High
on
the
respondents
is
the
ability
to
resolve
problems
in
a
customers
IT
environments
swiftly.
One
of
the
hallmarks
of
a
skilled
MSP
is
the
ability
to
troubleshoot
before
an
IT
nuisance
because
a
real
business
problem
for
the
customer.
RMM
tools
are
critical
to
meeting
that
goal
if
an
MSP
has
grown
to
the
point
of
managing
significant
numbers
of
customer
seats.
th
5
Annual
Trends
in
Managed
Services:
Section
3
3
Beyond
using
the
software
for
a
system
of
IT-based
alerts
and
proactive
maintenance,
other
features
that
assist
an
MSP
with
their
own
business
functions.
The
main
catalyst
for
deploying
PSA
tools
cited
by
nearly
8
in
10
respondents
is
to
manage
internal
sales
and
marketing
systems.
The
same
percentage
also
cited
as
a
demand
driver
the
desire
to
automate
the
management
of
customer
billing,
which
today
is
becoming
even
more
of
a
priority
as
MSPs
become
the
orchestrator
of
services
such
as
SaaS
apps
that
are
residing
in
multiple
different
clouds.
For
now,
most
MSPs
are
working
with
an
RMM
or
PSA
platform
from
a
single
vendor
that
is
an
on-
premises
package.
But
as
vendors
such
as
Connectwise,
Kaseya
and
others
begin
to
offer
cloud-based
versions
of
their
products,
more
MSPs
will
begin
looking
at
this
as
an
option.
And
like
what
is
happening
across
the
rest
of
the
IT
industry,
upstart
cloud
players
are
mushrooming
in
the
RMM/PSA
space
that
will
serve
as
direct
competitors
to
the
more
established
players.
The
majority
of
MSP
respondents
that
are
using
one
of
the
commercial
software
solutions
on
the
market
professed
satisfaction
with
the
experience,
with
high
marks
going
for
ease
of
deployment,
length
of
rollout
time,
training
requirements
and
the
impact
on
customers.
In
all,
6
in
10
said
the
purchase
was
well
worth
the
investment
vs
just
2%
that
found
it
somewhat
disappointing.
For
those
firms
not
opting
against
either
platform
at
least
for
now
the
chief
reasons
cited
are
that
their
business
is
not
large
enough
to
need
(56%)
and
that
commercial
platforms
are
too
expensive
(50%).
th
5
Annual
Trends
in
Managed
Services:
Section
3
4
Somewhat
disappointing Overall MSPs reported
Well worth 2% high satisfaction with
investment commercial software
in the following areas:
59%
39% Ease of deployment
Length of rollout time
Training needs
Customer impact
Interoperability with
Mostly worth other systems
investment
th
5
Annual
Trends
in
Managed
Services:
Section
3
5
36%
26%
15%
15%
6%
10 new seats 20 new seats 30 new seats 40 new seats 50 new seats
Source: CompTIAs Trends in Managed Services 2016: Base: n=171 IT channel firms
th
5
Annual
Trends
in
Managed
Services:
Section
3
6
SECTION 4:
MSP Strategic
Planning
Key
Points
Nearly
two
thirds
of
MSPs
(62%)
said
that
cloud
computing
is
the
No.
1
item
keeping
them
awake
at
night,
a
percentage
evenly
distributed
across
MSPs
of
all
sizes.
A
number
of
reasons
are
in
play.
One
involves
customers
growing
comfort
with
cloud-based
applications
that
may
lead
to
more
self-
service
procurement,
obviating
the
need
for
a
third-party
MSP.
Today,
54%
of
MSPs
say
that
supporting
cloud-based
solutions
and
services
is
a
strategic
part
of
their
business.
Forty-four
percent
of
respondents
are
support
cloud
services
when
requested
by
the
customer.
And
just
3%
of
MSPs
say
that
cloud
services
are
not
part
of
their
managed
services
catalog
at
all.
Slightly
more
than
half
of
MSPs
worry
about
margin
erosion.
Slimming
margins
can
be
pinned
on
naturally
occurring
market
commoditization,
but
some
of
the
blame
can
be
placed
on
MSPs
themselves
as
they
continue
competing
with
one
another
strictly
on
pricing.
More
than
4
in
10
respondents
said
they
spent
time
with
their
individual
customers
on
a
monthly
basis
in
the
last
12
months.
This
was
not
to
deal
with
an
immediate
tech
concern.
A
third
of
MSPs
said
they
meet
exclusively
with
their
customers
senior
executives,
while
another
third
indicated
that
they
routinely
meet
with
both
the
senior
executives
and
IT
staff
of
their
clients.
Slightly
fewer
(28%)
said
the
meet
only
with
their
customers
IT
staff.
th
5
Annual
Trends
in
Managed
Services:
Section
4
2
th
5
Annual
Trends
in
Managed
Services:
Section
4
3
Additionally,
as
end
customers
move
more
infrastructure
and
applications
into
the
cloud,
some
of
the
basics
of
MSP
life
begins
to
change.
For
example,
historically
MSPs
remotely
manage
and
monitor
devices
and
solutions
that
are
on-site
at
the
customer
place
of
business.
And
many
MSPs
sell
the
actual
hardware
they
are
managing,
often
as
part
of
an
initial
infrastructure
upgrade
when
onboarding
a
new
client.
With
a
cloud
solutions
model,
that
hardware
revenue
particularly
from
server
sales
--
is
declining.
In
the
first
quarter
of
2016,
for
example,
Gartner
found
that
worldwide
server
revenue
declined
2.3
percent
year
over
year.
By
contrast,
shipments
grew
1.7
percent
from
the
first
quarter
of
2015.
That
trend
will
most
likely
continue
and
impact
MSPs
along
with
the
broader
channel.
MSPs
will
also
have
to
adapt
to
managing
IT
solutions
that
are
in
a
public
cloud,
as
well
as
private
clouds
and
on-premises.
But
while
this
presents
an
integration
and
management
challenge
to
many
MSPs,
the
complexity
of
these
new
IT
environments
brings
with
it
opportunity.
The
role
of
cloud
orchestrator
is
bandied
about
today
across
the
channel
and
it
is
very
real.
MSPs
that
are
able
to
serve
as
the
conduit
for
all
things
cloud
and
in-house
for
their
customers
are
positioning
themselves
as
indispensable
service
providers.
Add
a
flare
for
security
expertise
to
the
mix,
and
the
opportunity
for
them
grows
even
more.
Today,
54%
of
MSPs
say
that
supporting
cloud-based
solutions
and
services
is
a
strategic
part
of
their
business.
Thats
the
case
most
prominently
among
the
smallest
MSPs
(2-9
employees),
among
which
65%
position
cloud
services
support
as
a
strategic
piece
of
their
business.
Another
group
of
respondents
(44%)
are
getting
behind
cloud
services
support
when
requested
by
the
customer.
And
just
3%
of
MSPs
say
that
cloud
services
are
not
part
of
their
managed
services
catalog
at
all.
Among
other
items
weighing
on
the
minds
of
todays
MSPs
is
margin
erosion,
which
53%
of
respondents
cited
as
a
concern.
A
primary
culprit
behind
slimming
margins
is
commoditization,
a
natural
occurrence
in
any
maturing
market.
But
in
the
case
of
managed
services,
eroding
margins
are
not
all
due
to
natural
market
economics.
This
trend
can
also
be
blamed
in
part
on
the
MSP
community
itself.
Whats
going
on?
In
the
quest
to
win
customers
contracts,
many
MSPs
are
undervaluing
their
services
or
constructing
pricing
models
that
do
not
drive
maximum
profit.
Several
dangers
inherently
arise
when
pricing
is
artificially
low.
One,
its
difficult
for
an
MSP
to
elevate
prices
to
the
real
market
value
during
contract
renewal
because
customers
will
balk
at
a
major
increase.
And
secondly,
commoditization
and
margin
erosion
become
a
self-fulfilling
prophecy
as
competing
MSPs
drive
one
anothers
rates
down.
Priorities
and
Planning
Worries
aside,
MSPs
have
strategic
priorities
in
play
for
the
next
two
years.
No.
1
on
the
list?
Acquiring
net-new
customers,
a
goal
cited
as
major
by
nearly
two
thirds
of
respondents.
Historically,
the
customer
numbers
game
was
the
key
to
growth
in
a
managed
services
space
that
depends
upon
volume.
And
its
still
integral
to
success.
But
today
thats
changing
as
the
real
source
of
growth
lies
with
existing
customers
and
the
ability
to
grow
share
of
wallet
there
by
taking
them
beyond
service
catalog
basics
to
the
expanding
number
of
new,
complex
technologies.
MSPs
seem
to
be
getting
the
message
about
the
benefits
of
growing
share
of
wallet
with
existing
customers,
as
58%
expressed
that
as
a
major
strategic
priority
for
the
next
two
years.
And
another
57%
said
they
are
focusing
on
expanding
into
new,
emerging
services
such
as
Internet
of
Things.
These
moves
are
smart.
th
5
Annual
Trends
in
Managed
Services:
Section
4
4
A
combination
of
net-new
customer
growth
and
existing
customer
scale
is
the
right
balance
to
strike
to
help
ensure
steady
revenue
increases.
Two
other
strategic
priorities
look
outward
and
indicate
evolution.
More
than
half
of
respondents
plan
to
focus
on
specializing
in
one
or
more
vertical
industries.
Targeting
a
particular
vertical,
whether
its
healthcare,
retail,
professional
services
or
another,
is
a
keen
way
for
an
MSP
to
differentiate
in
the
market
with
a
set
of
skills
not
universally
held
by
their
broader
set
of
competitors.
The
most
popular
vertical
industries
that
todays
MSPs
are
working
with
are
information
technology,
professional
services,
manufacturing,
finance/banking,
and
retail.
Additionally,
another
half
of
respondents
plan
to
align
with
a
new
set
of
vendors.
This
most
likely
suggests
they
are
taking
a
look
at
cloud-based
vendors,
chiefly
SaaS
providers.
From
a
vendor
perspective,
this
is
a
key
development.
In
CompTIAs
5th
Annual
State
of
the
Channel
study,
published
in
September
2015,
a
majority
of
respondents
said
a
main
reason
they
would
drop
a
vendor
from
their
line
card
is
because
the
vendors
products
and/or
services
no
longer
fit
their
customers
needs
or
their
own
business
model.
This
reality
should
prompt
vendors
to
take
a
hard
look
at
what
does
appeal
to
both
of
these
constituents,
both
in
terms
of
what
they
sell,
but
also
how
they
construct
their
partner
programs,
benefits
and
channel
compensation
models.
th
5
Annual
Trends
in
Managed
Services:
Section
4
5
Many
partners
today,
especially
MSPs
and
cloud-focused
firms,
will
tell
you
that
they
are
no
longer
so
vendor-reliant,
and
instead
market
to
the
customer
strongly
under
their
own
brand
and
reputation.
Speaking
of
Customers
When
it
comes
to
strategic
planning,
MSPs
must
always
consider
the
customer
relationship.
Its
especially
important
in
a
managed
services
model
because
so
much
of
what
an
MSP
does
goes
unseen
by
the
end
user
client.
This
is
a
good
thing,
for
the
most
part,
but
being
too
invisible
can
work
against
a
provider
if
it
shields
the
customer
to
the
extent
of
work
being
done
or
how
well
SLA
terms
are
being
met.
For
that
reason,
its
key
to
conduct
regular
updates
and
meetings
with
customers
under
contract,
both
technical
and
business-focused
in
nature.
The
quarterly
business
review
(QBR)
is
typically
cited
as
standard
operating
procedure
for
MSP-to-
customer
interactions.
But
the
study
found
that
MSPs
are
taking
that
process
further.
More
than
4
in
10
respondents
said
they
spent
time
in
person
or
virtual
with
their
individual
customers
on
a
monthly
basis
in
the
last
12
months.
Whats
more,
these
interactions
were
not
to
deal
with
an
immediate
tech
concern.
MSPs
worth
their
salt
understand
that
cementing
a
long-term
relationship
with
a
customer
means
much
more
than
troubleshooting
tech
problems
in
real
time.
Its
critical
to
also
be
proactive
in
helping
that
customer
plan
for
future
needs
that
align
tech
with
the
business
goals.
th
5
Annual
Trends
in
Managed
Services:
Section
4
6
One
indicator
that
these
customer
discussions
are
more
strategic
in
nature
is
whos
attending
the
meeting.
A
third
of
MSPs
said
they
meet
exclusively
with
their
customers
senior
executives,
while
another
third
indicated
that
they
routinely
meet
with
both
the
senior
executives
and
IT
staff
of
their
clients.
Slightly
fewer
(28%)
said
the
meet
only
with
their
customers
IT
staff.
Smaller
MSPs
contained
their
interactions
to
IT
staff
more
prevalently
than
larger
MSPs,
with
38%
saying
thats
how
they
operate.
By
insisting
that
the
customer
review
process
brings
both
business
and
tech
executives
to
the
table,
MSPs
are
ensuring
their
place
as
a
strategic
advisor,
not
just
a
technical
provider.
th
5
Annual
Trends
in
Managed
Services:
Section
4
7