Managed services have become dominant as the most profitable route for solution providers over the last decade, and new numbers from a Cisco-sponsored study conducted by Canalys show that the trend shows no signs of slowing down.
While IT spending is expected to grow at a 3.5 percent rate globally this year, managed services are lapping that several times, expected to come in at 12.7 percent. The Canalys report puts the value of the managed services market globally at $472 billion.
Closer to home, even a more mature market like Canada still sees managed services growth well above the IT average, with MSP revenue growth of 8.3 percent reported for last year, bringing the Canadian managed services market $10 billion (U.S.).
For many managed service providers, the challenge is where to invest, said Erin Gertner, vice president of the partner organization and SMB sales for Cisco Canada. But increasingly, cybersecurity is looking like the place to be with managed services. Finding the right people with the right skills for IT security is a challenge worldwide, and that can be magnified by the SMB nature of the Canadian market, where smaller companies struggle to attract, train, and retain talent.
“The great news is that partners are making that investment in managed security, and it’s taking some of that pressure off our customers to invest, which in turn gives our partners room to find the right people,” Gertner said.
But it’s not the only dimension in which customers are looking for held in the form of managed services. Among current opportunities, Gertner said that managed networking and collaboration are rapidly growing fields while pondering what the current universal fascination with artificial intelligence will mean in terms of the managed services of the future.
“As technology evolves and people are thinking through their AI strategy and their security strategy, it’s not necessarily something they want to handle in-house,” Gertner said. “That’s creating great demand in the midmarket and the lower end of the enterprise space.”
Customer demand for managed services continues to rise, but the approach is rapidly approaching ubiquity. While the study showed fewer than one in five solutions providers are true MSPs (defined as making half or more of their revenues from managed services), it notes that some 6,413 partners are delivering some managed services to customers in Canada this year. That represents most of the channel community at least dabbling in managed services.
“Partners who have invested are seeing growth. They’re very sticky with their customer base, and they want to be as holistic a provider as they can be” to their customers, Gertner said.
The survey notes that over 90 percent of managed service providers globally expect to post growth north of 10 percent.