The spate of mergers and acquisitions in the IT managed services space over the past few years may have changed the market, but it hasn't reduced the growing competition in the space. While some companies are using M&A to grow in size and market share, reducing the number of older MSPs that you have to compete with, there are always others that are just entering the managed services market. Just take a look at CompTIA's most recent report on the state of the MSP market. Here are the details.
More IT channel companies are saying they provide managed services, according to CompTIA's report. Last year four in 10 companies said they offered some managed services to customers. This year's survey of 400 channel companies showed that half of them offer managed services either exclusively or as part of a larger business portfolio. And there's more to come. Nearly two-thirds of those surveyed say they plan to begin offering some level of managed services within the year. Among channel companies not offering managed services, four in 10 say they are waiting to see the impact that cloud computing has on the managed services market before they make their moves.
The BreakdownA full 17 percent of companies expect their managed services business to account for 75 percent or more of their total revenue over the next five years. And just under two-thirds of firms see managed services as an escalating share of overall revenue during that time, according to CompTIA.
“The managed services model is becoming more commonly practiced across the channel and generating demand among end users,” said Carolyn April, director, industry analysis at CompTIA, in a prepared statement. “It’s a steadily growing market that is not going away despite some uncertainty.”
But don't expect these newcomers to jump in with both feet. CompTIA says that most IT channel companies that are adding managed services are opting for a hybrid model of both managed services and their more traditional value-added reseller model.
“The incidence of pure play MSPs is pretty low,” April said. “It’s still an added practice as part of an overall business. Many, if not most, MSPs continue to sell hardware and other infrastructure to their customers, do the implementation and only then take over management of said devices under a managed services contract.”
The cautious hybrid approach helps with the growing pains caused by financial and staffing issues that come with a full-fledged switch in business model.
“It’s difficult from a financial perspective to make a big turn like this overnight,” said April “They have to keep that part of the business that’s paying the bills running while they slowly phase in managed services.”
Plus, many companies are still struggling to figure out the sales compensation for managed services. CompTIA notes that lack of industry consensus on how to compensate sales staff follows the differences in business model between managed services and traditional resale. CompTIA says that some companies are choosing to issue small commission checks every month for their managed services sales staff while others are providing a percentage of the total contract at the time the contract closes.
Looking for another perspective on this info? Check out The VAR Guy's take on this study.