The Ultimate Managed Services Research Report?

A comprehensive managed services research report just hit my desktop. It's from Techaisle. I'm not very familiar with Techaisle's history or research methods. However, the company claims they surveyed 6,827 small businesses to pinpoint managed services spending trends across the globe.

The following blog entry is one of my longest ever, and it's packed with data that may help MSPs develop their sales, marketing and business strategies for 2009. Take a look.

Please note that most of the info below is taken directly -- word for word -- from Techaisle's report. That data and perspectives belong to Techaisle. I plan to offer some analysis in the next few days.

Among Techaisle's findings: small business managed services spending will reach $5.4 billion in 2008, according to Techaisle. The data covers the US, United Kingdom, Australia, China, Brazil and India. In the US alone, small business managed services spending will hit $1.5 billion this year, Techaisle predicts.

Market Segments

  •  Nearly 30 percent of overall spending will be made by 20-49 employee size category making it the most lucrative target segment.
  • Over 3.7 million small businesses in the above six countries are currently using some form of remote managed services resulting in a 19 percent penetration.
  •  Small businesses, firms with 1-99 employees, are turning to managed services as one way to efficiently address their computing, networking, storage and security support needs and help reduce the total cost of ownership of their IT.
  • Traditional Infrastructure Managed Services are still typically done onsite (Notebook, Desktop, Network and Server), while  other categories such as Network Storage, VPN Management and Storage Backup and Recovery are showing higher penetration as Remote Managed Services.
  • Network and server related managed services account for highest level of spending while desktop and notebook managed services account for over US$1.0 Billion in spending. Storage and Security services taken together including VPN management exceed US$2.9 billion in spending.

Why Small Businesses Want Managed Services

The top three reasons for using Managed Services are underscored with a closer look at the IT staffing situation for small businesses in the six markets surveyed.
  • Focus on Core Business: Is enabled by not having to hire an IT staff and deal with operational distractions not core to the business.
  • Keep Costs Under Control: Is achieved by not having to hire an IT staff and make capital outlays for IT Assets.
  • Reduce Business and IT Risk: Is accomplished by being able to hand off complex problems to specialists working with an SLA to solve critical issues quickly.
However, small businesses are generally unable to differentiate between “IT outsourcing” and “managed services”. These small businesses often ask, “What is being managed and how can it help me?”

Contracts and Service Level Agreements

Both Small Businesses and service providers still evaluating contractual models, according to the report.
  • Approximately 20 percent of the small businesses in mature markets (US, UK, Australia) that use managed services have a contracted relationship with their providers.
  • In contrast, in emerging markets of Brazil, China, India only about 10 percent of those using managed services have a contract. The presence of contract increases with size of business.
  • The study also found that average contract term is one year but varies with type of service. For certain types of services such as PC management “usage based contracts” are favored.

Top Services

The US market is fundamentally different from other markets in that nearly half of spending is driven by businesses with greater than 20 employees while in the UK majority of UK spending is coming from 20-49 employee category, the report says.

Across other markets, small businesses with fewer than 5 employees drive majority of the spend. Within various types of managed services:
  • Server Management is the most important in all markets, followed by Network Management and Network Storage resulting in the first tier of services.
  • This is followed by Notebook and Firewall, after which there is less of a  clear pattern, although VPN and ID Management tend to be at the lowest level.
  • For  Remote Managed Services the survey found that although the Australian market is slightly different, but mostly VPN, Backup and Recovery and Antivirus are the three  most important categories in the first tier. In the second tier of remote management, Network Storage and WAN are important, followed by PC and Firewall management.

How Small Businesses Choose MSPs

When asked the most important criteria for service provider selection, the survey found that selection criteria varies by size of small business and type of service.
  • Businesses with less than 10 employees are more concerned about positive referrals, performance based fees and responsiveness while greater than 10 employee businesses are more concerned about technical competence and responsiveness.
  • Informally, they all agree and would like their service provider to be within driving distance.
  • A high percentage of businesses, still being unsure about the services, prefer a “Combination Approach”, that is, remote management augmented by onsite support.
That's a lot of information to digest. And frankly, I'm still digesting it myself. But it's good to see more managed services data coming into the market, especially as MSPs formulate their business and marketing strategies for 2009.
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