Will the Managed Services Bubble Burst?
Talk about a timely reality check: Fred Knight, publisher of NoJitter, is asking the tough questions about the managed services market. In a recent column, Knight compares the managed services market to the real estate bubble. That’s a bit of a stretch and I don’t agree with all of his statements, but I think Knight has a point: The media and some research firms are over-hyping the managed services market.
According to Knight:
“If there were a CNBC for our industry, its reporters would be heralding managed/hosted services the way CNBC used to hype the never-to-end increase in real estate prices — or the stocks of AIG, Bear Stearns and more than a few others that have since tanked.”
Knight writes about the upside of managed services:
To be sure, managed and hosted services look attractive today because of the global credit crunch. Even enterprises that have access to capital may choose to preserve it, because the economic climate might get worse before it gets better. And there are a growing number of IT shops for which managed or hosted services is the only course available, due to edicts issued from on high that restrict capital expenditures or mandate that selected IT functions be jobbed out, outsourced or otherwise cut back.
But Knight also offers the following:
Managed/hosted solutions belong in everyone’s toolbox and, if our current economic conditions turn out to be the “new normal” for an extended period of time, they could become part of the permanent landscape. But a more likely scenario is that once economic stability returns, managed/hosted solutions will return to their historic levels.
Now for My Views
Regardless of the economy, I do think the managed service market will continue to grow five to 10 percent annually. But I do NOT think the rising MSP tide will lift all boats.
Thousands of managed service providers are growing and thriving. But we’ll see our share of MSP implosions as some companies fail to master the sales, marketing and financial obstacles ahead.