CompTIA: MSPs Optimistic About Growth, But Hung Up on Meaningful Change
At face value, the MSP business gains detailed in CompTIA’s 5th Annual Trends in Managed Services report (available to the organization’s premier members) are notably positive, with three out of 10 MSP firms reporting that services were their leading revenue generator over the past year.
Business-growth expectations were equally optimistic, with half of all MSPs surveyed expecting high revenue growth over the next two years — with services accounting for 75 percent or more of total revenue. Digging deeper, however, MSPs also report eroding margins, worry about the role of cloud in their businesses and, that new types of business services – such as cloud orchestration or analytics – are absent from their portfolios.
Report author Carolyn April, senior director, industry analysis at CompTIA, noted cause for optimism in the report, released Wednesday, particularly when compared to a similar 2013 report that looked at MSP businesses.
“MSPs are accepting their own capabilities at a very high level and that’s quite different from when we did the last study when MSPs considered themselves ‘competent but getting there,'” she told Channel Partners.
By contrast, more two-thirds of MSPs in this year’s report consider themselves at an expert level. This might be, in part, due to a maturing market. Forty-three percent of MSP respondents have been in the market for more than five years, with another 45 percent offering services for between two and five years.
The report surveyed 400 U.S. MSPs during March 2016. It covers four areas: market overview and MSP demographics; MSP internal operations; commercial software tools usage; and MSP strategic planning.{ad}
Peering into the services portfolio of the partners surveyed, the offerings are basic table stakes, i.e., security (firewall management), server management, storage, network management and monitoring, desktop management, business continuity and disaster recovery, backup as a service, software (patch) management, database management, help desk, email, virtual desktop and managed print services.
While these basic managed services keep MSPs in business, automation is driving down margins.
“It’s time for MSPs who really want to grow their business[es] to get into more advanced managed services and they could do this with their existing customer base,” advised April.
Any services that have to do with cloud would be considered …
{vpipagebreak}
… emerging services, i.e. cloud orchestration, managing the cloud infrastructure or managing cloud applications. Additionally, MSPs should out consider expanding their services portfolio with data analytics management and IoT.
Given that lack of cloud services offered by MSPs in the CompTIA survey, it’s no surprise to learn that cloud is what keeps MSPs up at night, not yet having figured how to add value to cloud offerings.
Still, more than half (54 percent) of MSPs reported offering cloud-based solutions and services as a strategic part of their businesses, while a surprising 44 percent only offer cloud solutions and services if requested by the customer.
It’s also worth pointing out that today, most MSP respondents’ annual business revenue also comes from IT project work or product sales.
Bottom line: MSPs can’t tread water if they want to grow their businesses. They have to add cloud and other new services and offer them to existing and new customers, specialize and/or delve into vertical markets as well as modernize their marketing message.