Managed Services: What We Learned In 2019

We at Impact like to keep our fingers on the pulse of the managed services industry. What’s up, what’s down, and what’s taken us by surprise.

The industry has changed significantly since the days when break/fix dominated IT service.

Today, the number of devices and apps that carry out functions within virtually any given office far outweighs previous years.

Because of this, the demands of businesses—small and midsize organizations in particular—have increased. There’s simply a lot more to look after to keep your house in order in 2019.

Break/fix is on the way out, and managed services are on the way up, which means a lot of change and disruption.

In light of this, and with the new decade looming, we’ve decided to take a look at the trends that are shaping our industry to see where we’re headed and what the biggest industry players are.

Market Size

The market for managed services has increased enormously in just a few short years.

An industry that was worth just $24 billion in 2009 is now worth $193 billion in 2019. Predictions indicate this figure will continue to rise to $320 billion in 2024—a huge increase over a period of only 10 years.

Related Post: Does Your Business Need a Managed IT Service Provider?

This growth has primarily been driven by a greater desire from small and midsize businesses to make use of managed services, as well as greater ease of access for SMBs to utilize MSPs.

A variety of factors has prompted this shift towards managed services. First, there’s the increased reliance among organizations on complex technology stacks.

These are often difficult for SMBs to curate, and so hiring an MSP that puts months and years into vetting the solutions they offer has become an attractive proposition.

Solution stacks cover a variety of areas that are crucial to modern businesses. Notably; cybersecurity, process optimization, cloud and IT infrastructure services, and marketing.

managed service industry growth chart

Businesses are adopting managed services in large numbers because of these reasons, and it’s no surprise that spending on tech is increasing and adoption of modern tech along with it.

2019 has been a big year for the managed services industry, and we expect to see the size of the market continue along its upward trend as we head into 2020.

From now until 2025, the industry is anticipated to expand at a CAGR of 11.7%.

More Emphasis on Cybersecurity

Managed cybersecurity has taken the entire managed services industry by storm in 2019.

This is largely due to a massive increase in the number of endpoints (and vulnerabilities) that exist in any given modern business.

The benefits of the Internet of Things has captured the attention of decision makers across virtually every industry, to such an extent that by next year, more than half of new businesses will rely on IoT tech for operations to function properly.

In tandem with more and more companies adopting BYOD (bring your own device) policies, there’s a lot more devices under network in 2019 than ever before.

To be more accurate, there were 15.4 billion IoT connected devices in 2015—today there are 26.6 billion and that number is expected to hit 30.7 billion in 2020.

What this means for businesses is an unprecedented amount of entry points for cybercriminals to attack.

43 percent of cyberattacks graphic

Given that cyberattacks are the fastest-growing crime in the US and breaches are larger, more costly, and more sophisticated, SMBs are understandably concerned about their security.

To secure their data, they are seeking out managed security service providers (MSSPs) to safeguard their networks and give them the protections they need in today’s environment.

With cyberattacks increasing, 78% of small and midsize businesses plan to invest more in security in 2020, and a huge 77% of SMBs expect at least half their cybersecurity needs to be outsourced within the next five years.

Cloud Technology Taking Over

Cloud adoption has been increasing at a rapid rate this decade. Consistent with most technology services, public cloud use in particular has been on a steady but substantial rise.

From $182.4 billion last year, to $214.3 billion this year, and an expected rise to $249.8 billion in 2020, the upward trajectory is clear.

The reasons for SMBs utilizing cloud tech more frequently in 2019 are varied, but typically owe to three prevailing factors:

  • Flexibility: The added means to implement solutions at their own pace, as dictated by their roadmap for digital transformation
  • Scalability: SMBs need to be agile in their business operations, and cloud services mean they can upgrade or downgrade their services practically at will 
  • Capability: Cloud solutions are more extensive than they’ve ever been—whether your business is in manufacturing or hospitality, there’s a solution that can benefit your organization

Cloud services have seen a stark rise as a result of these benefits, and flexibility from offerings like hybrid solutions have seen cloud use skyrocket.

2019 saw cloud adoption hit record levels, with an estimated 94% of businesses using at least one service within their organization. 83% of workloads will be fully in the cloud by next year.

cloud adoption SMBs graphic

Internet of Things and Bring Your Own Device

As we mentioned previously, IoT devices and BYOD policies within SMBs has meant an enormous increase in the amount of devices that operate under modern networks.

Increased dependency on IoT devices—whether it’s communication or workflow processing—has seen the market soar.

With a CAGR of 24.7%, estimates indicate that the global market for IoT tech, valued at $190B in 2018, will be worth a massive $1.1T by 2026.

While the estimated worth of the market is huge, the signs within the managed services industry have been pointing to this trend for a few years now.

The number of IoT devices in use today is expected to increase to 75 billion in just five years’ time—that’s an increase of 145.6%. That’s a lot more devices to manage.

Learn More: What is the Internet of Things? (IoT)

“Bring your own device”, or BYOD, has added to this need for management, with many SMBs lacking resources instead encouraging employees to bring in their own devices to work with under the company network.

61% of organizations expect employees to be available remotely, despite the fact that only 39% of companies have a formal BYOD policy in place

What this effectively means for managed service providers is a growing demand for tech stacks that comprehensively manage endpoints—mobile device management is now a vital service for businesses.

For an indication of how important mobile devices have become in 2019, look no further than the Industrial Internet of Things (IIoT) and Industry 4.0, which have collectively revolutionized work processes in the manufacturing business.

Managed service providers will have to continue offering quality solutions for mobile devices to keep up with the ever-increasing number of devices and high demand as we head into 2020.

Process Optimization Driven by Software-as-a-Service Apps

Digital transformation is, at its heart, an exercise in optimization. The essential goal is to quicken processes that need streamlining and cut processes that are redundant.

Software-as-a-Service (SaaS) may be an industry that has existed since the late 1990s, but only in the last few years has the industry exploded.

The total market value of SaaS was $80B in 2018, $95B in 2019, and by 2020 expected to increase by a similar level to $111B.

The large investments we’ve seen in cloud SaaS apps this year are largely as a result of the rapid surge of essential apps that many SMBs today rely on for their process optimization.

saas revenue chart 2019

Using off-the-shelf, turnkey solutions appears to be a thing of the past, with the vast majority of organizations instead opting to subscribe to SaaS apps.

Just under three-quarters (73%) of enterprises will run almost entirely on SaaS apps by 2020. This is a huge jump from just two years ago, when that same figure read 38%.

As more businesses look to bolster their process optimization plans in their digital strategies, we can certainly expect record numbers of companies opting to make extensive use of SaaS apps to meet their needs for streamlined work processes.

Managed Marketing on the Up

Marketing is one of the most commonly outsourced responsibilities for SMBs.

It ranks behind only accounting (37%) and IT services (37%) as the most popular managed service for small and midsize businesses, with 34% of organizations seeking outside help to get their message out.

Related Post: 5 Reasons You May Need Managed Marketing Services

Much like security, SMBs lack confidence and expertise and it’s not uncommon for businesses to be unsatisfied with their marketing efforts.

In 2018, just 37.5% of marketing decision makers felt their strategies were successful.

Furthermore, the marketing landscape has shifted, and in 2019 it is a practical necessity for businesses to have fully staffed teams to execute complex inbound and outbound marketing plans.

With just under two-thirds (61%) of CMOs expecting their budgets to increase in 2020, there is a clear appetite to continue investing in marketing.

And so SMBs are turning to managed service providers for their marketing, primarily to take advantage of some of the key benefits that come with hiring a provider, namely:

  • Skilled and experienced experts: Partnering with a managed marketing service means gaining access to an extensive roster of talented professionals for a fraction of what it would cost to hire them in-house
  • Enterprise-level tools: MSPs have access to the best tools in the business, like SEMRush, Hootsuite, or Ahrefs to name a few
  •  Budget-conscious planning: A managed service partner will fully cost your strategy so that it’s in-line with your budget, whether it’s tight or forgiving. This of course means decision makers can feel a certain degree of ease knowing they won’t go over an agreed budget

As We Head Into 2020…

In 2019, we’ve seen almost every managed service increase its market, as small and midsize businesses begin to see the value in outsourcing aspects of their organization.

The real question for MSPs and businesses is which services will prove to be the most significant as we head into the new decade.

The indications suggest that cybersecurity is the preeminent concern for SMBs, with frequent, costly attacks needing to be mitigated as comprehensively as possible.

Managed IT, cloud services, and process optimization all continue to show strong growth, largely driven by things like cloud migration and automation, which will keep on having a big effect on business processes in 2020.

Impact is one of the leading independent managed service providers in the country. We’ve been in the business of helping SMBs realize their goals for 20 years, and we will continue to do so for many years.

The wealth of expertise we have at Impact is one of the many reasons our thought-leadership blog is recognized as one of the Top 25 Digital Transformation blogs by Feedspot.

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