Managed Services Market and Where It’s Heading
The necessity for businesses of all sizes to implement technology in order to keep pace with their competitors is as important today as it’s ever been.
Whether it’s making use of digital marketing solutions, adopting an ERP to better manage a supply chain, or an MDM to help mitigate threats against mobile devices across an entire organization’s network, there’s no shortage of answers for modern-day problems.
The question for many organizations is how can they implement what they need in their business without breaking the bank?
The answer for a lot of companies is using the services of managed service providers. These are organizations that offer a suite of services typically at a set rate and with all costs built into the contract for which service is required.
Today, we’re going to be taking a look at managed services—where it’s heading as a model and whether they’re the right option for a modern business.
What Are Managed Services?
Managed service providers, or MSPs, offer a solution or set of solutions with the proviso that they will additionally assume the responsibility of maintaining and monitoring the offering.
The cost of maintaining it is usually built into the service agreement signed by the client business.
These offerings will often be broad. For example, here at Impact we offer network infrastructure management, branding and marketing, cybersecurity, print and document management, and process efficiency and business applications management.
The primary appeal of hiring a managed service provider is simplicity. They provide the expertise and solutions necessary to solve whichever technology pain point you may have and the service model ensures there are no unexpected costs that might otherwise be found in more traditional break-fix models of tech servicing.
Are Managed Services the Best Option for Businesses?
The question organizations want to know is; are managed service providers the best option for them? Do they provide good value and expertise for the variety of solutions they offer? Or is it better to use the services of several vendors that specialize in a particular service?
This is something that can be answered by examining the managed services industry as a whole and getting a good understanding of why exactly so many businesses are using the managed services model for their tech stacks.
While, for example, the break-fix model has traditionally been the go-to method for dealing with IT setups and the project-based model has been the go-to for areas like marketing; managed service approaches are more frequently looking like the better deal simply because of the amount of tech required to run a modern organization.
In the past, project-based or break-fix models made sense simply from a value perspective because of several reasons. Firstly, the necessity to hire someone to oversee a limited tech stack is lacking. Secondly, the costs of downtime didn’t outweigh the costs of around-the-clock IT maintenance—or any tech maintenance for that matter.
Simply put, the growth of technology within even small SMBs has risen exponentially over the last ten, or even five, years.
In 2019, there were 7.74 billion connected Internet of Things devices worldwide; roughly one device per human. By 2024, this figure is expected to have doubled to 14.76 billion.
Take the Internet of Things (IoT) as an example. In previous years, it was common for businesses to have employees’ PCs connected to the company network and little else.
The strong growth of IoT tech has completely upended this, with all kinds of devices (personal or company-owned) connected to business networks—phones, laptops, TVs, printers; the number of network-connected devices is higher than ever.
This increase in endpoints leads to an increase in attack vectors for cybercriminals—businesses are more at risk today than at any point in the past.
The same logic is applicable to a several other aspects of running business operations. The number of endpoints in a business means more work when it comes to their provisioning and management—particularly when dealing with remote workers.
With marketing, what businesses are expected to do today far exceeds what they’ve done in the past—site optimization; SEO; content marketing; email campaigns; paid ads—the list goes on a lot longer than it used to.
Of course, not all businesses can expand their IT departments or tech to meet these new and varying demands, nor hire an in-house marketing team for their digital marketing, so the answer for many has been MSPs.
What Are the Key Drivers of Increase MSP Usage in Business?
The combined worth of the global managed services market was an estimated $223 billion in 2020. This is expected to grow to $329 billion by 2025, a CAGR of 8.1%.
What are the key areas of concern that are fueling this growth?
Security is by far the biggest concern of companies today. Almost a third (29%) of MSPs state that “meeting security risks” as the foremost priority of their clients.
In today’s cybersecurity environment, businesses are concerned about safeguarding their data and an in-house IT department is often unable to handle the workload of such a task.
This is also one of the reasons managed security service providers (MSSP) have seen substantial growth in recent years, with 17% of all MSPs being focused on security alone.
For 77% of the MSP respondents in a Kaseya survey, 10 to 20% of their clients have experienced at least one cyberattack within the 12 months prior to the survey. This reflects the state of affairs before the pandemic took hold, which has itself led to a vast increase in security incidents over the last year.
Adoption of public cloud services is another key driver of MSP growth. Many solutions, like ERPs, are now cloud-based, and the need for businesses to migrate and host their data in the cloud has become a pressing concern for many.
Whether it’s infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), or software-as-a-service, cloud-based offerings are becoming the norm and organizations are increasingly opting for help from MSPs in order to implement and manage them.
After security concerns, cloud adoption and migration is the biggest MSP client need as reported by MSPs themselves.
New solutions and offerings have greatly improved what businesses can achieve with their IT operations.
The capability of a company’s IT operations is today often what sets them apart from their competitors. This is particularly the case when it comes to emerging tech, like low-code, which allows businesses to create apps for virtually any purpose relating to business operations.
Aside from that, the need for modern IT staff to manage remote workforce devices and be able to readily scale their solutions—a trend that is likely to continue to persist even after the pandemic has subsided—means that ensuring IT capability is of primary importance.
Managed Services Market Going Forward
There’s no doubt that increased MSP use among businesses in recent years has been driven by several key factors—security, cloud, and IT operations being the biggest. Will these factors continue to drive more MSP use?
The short answer is yes. As tech stacks become more comprehensive and difficult to manage by internal teams across all functions of business, the necessity to outsource management of these stacks will—and has—become more significant.
This is before making even further considerations. Compliance, for example, has risen in importance as existing legislation like HIPAA and new legislation such as CCPA and SHIELD make it into law.
Question of Value
The most important factor for organizations considering the use of an MSP will be one of value. In essence, is it worth it for a business to invest in MSP services or to keep whatever professional services model they are currently employing?
The answer to this naturally dependent on the specific organization, and though for the majority of companies there will be almost certainly be at least one service use of an MSP, there are circumstances in which it would not be appropriate for a company to use an MSP.
The best way for businesses to evaluate whether or not they should consider using an MSP is to have a business assessment conducted of their operations, be it marketing, IT, or security.
Related Post: What Happens During a Cybersecurity Risk Audit?
The increased use of MSPs by organizations today is a reflection of the complexity of business operations today.
Security, IT capability, cloud, and marketing concerns are core factors for companies to consider in 2021, and the number of solutions that comprise modern tech stacks require effective management from a well-staffed team—for many the best route to achieve this is by using the tech, talent, and experience MSPs have to offer.
As tech stacks grow and evolve in years to come, businesses will more frequently partner with MSPs in order to manage them, and the market’s growth as a whole will continue show this as it has done over the last five years.
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