When it comes to the managed service provider (MSP) arena, there are five areas that are emerging to drive change as customer purchasing patterns in major sectors evolve.
CloudJumper, a workspace-as-a-service (WaaS) provider, has revealed five trends the company expects to see an increase in throughout 2018 that will modify the business landscape for MSPs in 2018. The supporting data behind these forecasts originates from discussions with many of the company’s 1,000+ IT service provider partners and research data from top IT research firms.
1. Growth in cloud computing: A recent report by IDC indicates that “Worldwide spending on public cloud services and infrastructure is forecast to reach $266 billion in 2021. The cloud computing market is expected to achieve a five-year compound annual growth rate (CAGR) of 21.0% and public cloud services spending will reach $128 billion in 2017, an increase of 25.4% over 2016.” The meteoric rise of cloud computing is altering purchasing decisions and changing how solutions are delivered through the channel. This shift is presenting challenges and providing opportunities to MSPs.
2. Migration from private to public cloud infrastructure: While private cloud environments deliver a type of cloud computing that is similar to public clouds, they also require sophisticated virtualization, technical automation, resource monitoring, and many other expensive resources. Compared to a private cloud, the most obvious benefit to using a public cloud is the savings. With a public cloud, organizations do not have to purchase, install, operate, or maintain servers or other equipment as they would with private clouds. As organizations seek to reduce their annual IT spend, public clouds offer a viable alternative that CloudJumper expects to grow significantly in 2018.
3. Increasing acquisitions related to the consolidation of tools that MSPs use to operate their businesses: A recent example of this is the acquisition of Datto by Autotask. However, MSPs can look forward to a rising number of acquisitions and mergers as key providers centralize important MSP enablement solutions under an integrated solution set.
4. Continued movement down market by Telcos and independent software vendors (ISVs) resulting in the erosion of MSP marketshare: Many telcos are actively trying to make use of their existing scale and IT savvy to move beyond basic voice and data services in order to begin selling a managed service. Additionally, ISVs seeking to expand software availability, delivery, and reach, are augmenting revenue with service-based business units. With managed services proving to be a profitable line of business for telcos and ISVs, established MSPs can expect to feel revenue pressures in the year ahead and beyond.
5. Increasing demand for secure IT infrastructure: 2017 includes string of high visibility malware attacks on a global scale that are of concern to companies that consider their IT environments critical to success. As a result, businesses will look to MSPs in 2018 to ensure that secure service infrastructure is in place before making their provider selection. Security is not only dependent on the security solutions in place but also on the overall IT environment and how it is set up to both defend and recover against such attacks. As such, MSP business models that take this into consideration will lead with a strong point of differentiation in 2018.
“The demand for managed services has never been higher, but service providers must keep an eye on emerging trends to avoid significant revenue drops caused by changes in the market,” said JD Helms, president, CloudJumper. “We invite MSPs interested in learning more about how these trends will impact their organization to contact our team for a portfolio review and strategies for bulletproofing and strengthening their businesses against such trends.”
According to ResearchandMarkets, the managed services market is expected to grow from $152.45 billion in 2017 to $257.84 billion by 2022, at a CAGR of 11.1%. IT budget constraints for installation and implementation of required hardware and software, limited IT support to manage and support managed services, and the need for greater scalability are major factors that are likely to drive the adoption of cloud managed services in the coming years. Additionally, the cloud-based deployment model offers greater agility than on-premises solutions.