CompTIA, a non-profit trade association that bills itself as “the voice of the world’s information technology (IT) industry,” has just released its Third Annual Trends in Managed Services study. What it has found is that managed services providers are navigating some choppy waters, with many customers unwilling to expand their engagements, in part due to uncertainty with regard to the cloud as well as resource-constrained MSPs.
“This time we focused on quantitative research that applies to the end user,” says Carolyn April, director of industry research for CompTIA. “By not looking only at MSPs, or at the channel, we could see what the market looks like.”
The results were not surprising in that 92 percent of end user organizations saw technology as being strategically important. Of greater interest perhaps was that the study confirmed that most end users were relying on small MSPs. Most MSPS – who typically collect recurring revenue from service level agreements (SLAs) for remote IT services such as desktop and network management, applications management, and remote help desk – have less than $1 million in revenue, with many having a mixed revenue model.
“Very few MSPs are pure play,” says April. “The challenge, given that most have a hybrid revenue model, is that they can’t commit to one business.”
The CompTIA study also found that many MSPs are having a hard time articulating value to end users. This despite the fact that end-users can pay MSPs out of their operational budgets, and don’t have to tap into capital budgets to buy on-premise infrastructure.
“Part of the challenge is that many companies are already satisfied with how their internal IT departments are managing things,” says April. “And security remains an issue, with some organizations reluctant to put things in the hands of a third party provider.”
That said, the CompTIA study references an August, 2013 report by Research and Markets that identifies managed mobility services as a sought-after managed service. This will be driven by the BYOD trend, and will support global managed services growth from $143 billion in 2013 to $256 billion in 2018.
“However, in our study the most surprising finding was that adoption rates were relatively tepid,” says April. “Nascent users with less than a year of managed services were at 11 percent in 2013, compared to 8 percent in 2011.”
CIO in the Driver’s Seat
With regard to decision drivers, it is clear that the CIO and other senior IT staff play a critical role – 48 percent of respondents said that they drove the move to a managed services contract, compared to 21 percent for committees of IT and non-IT executives. Only 28 percent said that the move was driven exclusively by IT.
“Adoption levels may have plateaued, but I see this as a glass half full scenario,” says April. “There is a lot of opportunity for MSPs to do a better job evangelizing, and also for the channel to get more involved.”
Part of the message is that 82 percent of end users with MSPs were “very” or “mostly” satisfied. Interestingly, those companies that underwent a reduction or elimination of in-house IT staff due to an MSP contract had the highest percentage of “very satisfied” responses. This is a problem that, if done right, can be articulated as an opportunity.
“You don’t need to dump your IT staff when you go with an MSP,” says April. “Using an MSP for email, remote monitoring of viruses, and other basic functions can actually be an opportunity to take IT staff off of mundane functions and have them focus on profitability goals.”
That may make sense when looking at the problem from the outside, but it can be a tough sell internally. Usually – and the CompTIA study confirmed this – external providers are brought in for specific tasks, such as repair/troubleshooting, deployments or challenging integrations, and specialty areas like web design. When the discussion shifts to taking over day-to-day functions, IT staff can get nervous. According to CompTIA, MSPs could be doing a better job getting the message out that IT is not the enemy.
“From that perspective, there is a size and resource factor with many MSPs,” says April. “They need help with marketing, and learning how to sell better.”
The CompTIA data should make that job easier. In the study, only seven percent of end-users felt that the transition to an MSP fell below expectations. Across the total respondent sample only six percent reported eliminating their entire IT staff with the advent of managed services, though reductions of between 19 percent and 34 percent were common. And, as in any discussion these days, the cloud is playing a disruptive role.
“A managed service provider can be an aggregator of cloud services,” says April. “But despite the fact that managed services can dovetail with many cloud offerings, it hasn’t been completely figured out yet.”
Of note, too, is that about eight out of ten organizations had to upgrade or standardize some of their equipment in order to accommodate an MSP set-up. That makes sense given their top priorities – full-time support (63 percent) and data security (61 percent) –as well as the fact that CompTIA found that the roles of MSPs are evolving toward becoming long-term, and more deeply embedded within their customers’ organizations.