8am UK time, 23rd May 2019 – To coincide with the second ever MSP Day, which celebrates the ongoing changes and challenges faced by the managed services industry, Barracuda MSP has today released its latest The Evolving Landscape of the MSP Business Report 2019.
This year we’ve turned our eye to the whole of Europe, proudly outing managed services as the leading revenue opportunity for the region – and it’s continuing to grow. That being said, customer misconception around managed services, which was highlighted in last year’s report, remains as rife as ever.
This year’s report was compiled from the findings of interviews of 50 qualified, predominantly C-level, decision makers from channel partner organisations that provide managed services throughout Europe. The result is a telling deep dive into channel partners’ perception of SMEs’ understanding of, and relationships with, managed IT services.
- Managed services is the number one revenue opportunity, bigger than all others combined. 54% of channel partners say it offers the greatest potential revenue; almost x4 times as many as the next largest response. The confidence in managed services market is increasing, as in 2018 managed services beat cloud computing and professional services by a margin of 4 to 3. In this year’s survey, it was 4 to 1.
- Managed services revenue is growing as a proportion of overall sales. Around half (52%) of respondents made more than 30% of their revenue from managed services in 2018, growing to two-thirds (66%) in 2019.
- MSPs are aware of the risk of customer switching. And while price and budget pressure are (unsurprisingly) major factors, the biggest reason customers cancel contracts is “being acquired by another company” (55%).
- Lack of internal IT skills is now the main catalyst for MSP demand. 69% of partners said customer skills shortages were the key driver for managed services uptake, while 61% cited cloud migration. This differs from 2018’s findings, where the desire to reduce capex and other costs (65%) was the top reason behind managed services use.
- Customer relationships remain key to managed services sales success. 86% believe this is a major opportunity in selling managed services; around two-thirds said the same about “overall security concerns” and “lack of in-house IT skills”, respectively.
- Customer misconceptions still undermine managed service offerings. This was identified as a barrier by the largest group of channel partners (89 percent). It also led the way last year.
Overall these findings paint a promising landscape when it comes to growth, understanding and adoption of managed services, albeit in the face of many barriers that are proving to fuel mistrust and frustrating misconceptions.
“Just as it was last year, a basic lack of understanding from customers, resulting in ill-informed expectations, remains the biggest thorn in the sides of managed service providers across Europe,” says Jason Howells, Director EMEA, Barracuda MSP. “It’s clearly up to us as an industry to do more to inform, educate and reassure those in the dark about our offering.”
“That being said, there is clearly much to celebrate with these findings,” continues Howells. “MSPs are showing a sustainable, dependable growth forecast with further opportunities on the horizon.”
“The findings show that the MSP market is thriving – albeit still with certain pressures. On the buying side, there is still an abiding problem with misconceptions on what to expect from managed services. The selling side are seemingly ill-prepared to deal with this,” says independent IT analyst Clive Longbottom.
“This is leading to higher rates of customer defection (either to competitors or with services being taken back in house) than should be the case. It’s apparent we’re now moving past the first stage of the MSP. Although shrink-wrapped, stand-alone services such as backup and restore are still popular, the savvy MSP is seeing that added value extra services offered to meet customers’ needs in an increasingly complex hybrid cloud world are becoming a necessity.”
To get involved in MSP Day 2019, follow us on @NationalMSPDay, join our LinkedIn group or sign up for the full report here: cuda.co/mspday