Scale, the overlooked problem to MSP growth

THE 451 TAKE

The managed service provider (MSP) model is becoming the preferred route to market for nearly every type of business in the IT channel. Vendors, distributors, VARs, systems integrators and others are discovering that managed services are a growth engine for their organizations driving revenue and profitability.

451’s research into the market predicts that managed service revenue will exceed $80bn annually by 2022, up from $51bn today. With this high rate of growth, it is not surprising to see the market is exploding with increased competition. However, many organizations are quickly hitting a wall in their managed services growth. This is the same growth barrier that most managed IT service providers have been struggling to overcome for many years – scalability.

Scalability is a Focus for MSPs

Source - 451 Research’s Voice of the Service Provider: Budgets & Spending 2018, Workloads and Key Projects 2018

Attempting to address scale

of MSPs are increasing spending to address scaling capacity

Automation and agility are top priorities

of MSPs report that leveraging automation and improving the company’s agility are their most important goals for the next 12 months

Expertise is expensive

of MSP budgets are allocated to personnel costs, growing to over 30% within 12 months

Early adopters

of MSPs describe their organizations as early adopters on the leading edge when it comes to new technology

Business Impact

The most successful and profitable managed service providers have

shown that healthy growth is all about scaling

REDUCED COSTS AND HIGHER MARGINS

Service providers that can scale will see an upward trend in the average rate of return across their customer base as the average cost to deliver services declines. 

BRING NEW SERVICE OFFERINGS TO MARKET QUICKLY AND PROFITABLY

Benefit from standardization, automation, operational leverage and service modularization to produce services that deliver high margins and high value.

SERVICE QUALITY AND CONSISTENCY IMPROVEMENTS

Invest the time required to develop and refine processes to deliver quality, repeatable services to customers and optimize operational performance to maximize profits.

QUICKLY ADAPT TO CHANGING CUSTOMER DEMANDS

The ability to scale enables MSPs to adapt to changing customer dynamics without incurring disproportionately higher costs or increased complexity.

FLEXIBILITY TO GROW IN THE MIDST OF EXTERNAL PRESSURES

Develop the ability to move quickly and decisively in response to external forces without derailing the company from its goals and objectives.

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