IT and Business Insights for SMB Solution Providers

2019 State of the Channel Survey: Managed Services in the Majority at Last: Page 2 of 4

There’s plenty of upside ahead for both mature markets like managed services and up-and-coming ones like cybersecurity and the Internet of Things, according to our latest channel opinion study. By Rich Freeman
Reader ROI: 
THOUGH IT FEELS LIKE MSPs are yesterday’s news, this is the first year more respondents offer managed services than break-fix.
MANAGED ENDPOINT and network providers are adding more as-a-service offerings and venturing into fields like telco and print.
LARGE PORTIONS OF THE CHANNEL offer cloud solutions, but much smaller numbers are making serious money from them.
MOMENTUM FOR THE INTERNET OF THINGS is building fast, as is demand for security services.

A Rosy Picture for Managed Services

It’s no great mystery why managed services remains an up-and-comer among channel pros. It pays better than pretty much anything else they do. Indeed, nearly 35 percent of respondents to this year’s poll say managed services deliver high margins. By contrast, none of the 34 other offerings we asked about is deemed a high-margin business by even 30 percent of survey participants, and only about 20 percent of channel pros say break-fix offers high margins.

Moreover, MSPs are buoyant about the future as well. Just under 49 percent of them expect profits on managed services to improve this year, according to our data. Once again, nothing else on the extensive list of offerings we inquired about even comes close to that high-water mark.

And it’s not just channel pros who are bullish on managed services. Gartner, which expects global IT spending to increase 3 percent this year to $3.8 trillion, predicts that IT service outlays will outpace that growth, rising nearly 5 percent to a little more than $1 trillion.

“It’s a rosy picture,” Weaver says. “The data is all showing one thing, which is there’s more money being spent year over year on IT services, but specifically managed services.” Weaver, in fact, suspects that anyone betting the future of their business on break-fix is in for trouble. “Nobody’s really buying break-fix that much anymore,” he says. “Customer’s just don’t want it.”

That may be why approximately 57 percent of the people ChannelPro surveyed say that offering managed services versus break-fix alone has a positive effect on competitive advantage. Christopher Peters, owner of I Divide By Zero Technical Services, an MSP and integrator in Arlington Heights, Ill., is among them. Business owners like knowing there’s someone continually working to keep the devices and services they count on up and running.

“It makes things easier in their lives,” he says. “They don’t have to worry about it.”

That logic has SMBs paying for more and more technology on an as-a-service basis, and MSPs branching out beyond managed endpoints and networks in response. Already, 52 percent of channel pros offer managed security, a little over half offer subscription-priced VoIP or unified communications services, and about 33 percent provide disaster recovery as a service. Furthermore, 37 percent of participants in our poll expect margins on managed security to grow this year, and 26 percent say the same about VoIP and DRaaS.

Upbeat Projections for IT as a Whole

That’s not the only growth channel pros are anticipating, according to our data. About 67 percent of them forecast higher IT spending overall by their clients in 2019. In addition, 58 percent expect that trend to translate into higher revenue, 57 percent believe they’ll collect higher profits, and 41 percent project an increase in their personal income.

Our readers see good things ahead for everyone, in fact. About 53 percent of them foresee somewhat or much better market conditions this year for the economy as a whole, and 60 percent predict better conditions for the channel in aggregate. Those figures are down from roughly 58 percent and 67 percent, respectively, in our last State of the Channel poll, but remain solidly optimistic.

This year’s upbeat projections come on the heels of what appears to have been a lucrative 2018 for many channel pros, including Dale Cooper, president and CEO of Xact Communications, a provider of IT and telecom services based in Lexington, Ky. “Business was good,” he says, noting that the company’s top line grew 25 percent last year. Cooper’s no exception either. Just over 42 percent of survey participants saw revenue climb in 2018 and about 39 percent recorded higher profits.

About the Author

Rich Freeman's picture

Rich Freeman is ChannelPro's Executive Editor

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