IT and Business Insights for SMB Solution Providers

2019 State of the Channel Survey: Managed Services in the Majority at Last: Page 3 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.

Many of the same people making more money, however, are spending more too, specifically on people. U.S. unemployment rates for IT occupations are barely above zero at present, and that low supply of talent coupled with high demand is driving salaries up. That means the roughly 48 percent of survey respondents who plan to add employees in 2019, not to mention the additional 48 percent forecasting flat headcount, have more generous job offers and fatter paychecks in their future.

Indeed, 43 percent of readers expect to pay their technicians more this year (versus 35 percent in 2018), 39 percent expect to pay their salespeople more (versus 32 percent a year ago), and 28 percent expect to pay their office staff more (versus 26 percent).


Cooper, who has hired four people in the last three months alone, is among the many channel pros resigned to the inevitability of higher labor costs. “It’s harder to find the people you want,” he observes, adding that paying more to attract and retain them is the inescapable corollary.

Channel Convergence Rolls On

One way channel pros appear to be offsetting overhead increases is adding new services, including those that IT providers haven’t traditionally emphasized. Among respondents,  40 percent offer video surveillance systems, for example, and another 16 percent plan to in the future. Similarly, 34 percent offer access control systems and 23 percent provide alarm systems, with another 15 percent in both categories planning to join them in the future.

Cooper, whose firm serves several of those markets, found his way into them gradually. “We started out with an SMB package for businesses, just to handle their technology, and then we kept adding to it,” he says. “We’re getting into digital signage and managed access control and managed security, the whole thing now.”

According to I Divide By Zero’s Peters, moreover, the trend toward wider service rosters reflects increased demand among customers for one-stop technology shopping. “It’s really convenient,” he notes. “You don’t have to deal with so many different vendors to get something done.”

The accelerating convergence of formerly separate channels is a factor too. With voice and print providers increasingly adding managed IT services, more and more channel pros are responding in kind. Some 49 percent of readers we polled have a telco offering already, for example, and another 14 percent plan to add one. A more modest 29 percent deliver printer or managed print services, and 13 percent expect to enter that market in time.

Big Adoption, Small Margins in the Cloud

Not surprisingly, substantially larger portions of our readership have a cloud computing practice. In fact, about 55 percent offer cloud consulting and deployment services at present, and another 22 percent say they will in the future. Moreover, 52 percent of poll respondents sell Office 365 licensing right now and 42 percent provide email hosting.

Few of those channel pros are making lots of money in the cloud, however. In fact, 43 percent of participants in our survey make less than 10 percent of their revenue from cloud offerings, and fully 78 percent make less than 25 percent. Though 57 percent foresee cloud services accounting for a greater share of revenue this year, 39 percent predict no change.

Channel pros aren’t exactly enthusiastic about cloud margins either. About 42 percent of those we polled called margins on cloud consulting average, though 37 percent expect that to improve this year. Approximately 36 percent, meanwhile, labeled margins on Office 365 downright low, and 40 percent don’t see that getting better in 2019.

Yet there’s plenty of upside potential in the cloud for IT providers willing to grab it. For example, just 25 and 32 percent of survey participants, respectively, include platform as a service and infrastructure as a service among their offerings today. And even smaller numbers play in higher-margin cloud segments like cloud application development (20 percent), cloud CRM solutions (17 percent), and online ERP services (11 percent). Comparably low percentages plan to enter those markets in the future, too.

About the Author

Rich Freeman's picture

Rich Freeman is ChannelPro's Executive Editor

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