Businesses that provide managed technology services to customers have expectations of high revenue growth over the next two years, yet remain plagued by ongoing market concerns.
Despite the optimism, continuing worries remain around the role of MSPs in a market increasingly dominated by cloud computing solutions and by a persistent problem with employee retention.
“The level of confidence among MSPs in how they are running their businesses is quite high,” said CompTIA Senior Director, Carolyn April, following new research from the nonprofit association for the technology industry.
“Two-thirds of the companies we surveyed consider themselves to be skilled experts at managed services.”
April said some of this confidence is due to market maturity, with nearly 90 per cent of companies offering technology services for two years or more.
“Revenue growth is also a contributing factor,” explained April, with three out of 10 companies citing its services business as the leading revenue generator over the past year.
In addition, April said half of all MSPs surveyed expect high revenue growth over the next two years, with services accounting for 75 per cent or more of total revenue.
But bullishness on future business is tempered by worries about margin erosion.
“Just over half of the firms cite margin erosions as a factor that keeps them awake at night,” April added.
“Naturally occurring market commoditisation accounts for a portion of slimming margins, but some of the blame also falls on MSPs themselves, many of whom continue to compete with one another solely on pricing.”
Topping the list of things that keep MSPs awake at night is cloud computing, cited by 62 per cent of companies.
“They still haven’t figured out whether the cloud is a good thing or a bad thing,” April added.
“They fear that customers will simply bypass them and look to cloud providers for their basic needs.”
April said 54 per cent of MSPs offer cloud-based solutions and services as a strategic part of the business, while 44 per cent only support cloud services when request by a customer.
“Many companies are missing out on big opportunities to be “cloud orchestrators” for their customers,” April said.
“Just as they remotely managed on premise devices and applications, they can manage what a customer has in the cloud. It’s a natural spot for an MSP.”
Going forward, April said MSPs must also act to stem the persistent problem of employee churn.
“A majority of firms say in the past year they’ve lost at least one staff technician to an end-user organisation’s IT staff,” April added.
“Employees who leave are usually seeking more stable hours, better pay or a job that’s more challenging than simply monitoring and waiting for an alarm bell to go off. It’s a problem that MSPs will have to address.”