Managed services are the number one revenue opportunity, which offers the highest potential revenue according to a new Barracuda report.
To coincide with the second ever MSP Day, which celebrates the 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.
The report found that managed services were the number one revenue opportunity, bigger than all others combined. Fifty-four percent of channel partners say it offers the highest potential revenue. The report found that confidence in managed services market is increasing, as in 2018 managed services beat cloud computing and professional services by a margin of four to three In this year’s survey, it was four to one.
Managed services revenue is growing as a proportion of overall sales. Around half (52 percent) of respondents made more than 30 per cent of their revenue from managed services in 2018, growing to two-thirds (66 percent) in 2019.
The report found that MSPs are aware of the risk of customer switching. And while the price and budget pressure are (unsurprisingly) significant factors, the biggest reason customers cancel contracts is “being acquired by another company” (55 percent).
Lack of internal IT skills is now the primary catalyst for MSP demand. Sixty-nine percent of partners said customer skills shortages were the key driver for managed services uptake, while 61 percent cited cloud migration. This differs from 2018’s findings, where the desire to reduce CapEx and other costs (65 percent) was the top reason behind managed services use.
Customer relationships remain key to managed services sales success. Eighty-six percent 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 per cent). It also led the way last year.
Jason Howells, Director EMEA, Barracuda MSP said: “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. It is clearly up to us as an industry to do more to inform, educate and reassure those in the dark about our offering.”
“There is much to celebrate with these findings. MSPs are showing a sustainable, dependable growth forecast with further opportunities on the horizon.”
Independent IT analyst Clive Longbottom said the findings show that the MSP market is thriving – albeit still with specific pressures. On the buying side, there is still an abiding problem with misconceptions on what to expect from managed services. The selling side is ill-prepared to deal with this.
He said: “This is leading to higher rates of customer defection (either to competitors or with services being taken back in the house). 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.”
