In our rapidly evolving digital landscape, organizations face countless challenges, from thwarting increasingly sophisticated cyber criminals, to meeting ambitious sustainability targets, to adapting to new ways of working. To stay competitive in the face of scarce IT skills, more companies are leveraging managed services delivered by an evolving ecosystem of partners. And as customers look to simplify and manage increasingly complex technological needs, they also demand measurable business impacts from their IT investments.
In response to all these factors, the popularity of partner managed services is higher than ever. Recent research from Canalys, a leading global market research and analysis firm specializing in the technology industry, makes this clear. According to their findings:
- While total IT spending is forecast to grow 3.5% globally in 2023, managed services is predicted to grow 12.7%!
- 89% of partners surveyed expect their managed services revenue to grow in 2023. A full 56% expect it to grow by more than 10%.
- 35% of partners that sell managed services expect over 20% growth in their managed services revenue in 2023. That number is up from 27% in November 2022.
Paradoxically, confidence around managed services has increased amidst plenty of global challenges. You already know about them: rising inflation and interest rates, geopolitical instability, and climate change, to name a few.
A case for adoption of partner managed services
The three main forces behind the adoption of partner managed services are: 1) budget concerns, 2) customer acquisition challenges, and 3) talent/skills gaps. Here’s what I mean:
- Inflation and economic uncertainty translate into more budget scrutiny and lower risk tolerance.
- Customers’ needs and expectations continue to grow. Their IT investments are increasingly focused on outcomes and experiences. As a result, technologies applied within an organization need to show ROI as strategic operational expenditures.
- And when it comes to the IT workforce, IT remains a perennial challenge as the demand for skilled professionals with sufficient knowledge and experience in emerging technologies outweighs the supply. Without the ability to hire digital skills in-house, organizations lack the agility they need to compete.
The power of the Managed Service Provider
Enter the Managed Services Provider, or MSP. These are partners delivering managed services where these services account for more than 50 percent of the company’s revenues, according to Canalys’ definition. These MSPs address all three pain points outlined above. They allow the customer to access the skills they require, applying operational expenses to achieve valuable business outcomes.
To dig a little deeper into the Canalys research, here are the key trends partners are centering on:
- Flexible business models that can adapt to customer needs and market changes.
- Managed services help partners diversify and differentiate. And if you want to succeed these days, you need to specialize!
- Collaborating with other partners to solve customer challenges.
- An increased pace in moving to recurring revenue models.
Details of these managed services trends vary by region and country, but partners worldwide are looking for new ways to differentiate their services and demonstrate value to their customers.
For partners, the accelerating adoption of managed services reflects the times and represents unprecedented opportunity. Canalys outlined the biggest global growth areas for MSPs as:
- Cybersecurity and cyber-resilience. In response to evolving threats, we’ll see growth in networking and endpoint management along with a rise in detection and response. Demand for compliance will also expand due to new regulations.
- In a move toward increased specialization, areas of focus include data analytics and AI to optimize processes and systems, making services more predictive and proactive.
- Cloud solutions. Hybrid, migration and cost control.
- Delivering Everything as-a-Service, or XaaS (including software, infrastructure, and data centers as-a-Service, to name a few).
What should you take away from these findings? Here are the top takeaways from Canalys’ global research on partner managed services in 2023:
- Economic realities continue to put customer budgets under pressure, and they are looking for more flexible ways to consume IT while demanding these investments show ROI.
- The shift to managed services is picking up speed and MSPs will play an increasingly important role as strategic IT advisors and implementors to customers.
- To succeed, MSPs need to specialize to stand out in the marketplace and meet customers’ complex needs.
- Partners are collaborating more to deliver co-managed services.
MSPs in the Age of the Partner
What does this all add up to? First, it demonstrates that in this Age of the Partner, managed services are being built for today’s changing world. It’s an elegant and nimble solution we can all benefit from—partners, vendors, and customers alike.
The second is that we should be encouraged—and excited—by what we’re seeing. Because this is about something even bigger. We’re witnessing a convergence of forces that is driving a wave of growth in partner managed services.
And third, the robustness of managed services is another example of innovation playing out in the marketplace and the role of adversity in catalyzing progress. Evolution doesn’t happen in the absence of pressure. As Plato put it, “our need will be the real creator.”
You haven’t heard the last word on this! Naturally we’re seeing variation at the regional/country level since customer needs and budgets vary widely. Watch for more specifics on the Canalys research coming from my colleagues in different regions and join us at Partner Summit 2023 to hear more about how we’re empowering partners to #GoManaged.
We’d love to hear what you think. Ask a Question, Comment Below, and Stay Connected with #CiscoPartners on social!