To MSP or not to MSP, that is the question.

There's a simple answer to the question of outsourcing, says Billy MacInnes

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As questions go, it’s not quite as existential as Hamlet’s more famous one, but it is quite important to the livelihoods of many channel partners.

There’s no denying that vendors and others have been urging resellers to go down the managed services route for quite a few years now. The arguments in favour are well-known and becoming increasingly attractive in this age of cloud computing and the recurring revenue, subscription and services based model.

Delivery of a particular component on the technology stack on an as-a-service basis has led to a proliferation of managed services partners to support that strategy. Today, MSPs can provide a range of IT components on an as-a-service basis, such as back up, security, storage and infrastructure.

It’s definitely catching on. According to recent estimates from Canalys, managed services are expected to generate worldwide revenues of $488 billion (€440 billion) in 2023. While North America accounts for almost half of all revenue (45.5%), EMEA has reached just under 30%. That means EMEA is expected to achieve revenues of just under $146 billion from managed services this year. That’s a lot of money.

Perhaps equally interesting is the number of partners actively engaged in the MSP space. According to Canalys, only 24.4% of MSPs globally are in the North American market which suggests they are making a lot more money from those services proportionately than MSPs in other parts of the world. In fact, when you consider that 44.3% of partners are in EMEA, the difference in revenues per MSP between EMEA and North America would appear to be very large indeed.

But wherever you are in the market, there news is pretty good for everyone. In a LinkedIn post, Canalys chief analyst for Channels, Partnerships and Ecosystems Jay McBain notes that globally “82% of customers outsource some or all of their IT” so it’s definitely a trend that’s showing no signs of slowing.

Managed services seem to be growing everywhere. While managed services were mainly confined to North America 15-20 years ago, they have grown steadily in other markets. But revenues haven’t exactly kept pace with that growth. Or rather, while there may be more partners, the fact revenues in areas where managed services have grown outside North America are quite a lot lower suggests a lot of the deals may be too.

There’s also the issue of how heavily committed partners are to the MSP model. In his blog post, McBain stresses that although Canalys believes there are 335,000 MSPs worldwide, only 86,546 generate 30% or more in recurring revenue. That’s only slightly more than a quarter.

So when it comes to recurring revenues, most MSPs are not even dealing in half-measures, they’re guilty of less than a third measures.

Still, whatever the question over how deep they have ventured into the MSP waters, it seems fairly clear that they will be heading a lot further in as time goes by. The conditions are increasingly favourable and there doesn’t appear to be anything that could possibly reverse the course that has been set towards more managed services.

Given the opportunity that managed services presents, there doesn’t really seem to be much debate over how to answer the question “To MSP or not to MSP”? And it is perhaps apt that Shakespeare is the writer who probably coined the phrase, “O brave new world”. For many channel partners, it would certainly appear to be.

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