New CompTIA Study of Managed IT Services Market Reveals Contradictions

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Jun 29, 2016, 10:30 ET

DOWNERS GROVE, Ill., June 29, 2016 /PRNewswire-USNewswire/ -- Companies that provide managed technology services to customers have expectations of high revenue growth over the next two years, according to new research from CompTIA, the nonprofit association for the technology industry.

But their optimism is countered by continuing worries about their role in a market increasingly dominated by cloud computing solutions and by a persistent problem with employee retention.

CompTIA surveyed 400 U.S. managed services providers (MSPs) for its Fifth Annual Trends in Managed Services report. The study profiles today's managed services practices and examines both their internal operations and external strategies.

"The level of confidence among MSPs in how they are running their businesses is quite high," said Carolyn April, senior director, industry analysis, CompTIA. "Two-thirds of the companies we surveyed consider themselves to be skilled experts at managed services."

Some of this confidence is due to market maturity. Nearly 90 percent of companies have been offering technology services for two years or more.

Revenue growth is also a contributing factor. Three in 10 companies say their services business was their leading revenue generator over the past year. Half of all MSPs surveyed expect high revenue growth over the next two years, with services accounting for 75 percent 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 erosion as a factor that keeps them awake at night.

"Naturally occurring market commoditization 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," April said.

Topping the list of things that keep MSPs awake at night is cloud computing, cited by 62 percent of companies.

"They still haven't figured out whether the cloud is a good thing or a bad thing," April remarked. "They fear that customers will simply bypass them and look to cloud providers for their basic needs."

Just 54 percent of MSPs offer cloud-based solutions and services as a strategic part of their business. Another 44 percent only support cloud services when request by a customer.

April said many companies are missing out on big opportunities to be "cloud orchestrators" for their customers.

"Just as they remotely managed on premise devices and applications, they can manage what a customer has in the cloud," she explained. "It's a natural spot for an MSP."

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 organization's IT staff.

"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," April said. "It's a problem that MSPs will have to address."

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SOURCE CompTIA