The day after Labor Day in the U.S. seems like an appropriate moment for managed service providers to take stock of how IT labor trends and the cost of IT labor is impacting their business.
A new U.S. Salary Report published by LinkedIn notes that with an average salary of $92,300 computer science is the highest paying field of study there is. Within that segment, the report notes that the highest paying industry is IT software and services, with an average salary of $104,700. When you add in benefits it’s easy to see why IT labor remains the single biggest cost any MSP is going to incur.
New ways to reduce IT labor costs
Many MSPs have also figured out that the cost of IT labor is significantly higher in places such as San Francisco and New York than it is in Texas or Kentucky. That difference in labor costs is why more MSPs are moving their IT operations centers to places where it costs them less to hire IT talent.
A few years ago, that strategy wouldn’t have been nearly as feasible as it is today. But thanks to the rise of the cloud, the management plane for IT products and services is increasingly moving to the cloud. That means more IT tasks than ever can be managed remotely. It also means those tasks can be performed from almost anywhere. At the very least, for example, level-one support for a customer in Chicago can easily be delivered from Texas or halfway around the globe. After all, as part of the general shift toward infrastructure becoming code just about every piece of modern hardware now sports a programmable application programming interface (API) that enables that device to be remotely managed.
To make the cost of IT labor even less expensive, most modern hardware is self-healing to one degree or another. Servers, for example, come pre-integrated with high-availability features that allow them to continue to operate whenever a component fails. That component is then replaced by shipping a new component overnight or installed at a time pre-defined by the MSP. In either case, the need to roll a truck to provide immediate service is being sharply reduced. Soon machine learning algorithms will routinely alert MSPs that a component is about to fail before it even happens.
IT channel impact
This shift in how services are delivered is also helping to fuel a wave of merger-and-acquisition activity in the channel. Many MSPs have found that because the delivery of services is no longer tied to a specific geographic region it makes sense to merge with other companies. This larger entity can then leverage its investments in IT labor across a much broader range of customers. The merged organization still has a local presence in terms of sales representatives, but as much of the backend IT services as possible are being centralized in one remote location.
Each individual MSP will need to consider which of IT services they provide will be automated in the months and years ahead. Part of that exercise will involve recalibrating the number and types of IT professionals they employ. In fact, by this time next year most MSPs will already be far down the path to utterly transforming how they employ IT labor.