The market research firm Information Services Group (ISG) is forecasting that global spending on managed services will decline 7 percent for the full 2020 year in the wake of the COVID-19 pandemic.
Given the current pause in spending by most organizations, this forecast presupposes a fairly strong recovery in the second half of this calendar year. ISG estimates spending on managed services will decline 17 percent sequentially in the second quarter after a record first quarter that saw managed services revenue rise 2 percent to $6.8 billion. Prior to the pandemic, managed services revenue was on track to reach $7.3 billion for the second quarter.
The issue that is top of mind for managed service providers (MSPs), and the vendor community that supports them, is what the recovery will look like from an IT perspective. There is a general consensus that reliance on managed IT services will eventually increase. Some vertical industries have seen the staffs of entire companies laid off. When those companies do recover, they will not be in a position to rehire IT staffs full time.
The simple fact is that most organizations are going to be very cautious in their hiring. Funds from the Federal government may encourage organizations to retain employees, but the number of organizations that have access to those funds is still relatively small.
However, just because organizations may be more willing to rely on MSPs, it does not follow that customers will be looking for the same types of managed services that they were prior the pandemic, says ISG president Steve Hall.
Embracing DevOps offers key to post-pandemic survival
Hall predicts there will be a much harder shift to the left as organizations give more control over IT to developers to manage the entire IT stack programmatically employing best DevOps practices. Those developers are going to prefer to work with MSPs that expose application programming interfaces and command line interfaces (CLI) rather than a traditional graphical user interface (GUI), notes Hall.
Most organizations are also going to demand variable pricing models that do not necessarily require them to make year-long contract commitments, adds Hall.
In fact, Hall predicts many organizations will put developers in control over more of the IT environment to advance digital business initiatives that are now at the core of emerging business continuity strategies. Legacy IT platforms will either be modernized or outright replaced as organizations seek to become more agile, says Hall. Organizations that fail to learn the IT lessons from the COVID-19 pandemic won’t survive the next major disruption when faced with competitors that can take advantage of more flexible IT architectures.
Naturally, MSPs will need to adapt as well. Most MSPs today do not provide access to infrastructure-as-code using APIs. At best, many of them make available a self-service portal through which developers can access resources upon request. Rooted in traditional ITIL-based frameworks, that approach to delivering IT services is just too slow to keep pace with the rate at which applications are developed and deployed.
Of course, not every organization is going to be embrace best DevOps practices to build their own applications. However, the DevOps writing on the wall is now plain enough for every MSP to see.
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