Managed services are taking hold at nearly every business operating in the IT channel—regardless of their initial business model—and signs are pointing to MSP success. In a recent survey of 201 North American channel partners conducted by the 2112 Group and Intronis MSP Solutions by Barracuda, 94 percent of respondents reported that they are collecting revenue from managed services. Regardless of if you are a new channel partner offering only a handful of managed services or a veteran in the channel, the survey shows that generating recurring revenue and offering a portfolio of security services are keys to success.

The State of the North America Managed Services Report is chock-full of interesting insights, such as the top drivers of growth, the average number of customers added per month, the best-selling services by business model, and more. Here are three important takeaways for IT service providers:  

Security trend continues to grow

With today’s evolving threat landscape, it should come as no surprise that more IT providers are looking to add security services to their portfolios. Businesses want to increase their IT security investments, but with a limited talent pool, businesses are looking to IT service providers to help meet this requirement. According to the 2112 survey, 40 percent of respondents said their services were purchased because customers couldn’t hire the technical staff required to meet their needs.

The shortage of security talent in the market is a double-edged sword. While it creates a tremendous opportunity for channel providers currently offering these services, it also makes it more challenging for MSPs to add these services. In fact, only 15 percent of those surveyed are offering security services today. Channel providers not currently offering these services are quickly trying to catch up, though, and 62 percent are planning to add security services in the next 12 months.

A missed MSP opportunity?

Of the MSPs surveyed, only 30 percent offer data recovery services, and only 29 percent of channel companies offer backup. Is this a missed MSP opportunity? Backup has historically been considered  the bread-and-butter of managed services, but this survey proves that many MSPs aren’t taking advantage of this. This creates an opening for IT providers who are a little late to the managed services game. Not only do MSPs have headroom to grow in this sector, but this also presents VARs and break-fix providers a way get started in the managed services market. 

Backup is really an extra layer of security—especially in today’s aggressive threat landscape. While firewalls can mitigate the threats from entering a network, backups are the insurance policy that ensures business-critical data can be recovered if something does go wrong.

Recurring revenue, the new norm

Investing in manages services is starting to pay off. A full 64 percent of respondents said their number one growth driver was recurring revenue through services. Companies that focus on delivering recurring revenue services have a greater chance of being successful and profitable in the coming year—and 94 percent of the companies surveyed earn some revenue from managed services, regardless of how they identify their business.

This growing trend in the market helps channel firms generate more predictable revenue from month to month—which makes the managed service model more attractive to traditional break-fix and VAR providers. Instead of waiting for something to break or need to be replaced, this gives channel providers an easy way to get guaranteed money from month to month, which is why this approach is becoming increasingly popular.

While the IT channel continues to evolve, insights from this survey show where the market is and where it is headed. Recurring revenue and security are at the forefront of channel profitability, and the untapped potential in these areas highlights where channel providers should look next. To get more channel insights, read the full survey here.

Photo Credit: Joe Techapanupreeda / Shutterstock.

Lauren Beliveau

Posted by Lauren Beliveau

Lauren is a content and product marketer with several years of experience in the IT channel. She has created and developed content that helps managed service providers grow their business, and has written many articles featured in SmarterMSP’s The MSP’s Bookshelf and Ask an MSP Expert series.

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