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A single-digit increase in the percentage of IT budgets being allocated to managed services in 2021 may give managed service providers (MSPs) cause for concern, but within the context of larger IT spending patterns it would appear MSPs are holding their own.

A survey of 1,000 IT leaders conducted by Spiceworks Ziff Davis, finds that on average, spending on managed services will increase from 15 percent in 2020 to 16 percent in 2021. In normal times, that rate of growth might be considered disappointing. However, at a time when overall spending on IT is expected to be relatively flat as the economic downturn brought on by COVID-19 persists, many MSPs might consider themselves to be holding their own.

Overall, the Spiceworks Ziff Davis survey finds 80 percent of businesses in North America and Europe anticipate year-over-year tech spending in 2021 to stay the same (46 percent) or increase (33 percent). That compares to 44 percent of respondents who reported an increase in IT spending 2020. Those forecasts are roughly in line with similar forecasts made by International Data Corp (IDC) and others.

The decline in IT reflects in part the amount of revenue organizations expect to generate in 2021. Only one-third of businesses expect revenues to increase year-over-year from 2020 to 2021. The size of the IT budget is usually a single-digit percentage of the revenue an organization generates, so the survey suggests spending on IT remains largely resilient even as revenues decline.

Resiliency can be attributed to the pandemic

More organizations than ever are relying on a wide range of IT platforms to keep operating as employees and customers alike continue to work from home. The Spiceworks Ziff Davis survey finds more than three quarters of respondents (76 percent) are making long term change to their IT strategy that can be traced back to the pandemic. In fact, more than a third of 2021 budget increases will be influenced by COVID-19, with 44 percent reporting they already have digital business transformation initiatives underway, the survey also notes.

Of course, as COVID-19 vaccines become more widely distributed, it’s difficult to say how much influence the pandemic will have on IT spending in the latter half of 2021. However, as COVID-19 infection rates in the short term continue to spike, it’s clear just about every organization is at the very least reconsidering their approach to IT. Historically, it would be fair to say only a quarter of organizations at any given time might be reevaluating their IT strategy. The potential opportunity for MSPs to claim a larger percentage of IT budgets therefore still exists.

Most MSPs rely heavily on word-of-mouth to generate sales leads. Yet, with most of their current and potential customers not actively connecting beyond the four walls of a virtual office, MSPs are finding it difficult to engage with them at a time when most interactions must occur online.

Obviously, MSPs need to find better ways to digitally interact with potential new customers. Many organizations are resistant to major changes during a downturn. However, more organizations than ever are at the very least questioning how they manage IT, which means the opportunity for MSPs to have a conversation with a potential customer about the state of IT might never be greater than it is right now.

Photo: Duet PandG / Shutterstock

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Mike Vizard

Posted by Mike Vizard

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications including InfoWorld, eWeek, CRN, Baseline, ComputerWorld, TMCNet, and Digital Review. He currently blogs for IT Business Edge and contributes to CIOinsight, The Channel Insider, Programmableweb and Slashdot. Mike blogs about emerging cloud technology for Smarter MSP.

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