It’s been a very long time coming, but it looks like there may finally be more channel partners offering managed services than traditional break-fix services. A survey of subscribers published this week by ChannelPro finds the number of partners offering managed services (65 percent) for the first time exceeds that number of partners offering traditional break fix services.
However, the survey notes there is a still a long way to go before managed services becomes the dominant business model in the channel. Only 27 percent of the ChannelPro survey respondents said they generate greater than or equal to half of their revenue from managed services. On the positive side, well over half (57 percent) said they expect managed services to account for a greater share of their revenue this year.
Making the case for managed services
Channel chiefs, along with providers of platforms for delivering managed services, have been making the case for transitioning to managed services now for well over a decade. Typically, managed services wind up being significantly more profitable than traditional break-fix services.
The first challenge has been the level of investment required to deliver those professional services. Secondarily, becoming less dependent on re-seller sales has significant implications for a solution provider’s balance sheet because revenue gets deferred across a multi-year services contract. Most solution providers wind up providing a mix of managed and break-fix services.
For all the focus on the business model of channel partners, one thing that gets continually overlooked is how end customers continue to prefer to acquire IT products and services. Most IT products and technologies employed today are not consumed as a managed service.
This is not because the end customer isn’t aware managed services exist. Rather, many of them conclude managed services are either too expensive, don’t provide a sufficiently high enough quality of service, or represent an existential threat to their continued existence.
Hope on the horizon
On the plus side, the rise of managed services delivered by cloud service providers, such as Amazon Web Services, Microsoft, and Google Cloud platforms, has made organizations more predisposed to consider relying on an external service provider. It doesn’t always necessarily guarantee that just because an organization is relying on managed services for external cloud services, that the internal IT organization will countenance to the same approach being applied to internal IT systems.
In fact, the ChannelPro survey suggests that where channel partners tend to see a lot of success with managed services is when they are wrapped around an emerging technology that most internal IT organizations don’t have the skills to manage.
Many enterprise IT organizations are also coming to terms with the fact they will never have the skills required to successfully cope with cybersecurity threats that continually evolve. Longer term, it’s also apparent that as organizations focus more on ambitious digital business transformation projects, there will be greater willingness on the part of internal IT teams to give up control over mundane IT tasks.
All these factors collectively make it clear that the future is bright for managed service providers (MSPs) that focus their efforts on optimally delivering IT services at scale. Much of that future is clearly tied to proactively expanding the total addressable market for those services, versus simply waiting around for the end customer to one day realize they’re better off focusing their limited resources on a very narrow set of IT tasks that enables them to truly differentiate their business.
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