Selling managed services to larger enterprises is distinctly different from selling them to smaller organizations. However, tracking the amount of spending specifically allocated to managed services by larger organizations does serve as a barometer to track overall expectations. For instance, a forecast from ISG predicts a 4.5 percent increase in managed services spending among large enterprises in 2025 is welcome news following a year in which spending grew only 1.6 percent.
Still, in terms of overall spending on managed services, the $41.7 billion spent in 2024 still represents another all-time high, even if it did grow at a meager rate.
Driven by lower interest rates that should increase discretionary IT spending and increases in the percentage of employees returning to the office, ISG notes there are also 39 contracts valued at more than $100 million coming up for renewal between now and 2026, valued at nearly $6.5 billion per year with the average contract duration now reaching 2.9 years.
The scope and breadth of those contracts suggest something has fundamentally changed in the mindsets of business and IT leaders. Rather than continuing to prioritize hiring additional internal IT staff to manage all aspects of IT, businesses are realizing the benefits of managed services. They see it as a cost-effective solution to automate the delivery of IT services.
The shift toward MSPs and the role of automation
There is often a tendency to blame managed service providers (MSPs) for any disruption. However, MSPs can generally maintain higher uptime than an internal IT team.
Given that annual global spending on IT is still measured in trillions of dollars, MSPs still have a long way to go before they become the dominant method of consuming IT services. However, with each passing year, it is becoming apparent that there is a general shift in this direction. The impact of this shift on IT job numbers isn’t clear. However, as automation advances, it makes less economic sense for organizations to hire their own IT teams.
The issue is that automation is also one of those swords that cuts both ways. As services become more automated, they turn into yet another low-margin table stake that MSPs must deliver more cost-effectively.. Every successful MSP knows their service is riding a bell curve toward commoditization. The reason any MSP gains and retains a customer over another has as much or more to do with customer experience as it does technical prowess.
Stay optimistic
Overall, the economic outlook for MSPs in the coming year remains relatively healthy, even in an economic climate where a trade war might upend entire vertical industry sectors. As the economy becomes more uncertain, business leaders are less inclined to hire full-time employees. This is especially true when a readily available service allows businesses to scale up or down as needed.
Put it together, there are plenty of reasons for MSPs to remain cautiously optimistic in 2025 despite the occasional economic jolt to the system.
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