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One of the first IT spending forecasts for 2020 contains both good and somewhat disappointing news for managed service providers (MSPs).

Based on a Spiceworks survey of 1,105 IT leaders in the U.S. and Europe, spending driven by the need to enhance security and replace aging infrastructure will be up across the board.

A total of 44 percent of survey respondents say their organization plans to increase their IT budgets, up six points from the previous year. Organizations that expect IT budget growth next year on average anticipate an 18 percent increase. Only 8 percent of respondents expect IT budgets to decline in 2020.

Allocation of budget dollars remains an obstacle for MSPs

Unfortunately, the allocation of those budget dollars doesn’t appear to be substantially changing. The survey forecasts organizations plan to spend 33 percent of their IT budgets on hardware, 29 percent on software, 22 percent on hosted/cloud-based services, and only 15 percent on managed IT services.

On the plus side, the overall size of the IT budget is expanding, so there are going to be more budget dollars available. However, the share of wallet claimed by MSPs might remain steady.

The top areas where budget dollars for managed IT services will be allocated are managed hosting (13 percent), managed hardware support (11 percent), and managed storage/backup (11 percent). The survey also finds spending on managed IT help desk solutions will increase from 6 percent of managed service budgets in 2019 to 10 percent in 2020.

Skills shortage is another MSP hurdle

Of course, IT professionals surveyed by Spiceworks might be biased against MSPs that many respondents view as competition. Other studies suggest the number of business leaders willing to consider managed services as an alternative to internal IT staff that are increasingly hard to find and retain is on the rise.

That skills shortage is only likely to be further exacerbated as organizations move to embrace new IT platforms. The Spiceworks survey finds adoption of hyperconverged infrastructure (46 percent), edge computing (43 percent), and serverless computing technologies (40 percent) are expected to double.

Adoption rates of artificial intelligence technologies are expected to nearly triple, from 15 percent to 42 percent by 2021. The probability that internal IT teams will have all the skills required to deploy and manage these platforms is simple slim to none.

The Spiceworks survey makes it clear that much of the spending on IT in the coming year will be driven by replacing Windows 7 and Windows Server 2008 R2 platform, both of which are scheduled to reach end of service support in January 2020.

Interestingly, the Spiceworks survey also notes that tax cuts are proving to be a bigger driver of IT spending in Europe than in the U.S. Only 4 percent of U.S. respondents said their organization is more likely to increase IT spending in 2020 because of corporate tax cuts, compared to 15 percent in Europe.

Whatever the motivation of increased IT spending, it’s clear MSPs need to make a more aggressive case for why organizations should allocate a greater percentage of their IT budget to managed services. Prospective customers are not simply going to wake up one morning and come to that conclusion on their own. It’s clear that MSPs who want to succeed and thrive will have to allocate a greater percentage of their overall budgets to marketing, whether they like it or not.

Photo: Galen Crout / Unsplash

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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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