A survey of more than 1,000 IT decision makers in North America and Europe published this week by Spiceworks Ziff-Davis forecasts managed services will account on average for 16 percent of the total IT budget in 2021, a single percentage point increase over the previous year.
In contrast, hosted/cloud services will account for 24 percent of IT spending in 2021, an increase of three percentage points over the prior year. In fact, the survey finds more than a third of respondents (35 percent) said their organizations have either already migrated or plan to accelerate migration of workloads to the cloud due to the COVID-19 pandemic.
Overall, the survey finds IT budgets are expected to decline slightly year-over-year in 2021. However, 80 percent of respondents said they expect IT spending to stay the same or increase. Clearly, the impact of the economic downturn brought on by the pandemic has been uneven with some vertical industries more adversely affected than others.
More than three quarters (76 percent) also said there would be long-term changes to IT as a result of the pandemic, a shift that may ultimately benefit MSPs.
Change comes slowly to IT organizations
In the wake of the COVID-19 pandemic the number of organizations relying on managed services is expected to increase. Many organizations also lack expertise in critical areas such as cybersecurity.
The challenge MSPs face, of course, is that internal IT teams are often conflicted when it comes to MSPs. They know they can use the help. However, many IT professionals are concerned they will be replaced by an MSP.
Further, in a lot of instances, MSPs often feel they are forced to circumvent the internal IT team by selling their services directly to the business owner. Sometimes that only leads to irritation for the internal IT staff. Just as often, however, many IT professionals are quietly relieved so long as their own role isn’t threatened.
Of course, not all MSPs are created equal. There have been plenty of complaints about the quality of a managed service over the years that have been proven to be legitimate. MSPs are also often times viewed as inflexible because they are perceived to be wedded to a specific set of repeatable processes.
Many MSPs are long overdue for a marketing and sales makeover
At the very least, MSPs should be able to command at least 25 percent of all IT spending on average. The Spiceworks Ziff Davis survey would suggest there’s a nine-point gap between that goal and where MSPs are now that is being narrowed at a rate of one percentage point per year. The rate at which managed services are growing as a percentage of the overall IT budget would need to triple just to get to 25 percent by the beginning of 2025.
Word-of-mouth sales and marketing efforts alone are not going to close this gap. MSPs must figure out how to master social media to establish credibility through thought leadership. That dialogue then becomes the foundation upon which leads based on relationships are created.
The social media issue MSPs have is they are so focused on employing their best IT talent to service existing customers that those individuals become unavailable for anything else. MSPs need to decide to what degree raising the overall visibility of the business to fuel long term growth matters more than making sure their best people are available to meet client needs.
When all the costs of hiring full time IT staffs are fully loaded, there’s no way it can be less expensive to employ IT professionals than it is to contract for IT services. Nevertheless, large number of organizations continue to hire IT staff. Ultimately, getting to the heart of that issue is going to be the difference between success and failure for any MSP looking to expand its business.
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