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Dec 19, 2012

Managed Services Market Growing, but Still a Work in Progress for Many IT Firms, New CompTIA Study Reveals

Financial and staffing considerations, impact of cloud computing have many companies taking a go-slow approach

Downers Grove, Ill., December 19, 2012 – Managed services are a steadily growing market for information technology (IT) channel companies even as concerns about revenue, staffing and the impact of cloud computing lead many firms to take a go-slow approach, according to a new study released today by CompTIA, the non-profit association for the IT industry.

Half of all channel firms surveyed for CompTIA’s Trends in Managed Services Operations study say they provide managed services either exclusively or as part of a broader business portfolio. That’s up from four in 10 companies in 2011.

Additionally, 17 percent of companies expect their managed services business to account for 75 percent or more of their total revenue over the next five years. Just under two-thirds of firms see managed services as an escalating share of overall revenue during that time.

“The managed services model is becoming more commonly practiced across the channel and generating demand among end users,” said Carolyn April, director, industry analysis, CompTIA. “It’s a steadily growing market that is not going away despite some uncertainty.”

That uncertainty has prompted most IT channel companies to make an initial foray into the managed services market, but not a full-fledged switch. The scenario that has emerged as the most viable is that of a hybrid model, where the company slowly introduces some measure of managed services offering into their portfolio, while continuing to foster their legacy streams of revenue.

“The incidence of pure play MSPs is pretty low,” April noted. “It’s still an added practice as part of an overall business. Many, if not most, MSPs continue to sell hardware and other infrastructure to their customers, do the implementation and only then take over management of said devices under a managed services contract.”

Financial considerations and staffing issues are two big contributing factors that prompt companies to make a cautious move into managed services.

“It’s difficult from a financial perspective to make a big turn like this overnight,” said April “They have to keep that part of the business that’s paying the bills running while they slowly phase in managed services.”

Companies also continue to struggle with how to compensate sales staff for a managed services sale. Sales reps selling products are used to a percentage commission on the total sale. But managed services customers typically pay a fee each month based on a flat rate or a per-user or per-device charge. There is no industry consensus on how to compensate sales staff. Some choose to issue small commission checks every month; others a percentage of the total contract at the time the contract closes.

Impact of the Cloud on Managed Services
Among IT channel companies not offering managed services, four in 10 say they are waiting to see the impact that cloud computing has on the managed services market.

“There are a number of camps when it comes to making comparisons between managed services and cloud computing business models,” April said. “Are these models essentially one in the same? Are they complementary, but different? Or are they directly competitive?”

Despite the cloud-related uncertainty, a slow start to managed services does not mean a never-start for the majority of channel companies. Nearly two-thirds say they plan to begin offering some level of managed services within the year.

CompTIA’s Trends in Managed Services Operations study is based on a survey of 400 IT solution provider and channel firms. The survey was conducted in October 2012. The complete report is available at no cost to CompTIA members who can access the file at www.CompTIA.org or by contacting research@comptia.org.

About CompTIA
CompTIA is the voice of the world’s information technology (IT) industry. Its members are the companies at the forefront of innovation; and the professionals responsible for maximizing the benefits organizations receive from their investments in technology. CompTIA is dedicated to advancing industry growth through its educational programs, market research, networking events, professional certifications, and public policy advocacy. Visit http://www.comptia.org/home.aspx or follow CompTIA at http://www.facebook.com/CompTIA and twitter.com/comptia.

Steven Ostrowski