Managed Services Accelerate Again Thanks to Investments, Innovations

State of Managed Services

Managed services may not be the revolutionary business model it was a few years ago, but with increased demand, outside investments, and innovative technologies on the way, there are plenty of opportunities for MSPs today—and tomorrow.

John Tippett, vice president of product, networking at Datto, recently talked about the current state of the managed services space—where the opportunity lies and where MSPs need to focus—on a CompTIA Volley podcast with CompTIA’s Carolyn April and Seth Robinson. The discussion touched on increased investments from outside the MSP space, why MSPs are a new target for cyber criminals and how new networking technologies will create new business for MSPs. Here’s a look at some of the conversation:

Outside Investment Is Changing the Game

There’s been a lot of M&A activity in the MSP space the last several years, largely between MSPs to create larger, regional or multi-national players. That’s helped validate the model and proved to be a productive and profitable business model. Now, the MSP industry is starting to see real meaningful investment—in the billions of dollars—flowing into the market from outside the industry, Tippett said. That’s helping to bring more buzz back to the MSP space, which in turn drives new business and new opportunities.

“We're at the beginning, in my opinion, of a new cycle, a wave of innovation and business development around the managed services model,” Tippett said.

CompTIA research reveals that there’s been a plateau in the number of companies transitioning from traditional reseller models to managed services—about 40% of channel firms now identify themselves as doing some form of managed services, April said. But that may be changing, as more companies take a hybrid approach—performing traditional resell activity and dabbling in managed services on the side.

For example, Datto has some partners that continue to provide break-fix services but also see the validation of the MSP model and are beginning to engage in managed services and recurring revenue, Tippett said.

Those changes have changed the way we think of MSPs—and what we call MSPs, said CompTIA’s Robinson. In fact, for a while there was even some backlash to what is, or was, considered an MSP. But that’s come full circle, he added.

“I think we even realized we don't have to come so hard with the message that everyone has to go into MSP because there's a lot of seats at the table and someone could just be a reseller or someone could have some kind of virtual CIO business or whatever it might be, that works perfectly well for them.” Now, more investment is expanding the family of business models that fall under the MSP umbrella, Robinson added.

Businesses now understand that they can outsource their IT to MSPs and get the functionality they need at a price that’s reasonable, Tippett said. “[The MSP market is] not certainly mature at by any means, but there's a reality now where businesses understand the concept and are asking for it. They want to understand how they can consume whatever they’re looking for as a service and have it be managed. That’s kind of what makes it exciting and it's this cycle of awareness that you then see the investment and then businesses ask about the technology and off we go.”

MSPs Become Cyber Targets

So, the good news for MSPs is that customers are taking notice and investors are taking notice. The bad news? So are cyber criminals. Increasingly, hackers see MSPs as a gateway to reach multiple corporate clients, Robinson said. It’s incumbent upon MSPs and their vendor partners to take more precautions.

It’s similar to when there was a notion that “Apple devices don’t get viruses,” said Tippett. A decade ago, Windows was the de facto operating system to try to exploit for maximum impact. Today, Mac OS and iOS have more traction and are more at risk, according to Tippett.

“I think the MSP is sort of in the same boat where it's not that it wouldn't have been an individually appealing target a long time ago, it's just that the scale wasn't there,” Tippett said. “And so just like any technology that becomes pervasive and grand the attacks we see at this scale aren't typically targeted at an individual MSP. They're targeted at blanket vulnerabilities that theoretically impact MSPs. They go after the tools that MSPs use or they try to exploit practices that MSPs deploy.

“And that is absolutely going to be more of a concern [because criminals] will pay attention to places that they can have a bigger impact. So, it's a new threat and a new challenge. And it's something that we're all in the industry going to have to be conscious of and be careful about how we manage these applications and what types of protections we have in place to prevent these types of things.”

Innovations Spur Improved MSP Solutions

Security is central to MSP success and growth, but other new technologies will also impact managed services going forward, according to Tippett.

Specifically, as the number of devices increases, and as more applications move from on premises to the cloud—in multiple connections—having a reliable network becomes paramount.

“Everything we do goes through the Internet. You have Wi-Fi 6 coming right around the corner. That's an entirely new generation of wireless standard, which is exciting and will usher in a refresh. But that technology is also accounting for IoT devices that have new specifications built into the standard that extend battery life and make communication of smaller decentralized IoT type devices possible over Wi-Fi.”

Network traffic has increased—and will continue to increase—at a rate that will challenge current switch and throughput capacity, which will usher in a new generation of bigger, better infrastructure too.

“I think an exciting change that's coming that doesn't yet get a lot of attention: the collective technologies around connectivity and Wi-Fi 6, the next generation of switching, and 5G availability are going to create opportunities for MSPs,” Tippett said. “The most important thing for an MSP now is to stay educated on those things, stay aware and continue to present themselves to their current businesses and prospects as a source of truth and a source of information around, ‘what do these things mean and how do I use them?’. But they're right around the corner and we'll just continue this acceleration of what we can do with technology, how fast and what the capabilities are. It's a really exciting time to be able to watch that.”

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