Managed Services Growth Exaggerated, Shows Research

New research shows that the industry momentum around managed services may be exaggerated.

There were more than 148,000 channel partners delivering $122 billion of IT managed services in EMEA in 2022. But only 11% of those were managed service providers (MSPs).

That is because the term MSP is being used inaccurately, said Robin Ody, senior analyst at Canalys.

One reason is that vendors have been targeting growth in their MSP channels in the last three to five years.

Canalys’ Robin Ody

“It has also been important to vendor valuations to have more recurring revenue,” said Ody. “[Vendors] have to use the term MSP to convince the market they have a real managed services or recurring revenue strategy. The conflation of those two terms has also been a problem, because they obviously aren’t the same thing but are sometimes used interchangeably.

“They tend to call a lot of partners MSPs, when what they really mean is ‘those partners which are selling products and services on a recurring revenue basis,’” he said.

Canalys classifies MSPs as channel partners making more than 50% of their revenue from IT managed services.

However, there are many other ways to determine if a partner is relevant to a vendor’s managed services go-to-market strategy, said Ody.

“A partner may not be an MSP, but that doesn’t mean they aren’t relevant in the managed services landscape. And to be honest, most vendors aren’t really equipped to handle real MSPs. Their processes, products, pricing and programs aren’t really geared toward pure MSPs, so what they are really looking for are hybrid partners.”

Managed Services in the Americas

Managed services through the channel in the Americas in 2022 reached $202 billion, growing a little more than 11% year on year.

In total, 105,264 channel partners were delivering these types of services in 2022 in the region, of which slightly more than 22% were pure MSPs, according to Canalys.

The USA generated the largest managed services revenue in 2022, at nearly $181 billion, up 11% year on year, delivered by more than 75,000 channel partners.

The Latin American region saw the strongest growth in managed services revenue at 14.2%. These were delivered by nearly 24,000 channel partners, growing the total number of pure MSPs by more than 7%.