Show Me the Money: Partners See Margins in Managed Services
Channel partners focusing on managed services will see significant growth in 2023. But where’s the growth coming from?
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A key driver of managed services growth is the mounting need for cybersecurity, as organizations contend with a rapidly evolving threat landscape.
This challenging landscape, in addition to a global shortage of cybersecurity and IT talent, has prompted many organizations to turn to MSPs for their tech expertise and support. Findings from the study indicate that 56% of channel partners expect revenues from cybersecurity managed services to grow this year.
Alexandra Zagury is VP of partner managed services and as-a-service sales at Cisco. She said customers expect partners to provide agility, value and flexible consumption models to manage their growing and complex technology needs.
“The evolving ecosystem of IT partners selling managed services is adapting to meet customer needs and challenges by finding ways to modularize and package what once were customized solutions.
“We anticipate more innovation and specialization from channel partners through managed services that offer distinct business outcomes and exceptional experiences,” she added.
Buoyed by global growth, confidence among channel partners selling managed services has surged significantly.
The study reveals that in June 2023, 35% of channel partners said they expect growth of at least 20% in their managed services business this year. This represents a significant increase compared to the 27% reported in 2022. It also points to a rapid update of managed services by organizations of all sizes.
“Managed services are the force driving the global IT industry’s adaptability and growth,” said Robin Ody, senior analyst at Canalys, which shares a parent company (Informa) with Channel Futures. “Our research underscores the substantial potential for companies selling managed services, opening up diverse avenues for them to thrive in a post-pandemic era.”
The study identified cloud infrastructure management as another key growth opportunity.
“As organizations digitize operations and move to the cloud, they face challenges with complex cloud infrastructure spanning private and public clouds, along with distributed applications and services. This has increased the need for cloud infrastructure management and expertise. Fifty-five percent of channel partners say they expect revenues in this segment to grow in the current year.”
Revenue growth for managed service providers is also likely to accelerate with emerging technologies like AI and the growing emphasis on sustainability measures driven by IT investments. According to the study, nearly six in 10 partners (59%) believe AI presents a business opportunity, with 39% stating it will be “significant” or “tremendous.” Similarly, 57% believe customers would be willing to pay a premium for sustainability products and solutions.
Ody said, at their core, managed services are about businesses getting the most from technology investments.
“As new technologies emerge, managed services are vital to an organization’s digital business strategy. By specializing in specific verticals, technologies or even geographic areas, partners in managed services are helping customers to solve their IT challenges, remove complexity and deliver outcomes that drive a business forward.”
The study showed that revenues for partners delivering managed services are poised for global growth between 2023 and 2025.
In Asia Pacific, the sector is expected to grow to 14% from $95 billion.
In EMEA, where managed services revenue is currently $122 billion, growth is forecast up to 12%.
Latin America is expected to grow 11-12% from $11.5 billion.
North America will see growth of between 10-12%, from $190.6 billion.
Canalys classifies MSPs as channel partners making more than 50% of their revenue from IT managed services.
The study showed that revenues for partners delivering managed services are poised for global growth between 2023 and 2025.
In Asia Pacific, the sector is expected to grow to 14% from $95 billion.
In EMEA, where managed services revenue is currently $122 billion, growth is forecast up to 12%.
Latin America is expected to grow 11-12% from $11.5 billion.
North America will see growth of between 10-12%, from $190.6 billion.
Canalys classifies MSPs as channel partners making more than 50% of their revenue from IT managed services.
Managed services are a golden goose for channel partners, according to new figures. Managed services revenues are on course to exceed $472 billion globally this year. The represents double-digit growth and surpasses the estimated 3.5% growth in overall IT spending in 2023, says research from Cisco and Canalys. (Canalys and Channel Futures share a parent company, Informa.)
Customer needs and growing expectations of IT investments are driving the surge in managed services, according to the research.
The growth is fuelled by a rising demand for cybersecurity services and expertise. More than half (56%) of channel partners expect revenue growth from managed cybersecurity services in 2023.
“Managed service providers (MSPs) are uniquely positioned to help companies adapt to emerging technologies and optimize IT investments with agile and customizable solutions that meet business needs and challenges,” said the research’s author
See the slideshow above to find out what’s driving the managed services growth and how the regions compare.
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