Analyst Firm Predicts Huge Managed Services Growth, But MSPs Urge Caution


A recent study predicts the MSP market to nearly double over the next five years, but industry members say the numbers don't tell the whole story.

The study by research and consulting firm MarketsandMarkets predicts a jump in the market from $142.75 billion this year to $256.05 billion in 2018. The study includes managed data centers, networks, mobility, infrastructure, communications, security and other areas in the managed services market.

Despite the optimistic predictions of the study, industry members said to take the results with a grain of salt. They credited the predicted growth to an increase in companies that outsource IT but warned that companies could fall behind if they failed to stay up-do-date with current technology trends, particularly the cloud.

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"I actually think the traditional managed service providers are at risk if they don’t adopt this new strategy," said Seth Bostock, president and COO of independenceIT. "It's more important than ever to make sure you partner with the right people, you have the right solutions in place and you're going to capitalize on this growth and you're going to combat the big companies."

The study also attributed the growth to outsourcing, increased market penetration by new businesses and technological advancements. Bostock pointed out that all of the elements included in the study involve the cloud, which he argued was 100% driving the growth of the industry and the push towards outsourcing.

Scott Samborn, chief business development officer for Vantage Point Solutions Group LLC, said that while he agreed with the growth prediction, he did not think that larger companies would continue outsourcing forever. Instead, he predicted that, after the study's timeframe, larger companies would return to in-house IT, causing the market to shrink.

"I almost think it’s a cycle; seven or eight years from now they're going to bring those employees back in house," Samborn said. "The growth in managed services may come from larger companies outsourcing, but I also think it's not sustainable over the long term."

Samborn predicted that smaller businesses will continue to seek out managed service providers. Businesses can save 30 to 40 percent on their IT costs by switching to a managed service provider, according to the study, which is especially significant for small businesses.

Part of the concern over the new study is that more businesses may try to make the leap from more traditional services to managed services and the cloud.

"I think people are going to jump in. We see that today. We see partners jumping in from print service and doing incredibly well," Bostock said. "I think because the market is so big, that people are going to come in."

Michael Goldstein, president and CEO of LAN Infotech agreed that the increase in cloud added to the increase in competition he has seen at his own company.

"Right now people are demanding higher quality service for a lower price," Goldstein said. "Everything going electronic makes it a really competitive space."

New companies jumping in didn't concern Samborn as much because he said the barriers to entry were much higher than when he started his business in 2002, when the market was much less crowded, he said. If the companies jumped in, they probably wouldn't be there to stay, but might help grow the market temporarily.

"It's hard to say," Samborn said. "I'm not sure to be honest with you."