The IT managed services market size is ballooning. The modern economy has become reliant on well-crafted IT infrastructure to keep their operations up and running. Research Dive predicts the market will hit $411 billion in 2027, up from $174 billion in 2019, a Compound Annual Growth Rate (CAGR) of 10.2% in that period.
This is not simply about being competitive; to survive, businesses of all sizes need comprehensive solutions for their IT infrastructure.
Servicing the needs of companies both big (banks, governments) and small (small and medium-sized businesses (SMBs)), MSPs are cutting costs and increasing efficiency. The result has been an explosion in value for the industry and a higher demand for their services.
There are over 150,000 MSP companies globally, according to MSP Alliance. While that number did shrink in 2009, it has since rebounded in recent years.
IT Managed Services Market Size and Trends
A managed services market analysis of the industry shows that we’re seeing growth concentrated in several key segments.
Managed services market research reveals some of the fastest growing segments:
- Cloud-based management
- Managed networks
Cloud Based Management
The adoption of cloud by businesses has been a boon to the MSP market.
Connectivity and speed are the lifeblood of a modern company.
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A Grand View Research study estimated that the 2016 cloud managed IT services market exceeded $23 billion in value and is projected to be worth more than $80 billion by 2020.
Growth in the market is being driven by key segments like cloud-migration and adoption.
Amazon Web Services and other large, powerful corporations have instituted partner programs for cloud services. This has made the cloud adoption process easier. It’s also encouraged MSPs to focus on cloud services by joining these partner programs.
The growing danger of cybersecurity threats means that SMBs which lack the funds to hire full-time, in-house IT teams will by necessity seek out cybersecurity support from MSPs. The WannaCry ransomware attack in 2017 alone caused billions of dollars in damages and infected hundreds of thousands of computers. As you’d expect, the managed security services market size is growing due to these concerns.
A study titled Underserved and Unprepared: The State of SMB Cyber Security in 2019 conducted by Continuum found that out of 850 small businesses with 10-1,000 employees 9 in 10 would hire a new MSP if it had “the right cybersecurity solutions.”
Cybersecurity also grows in tandem with cloud migration: as more and more companies move the bulk of their operations online, this in turn creates more vulnerability to online hacks, not to mention that the severity of these attacks is amplified due to the increased online presence.
- Enterprises are predicted to spend $12.6 billion on cloud security tools alone by 2023, up from $5.6 billion in 2018, according to Forrester.
- Enterprise spending on cloud security solutions is predicted to increase from $636 million in 2020 to $1.63 billion in 2023, attaining a 26.5% CAGR.
- Endpoint security tools are 24% of all IT security spending, and by 2020 global IT security spending will reach $128 billion, according to Morgan Stanley Research.
Having a fast and efficient IT infrastructure isn’t considered a competitive edge anymore – it’s now the baseline of what a company needs to stay relevant in a connectivity-based economy.
A Spiceworks survey shows that SMBs spend about 19% of their total budget on managed IT services, cognisant of the shifting economic landscape.
The managed network services market trends show that businesses are looking for their networks to be fast, secure, connected, and reliable. If a network goes down that could mean potentially bringing the entire enterprise to a halt, which in turn means a catastrophic loss of revenue.
That explains why one of the largest spending areas in IT services has been infrastructure protection. Gartner predicts that spending on infrastructure protection is predicted to increase from $18.3 billion in 2020 to $24.6B in 2023, attaining a 7.68% CAGR.
Focusing on Market Verticals
One of the stronger managed services market trends has companies specializing in specific verticals and bringing a unique approach to each discrete industry.
These verticals include:
- Banking, Financial Services and Insurance (BFSI)
- Healthcare and Life Sciences
- Media and Entertainment
- Consumer Goods and Retail
- Energy and Utilities
- Others (transportation and Hospitality)
Gone are the days of one-size-fits-all approach to managed IT.
Instead, companies are tailoring their approaches to their industry (or industries) of choice.
Private Equity’s Growth in the Market
Several private equity firms, including One Equity Partners (which has committed over $1.75 Billion to tech and IT, according to CRN.com), M/C Partners, and Trinity Hunt Partners, to name a few, have begun pouring money into the sector.
As is the case with other industries, whenever private equity begins flooding the market with cash, there is a built-in anticipation of growth.
Private equity funds are specifically designed to profit from high-growth markets. The fact that there is an increase of private equity capital entering the MSP market signals a potentially faster trajectory of growth for MSPs moving forward.
It also means that certain MSPs will have far more capital to fuel their growth, making ancillary aspects of the industry like MSP marketing that much more competitive.
Managed Services Market Analysis
MSPs have been one of the biggest beneficiaries of the broader 2020 economy.
With the pandemic in full effect (more on that below) many companies transitioned to work-from-home configurations or increased their reliance on the cloud and similar services.
Even pre-COVID, some estimates showed 90 percent of Fortune 1000 companies using MSPs to provide at least part of their IT infrastructures or services. Post-COVID, we can expect to see that number rise.
What’s more, technological advances made in 2020 (and projected to continue throughout the decade) have also spurred growth in the industry.
Continued development in AI and cloud services will call for adaptive approaches while integrating these tools into an enterprise. MSPs that specialize in these areas and incorporate evolving technologies into their services will be most able to capitalize on this growing segment of the market.
Growth in working from home beyond 2020 (the ‘New Normal’) and reliance on cloud management and interconnectivity will also spur managed services market growth for the foreseeable future.
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The dual push of a reimagined workspace and the technological growth in highly specialized, highly complicated segments will mean that MSPs offering expertise in these areas will be at a premium.
One of the largest projected bottlenecks will be the lack of skilled labor in managed service providers, according to Research Dive.
Finding professionals who specialize in these cutting-edge technologies – and who don’t already work in development of said technologies – is a barrier that MSPs must overcome.
Other gaps in the market include lack of training for cybersecurity professionals, creating another availability disparity which in turn could impact growth on the market.
Said industry growth isn’t specific to only SMBs or only large institutions. Rather, companies of differing sizes will require different services from MSPs.
Larger institutions like banks, for instance, will likely be faster to adopt AI, automation, big data, and compliance services, while SMBs are more likely to make use of cloud management and cybersecurity offerings (larger institutions may opt to have these areas covered in-house).
COVID-19’s Impact on MSP Market Size
COVID-19 is not going to be permanent (we hope) but what may be permanent is the new normal we’ve come to inhabit.
What is this new normal? A world with less office space and increased focus on remote working and collaboration.
The ‘Death of the Office’ has been on the tongues of tech evangelists for years now, but with the novel coronavirus playing catalyst, 2020 is likely to be the office’s last gasp.
Bad news for people who loved offices. Good news for the MSP market.
While the economic outlook has been grim at times during this crisis, one segment of the stock market has not only survived through COVID-19, but thrived: tech companies.
Those operating in the tech space (IoT, AI, cloud, SaaS, automation) have largely seen their fortunes rise through this tumult, far outpacing the S&P and Dow Jones in 2020. Consider this: 2020 saw the largest software initial public offering of all time hit markets in the middle of the pandemic.
What that tells us is that the market is still trending towards adoption of these tools. Automation, Big Data, cloud-based services, etc., all will require highly specialized knowledge to properly integrate and operate within a company’s existing infrastructure.
MSPs will be in demand more than ever as the transition towards a new, tech-focused world continues. COVID-19 has, if anything, only accelerated already-brewing macroeconomic shifts.
The upshot for the managed services IT market is a steady diet of reliable growth for years to come.
MSP Market 2020 and Beyond
The explosive demand in the market has created a wealth of opportunities for MSPs . . . and a glut of competition.
Differentiating one MSP from another will be a key factor in the success of these companies moving forward. That being said, the stakes are high when selecting an MSP, with the wrong choice potentially having dire consequences.
The managed services market is one on the rise and perfectly situated to take advantage of the opportunities being created by the economic conditions we face today. But with some companies being funded by billions in private equity and others just starting out, this is not an equal battleground.
Jumpfactor has years of experience marketing IT companies and has a deep understanding of MSPs and their industry. We’ve generated over $250 million for IT and MSP firms and can get your company 5x more leads than the competition. Don’t let the private equity firms and monied companies squeeze you out of the market.