Cloud Managed Services: Market Growth Forecast, MSP Challenges

The cloud managed services market remains in rapid growth mode, but not all MSPs will profit from the cloud managed services boom.

First, the expected good news: Spending in the cloud managed services market is expected to reach $139.4 billion by 2026, up from $86.1 billion in 2021. That’s a 10.1% compound annual growth rate (CAGR) during the forecast period, according to MarketsAndMarkets.

Typical cloud managed services span mobility, security and data services, the report indicates. And the overall goal of cloud managed services, predictably, is to deliver “hassle-free management of businesses, network, security, data center, and mobility services,” the report indicated.

North America dominated the cloud services market in 2021, the report said, though actual financial and deployment statistics were not published in the report summary.

Cloud Managed Services and MSPs: Revenue, Profit and Market Challenges

At first glance, the forecast is great news for MSPs that offer cloud managed services. But take a closer look, and MSPs of all sizes face challenges in the sector, ChannelE2E believes.

For starters, public cloud service providers such as Amazon Web Services, Microsoft Azure and Google Cloud Platform increasingly wrap “fully managed services” around their own IaaS (Infrastructure as a Service), PaaS (Platform as a Service) and SaaS (Software as a Service) offerings.

Also of note: The report points to roughly 20 “dominant” MSPs in the cloud managed services market. But if you check in with a few of those businesses — for example, Alcatel-Lucent, Atos, Huawei, IBM and Rackspace — you’ll find that many of them are generating mixed results.

And for the overall MSP market, roughly 25 percent of service providers are break-even or losing money, according to Service Leadership Inc., a ConnectWise business.

Best Public Cloud MSPs: Growing Fast

Still, the are signs of strong market success as well. For instance, the Top 250 Public Cloud MSPs are growing their monthly recurring revenues (MRR) roughly 50 percent to 75 percent faster than traditional MSPs, ChannelE2E research found in November 2021.

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