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Top 10 Managed Services Provider (MSP) Predictions for 2016

Where is the managed services provider (MSP) market heading in 2016? Here are 10 MSP industry predictions based on ChannelE2E's interviews with dozens of leading sources in recent weeks.

10. Managed Services Market Size: Actually, this forecast actually gives you a longer-term view of the market. The global managed services market will reach $229.59 billion by 2020, a compound annual growth rate of 10.20 percent from $128.19 billion in 2014, according to Mordor Intelligence.

9. Managed Cloud Services: Smaller MSPs will follow Rackspace's lead, introducing managed services for third-party public clouds like Amazon Web Services (AWS), Microsoft Azure and IBM SoftLayer. Forward-thinking MSPs will start to connect the dots between Office 365 and Azure, in particular.

8. Managed DevOps Services: MSPs as a whole are overwhelmingly late to DevOps conversations. But the best MSPs will start to introduce services that help customers to manage and accelerate agile software development projects, continuous software delivery and the overall DevOps strategy.

7. Managed Container Services: Leading MSPs will begin to experiment with Docker and container services, especially MSPs that focus on midmarket and enterprise customers. The efforts will speed IT projects and application rollouts.

6. Managed Big Data Services: Selected MSPs will gradually dabble in managed services for Hadoop and other big data platforms. Hadoop providers like Cloudera, Hortonworks and MapR will work more and more closely with MSPs that monitor and optimize Hadoop storage grids for customers. Although big data can be an overwhelming term, smart MSPs will boil the conversation down to a concise question: How will they help customers to gather, store, manage, optimize, secure and monetize data? Also, MSPs will leverage big data and machine learning without even realizing it -- as tools like Cisco OpenDNS and LogicNow LogicCards proliferate.

5. Managed Internet of Things (IoT) Services: Overall, MSPs will struggle to understand and/or monetize the Internet of Things wave in 2016, but a promising list of IoT startups will help to drive experimentation over the long haul.

4. Managed Services Guidance: The best MSPs will remain in peer group organizations, while also exploring vertical market conferences (examples: HIMSS 2016 and NRF 2016), while stretching out to attend IT events outside of their typical comfort zones and budgets.

3. Managed Services Tools: The lines between PSA (professional services automation), RMM (remote monitoring and management), NOC (network operations center), BDR (backup and disaster recovery), security and other tools will blur. MSPs will increasingly migrate to end-to-end platforms -- rather than individual tools -- from only a handful of companies. Still, new niches outside of the traditional MSP toolset will emerge. Examples include application performance management (APM) and network infrastructure monitoring tools.

2. Managed Services Profits: The best MSPs will continue to generate about 30 percent profit margins. Even as some services commoditize, the best MSPs will maintain those healthy services margins because they essentially are virtualized CIOs for their end customers -- offering strategic advice that keeps the best SMBs primed for success.

1. Managed Services Mergers & Acquisitions: The M&A market will continue to gradually accelerate, with another clear uptick toward the end of 2016 as MSPs seek to finalize their finances in a clean way before kicking off 2017. MSP valuations will hold steady, delivering a 6X EBITDA multiple for average companies and up to an 8X EBITDA multiple for fast-growth MSPs.

Note: ChannelE2E is running 2016 technology predictions throughout the month of December 2016. Submit predictions for consideration to [email protected]. Read all daily predictions here.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.