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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 Joe@AfterNines.com. Read all daily predictions here.

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15 Comments

Comments

    Marc Haskelson:

    Great summary I would also add “Compliance as a Service” per CRN one of the fastest growing areas for MSP’s and the general market. The MSP’s address the security issue but often leave the client failing the compliance component. (HHS reports 70% failure rate)

    Marc

      Jethro Gardner:

      Hi Mark,

      Could you point me towards this HHS report? I’m really keen to have a read and see what they are saying about the Compliance failures.

      Thank in advance,

      Jethro

    Joe Panettieri:

    Hey Marc,

    Thanks for stopping by ChannelE2E. Stay tuned for some thoughts on compliance when our daily “predictions” list surfaces for vertical markets later this month.

    Best,
    -jp

    Jay McBain:

    With the explosion of SaaS companies – now numbering in the tens of thousands – the integration/stack expertise required in line of business apps will accelerate in 2016.

    Not just the 28 major verticals, but the 10 lines of business within those will create niche opportunities for MSPs that will be potentially global in nature.

    The future looks very bright.

      Joe Panettieri:

      Hey Jay: As usual you struck a chord with me. It’s sort of ironic to see cloud (SaaS) offerings creating millions of of-premises silos. Far more complex than the on-premises silos most SMBs, midmarket and perhaps even enterprise businesses must navigate. To your point… those silos are integration opportunities.
      -jp

    Rohit:

    Great summary for the MSP market and tips to explore as a young MSP entrepreneur in this space

      Joe Panettieri:

      Rohit,

      Thanks for your readership and comment. When time permits, please send me some info about Techila. Joe@AfterNines.com.

      Best,
      -jp

      Content Czar
      ChannelE2E & After Nines Inc.

    Ben:

    While I agree the managed service tools will begin to blur, I think we will also see an increase in managed security services specifically in 2016. The best managed security service providers have deep expertise and far more experience than most companies can hope to develop in-house. These days, outsourcing security makes sense. Managing firewalls, intrusion detection systems, encryption, and DDoS protection are specialized services that are both necessary and best handled by experts.

    Matt K:

    Thank you for these top 10 Managed Security Services prediction. As they seems very helpful for us.I like the stuff describing MSP’s for all small and large companies to protect against theft. I would like to recommend Transputec Ltd as a Managed Security Service Provides in this list. We are using there services since 2005 for our business.

      Joe Panettieri:

      Hey Matt: I’ll give them a look. Thanks for the suggestion.
      -jp

    Dave Kial:

    need more articles on Security in the managed services channel and expected growth for Australian based companies
    Cheers Dave

    http://www.macit.com.au

      Joe Panettieri:

      Hi Dave,

      Thanks for your readership and comment. ChannelE2E continues to expand its team of bloggers, reporters and editors. Dan Kobialka and I cover security, and you’ll see continued content additions in this area. If you have time please email me and let me know what types of security coverage you’re seeking. Joe [at] AfterNines [dot] com. Thanks,
      -jp

    Manish Shivhare:

    Hi Joe,

    Thanks for sharing such an informative article with us! This article clearly gives an idea on what should SMBs priorities for next year as part of their IT strategy. The industry is moving from CAPEX to OPEX and hence, Managed Services’ seeing more inclination from other non-IT organizations. However, the top 10 predictions made by you in your article above are bang on. Keep up the great work and look forward to some more good articles soon.

    Regards,
    Manish
    http://www.intertecsystems.com

    Joe Panettieri:

    Hi Manish,

    Thanks for your note and readership. Feel free to email me updates as Intertec announces new business milestones, strategic moves, etc. Joe@AfterNines.com.
    -jp

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