Talk about a timely reality check: Fred Knight, publisher of NoJitter, is asking the tough questions about the managed services market. In a recent column, Knight compares the managed services market to the real estate bubble. That’s a bit of a stretch and I don’t agree with all of his statements, but I think Knight has a point: The media and some research firms are over-hyping the managed services market.
According to Knight:
“If there were a CNBC for our industry, its reporters would be heralding managed/hosted services the way CNBC used to hype the never-to-end increase in real estate prices — or the stocks of AIG, Bear Stearns and more than a few others that have since tanked.”
Knight writes about the upside of managed services:
To be sure, managed and hosted services look attractive today because of the global credit crunch. Even enterprises that have access to capital may choose to preserve it, because the economic climate might get worse before it gets better. And there are a growing number of IT shops for which managed or hosted services is the only course available, due to edicts issued from on high that restrict capital expenditures or mandate that selected IT functions be jobbed out, outsourced or otherwise cut back.
But Knight also offers the following:
Managed/hosted solutions belong in everyone’s toolbox and, if our current economic conditions turn out to be the “new normal” for an extended period of time, they could become part of the permanent landscape. But a more likely scenario is that once economic stability returns, managed/hosted solutions will return to their historic levels.
Now for My Views
Regardless of the economy, I do think the managed service market will continue to grow five to 10 percent annually. But I do NOT think the rising MSP tide will lift all boats.
Thousands of managed service providers are growing and thriving. But we’ll see our share of MSP implosions as some companies fail to master the sales, marketing and financial obstacles ahead.
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Tags: Fred Knight | Managed Services Bubble | MSP Buble | No Jitter
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Comparing managed services to real estate is like apples and oranges. Most of the providers I know provide “More value” than the monthly or periodic payment.
As we know, the real estate market in some areas of the country were beyond the means of the market, artificially inflated by overextended borrowers.
The bottom line is, for MSPs that provide a fair and quality service companies need, potential is there to grow. The more true value you provide in your offerings, the more some will be willing to pay.
Brain: Agreed — in the MSP market, the goal is lifting profit margins and improving profitability. That bodes well for long-term MSP industry success.
But I also think there is a key threat to the industry: Some software vendors really push MSPS to buy more licenses than they need. This leads to the same “shelfware” problem that we all saw in the enterprise software markets.
I think the SaaS model will destroy the MSP shelfware problem… but some software providers that push old licensing models will take a hit because they’re addicted to selling MSPs more licenses than they need.
I was out with 3 customers yesterday and they all choose to use Cobweb services becuase they don’t want the hassle of doing themselves, they buy the “service” not the “managed” (technology). We have a long way to go to get Managed Services into the Mainstream, but we are getting there
Mark
Mark: Do you have any financial interest or ties to Cobweb?
I don’t think that the consumers of managed services will stop buying; these services just make more sense than most of the alternatives. However, we will see the bubble burst for many of the companies in our industry; those that don’t have scale and aren’t as competitive. There are just too many service providers that are constantly innovating and improving for many of the weaker competitors to survive; there will be fallout.
Mike Cooch
http://www.everonit.com
http://www.smbitpros.com
http://www.mspcoach.com