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There appears to be something fundamentally amiss about the way solution providers are going about building their managed services practices. And what that something is becomes pretty apparent when you take a look at the results of a study conduced by the Pacifica Group on behalf of Untangle, the makers of a security appliance for delivering managed services.

According to the results of a survey of over 200 managed service providers, most managed service providers seem to be able to scale their business up to anywhere between 25 to 50 customer contracts, or about 500 managed devices, simply by adding head count. According to the folks at Pacifica, that roughly translates into 10 to 20 managed devices per employee.

Beyond this point, the average managed service provider should be investing in IT automation tools to continue scaling the business. That can be accomplished in basically two ways. The first is to invest in buying traditional IT automation tools from companies such as Hewlett-Packard, IBM, Microsoft, CA or BMC. This approach can be prohibitively expensive because even after you acquire the tool, you still have to invest in learning how to run it.

 Read: Study: Automation the Answer for MSPs

The second approach is to use tools from companies such as Kaseya, N-Able or Level Platforms. The expense associated with running and mastering these tools is not as great as traditional IT management tools, but it’s not as easy to customize these tools for every possible customer scenario either.

But in either approach, the ability to scale a managed service business up presents itself. And yet, according to the Pacifica study, 71 percent of the MSPs surveyed said they are managing 25 or fewer customers. And 46 percent of them said they are managing less than 10.

Given the general shortage of skilled IT people available and the rise of ever more complicated sets of technologies such as virtualization, unified communications and next generation security tools, something is clearly amiss. The number of customers that should be leveraging managed services should be substantially higher.

The fact that this number is relatively low probably comes down to two factors. The first is that most managed service providers are throwing labor at the opportunity, which means they are not making much use of IT automation tools to allow them to scale the business higher. The second is that the marketing efforts they are making to sell the service probably don’t amount to much more than door-to-door selling.

Whatever the reason, it’s becoming clear that managed service providers are starting to hot some kind of ceiling in terms of managing the overall opportunity. But rather than just accepting the status quo, maybe the time has come to take a good long look at the business and decide if managed services are really a core part of your business or, as it appears to be all too often the case, some sort of auxiliary service they are providing customers that might most gently be described as a tactical distraction.

If the answer is the latter, then maybe the time to cut bait has finally arrived, because it’s only a matter of time before somebody comes along and provides a much better level of service at a much lower cost. Of course, the other option is to do on to others before they do on to you. That would mean making a substantial investment in the types of IT automation tools that you’re going to need to stand a fighting chance. The decision to fight or flee is up to each individual solution provider. But one thing that is for certain is that they are running out of time to decide what to do.

Michael Vizard is Strategic Content Expert for Ziff Davis Enterprise. He can be reached at michael.vizard@ziffdavisenterprise.com