MXLogic Study Shows Managed Services Continue Steady Growth

A recent study by Internet security provider MXLogic shows solution providers are still bullish about their businesses and are leveraging managed services to drive new and recurring revenue.

In an economic climate where "Hello, can I interest you in upgrading your servers?" won’t get solution providers very far, an MXLogic study finds that VARs are finding success leading with managed services to help customers cut costs and increase efficiencies.

"You just can’t walk into a CIO’s office anymore with a pitch to upgrade their infrastructure," says Steve McCutcheon, vice president of marketing for MXLogic. "But what partners can say is, 'We have a new, efficient way to address many of the pain points you face while reducing your total IT spend.'"

The MXLogic study involved about 200 solution providers, of which 23.9 percent identified themselves as a traditional VAR, 27.8 percent said they are a managed services provider (MSP), and 41.9 percent said they are a consultant or a systems integrator.

McCutcheon says what most interested MXLogic was the finding that almost half, or 48.3 percent, of respondents said they are leading with a managed services pitch when courting new clients.

"MSPs are seeing their business grow," he says. "Hardware’s down, software’s down, but managed services are still growing, and solution providers are making investments based on that growth."

The study showed that while solution providers reported slowing sales because of the economy, most were bullish on their projections for growth in 2009. Over 85 percent of respondents said segments of their business have been doing well despite the economy, and 44.2 percent said those successes were in their MSP practice.

Conversely, 57.1 percent said hardware and software sales were slumping.

"What we see is that solution providers are pushing the parts of their business where they see the most opportunity, and that’s in managed services," McCutcheon says. "In fact, 87 percent told us they believe their year-over-year sales will stay the same or increase this year."

McCutcheon adds that as customers shift their buying patterns to consume more managed services, MXLogic is encouraging its partners to follow and "go where the customers are," rather than try to stick it out until the economy rebounds. This strategy seems to be paying off, with 61.2 percent of respondents saying they aren’t worried about the future of their business.

Though solution providers are optimistic despite the economy, McCutcheon says many are taking proactive steps to counter any negative impact the economy has had on their business.

Marketing initiatives are taking center stage, with 61.8 percent of respondents saying they’re stepping up their proactive marketing strategies and leveraging sales and marketing tools from vendors such as MXLogic to help them reach a wider audience.

Offering more solution bundles was the method favored by just 14 percent of respondents and even fewer, 8.5 percent, said they are lowering prices.

The MSP model can be an easy sell for solution providers, says McCutcheon, since they can emphasize the efficiencies of the model to deliver security and networking services. MSPs can save customers IT resources—both personnel and cash flow—while strengthening ties with existing customers and providing a "foot in the door" to new customers, he says.

"This is an alternative to solution providers pressuring customers to invest in hardware and software, which many customers could do without. But with an MSP model, solution providers can deliver more value, increase efficiencies and save money," he says.

And, of course, the MSP model brings solution providers a recurring revenue stream that directly follows the shift away from transactional sales to an annuity stream model, McCutcheon says.

"We’ve seen more and more emphasis on this recurring revenue model, but one thing partners still struggle with is how to set this up step by -step," he says. To help, MXLogic has introduced a revenue road map that underpins all of its solution provider programs. The road map lays out three steps solution providers can take every 30 days to prepare themselves to deliver managed services and to drive recurring revenue, he says.

"We’ve set up all of our programs to give them that step-by-step process they need," he says. "They can use our tools to engage them with our resources, and lean on our marketing and sales support so they can jump-start their MSP practice."