For the managed services providers that have figured out the model, there is as lot of business to be had.Managed services providers are enjoying growth rates of more than 200 percent in some cases, and often they are winning customer business without having to face competition.
The lack of competition, said Jonathan Wolf, vice president of product marketing at SilverBack Technologies, a managed services platform vendor in Billerica, Mass., indicates there is still a lot of managed services business to be had.
"The market is far from saturated," he said. "There's an enormous amount of business available."
SilverBack partners in 2006 saw their business increase at an average of 67 percent, Wolf said. SilverBack partners use the vendor's platform to remotely monitor and manage their end-user customers' systems, networks and applications.
Partners report to SilverBack that they rarely have to bid for the business. This is because other channel companies haven't approached the customers with a managed services offering, Wolf said.
There are two main reasons for this, say channel insiders: Some solution providers have yet to figure out the model well enough to seek out business aggressively, while those that have are finding enough business without bumping into other providers yet.
SilverBack competitor Level Platforms, of Ottawa, Ontario, has seen its partners' business grow so far this year at rates topping 200 percent, said CEO Peter Sandiford.
A lot of partners that signed up early have passed the learning and experimentation stage to settle on a business model that works for them, he said. Also contributing to the growth is a realization by most solution providers that they need managed services to gain a competitive advantage, he said.
In addition, end-user awareness is growing, Sandiford said.
"There is small but growing end-customer recognition that these kinds of services are available. So end-user demand—the power that will really drive solution provider mass adoption to the end of the decade, is showing the first signs of life," he said.
Despite the growth rates a lot of providers are enjoying, not all is roses in the managed services space. Some providers continue to struggle to make the necessary adjustments to move from a break/fix, project-based model to the fixed-fee business of managed services, said Chad Gniffke, a director at InhouseIT, an MSP in Costa Mesa, Calif.
InhouseIT's managed services business, however, grew 100 percent in 2006 and 87 percent in the first quarter of this year, he said.
The company has figured out how to make the model work, Gniffke said. "I believe we sell our solution well and educate the client along the way, which keeps expectations clear," he said.
In any case, Gniffke added, customers often turn to InhouseIT after having such bad experiences with IT that "they are willing to try anything new."
Wolf said SilverBack has invested in making sure its partners understand the changes they have to make to adopt the managed services model.
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