business services

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A global survey of 419 managed service providers (MSPs) conducted by Barracuda Networks finds that in the last year, remote work and security is emerging as a primary driver of new business.

A full 85% of MSPs also said there is opportunity to grow their business in 2021 because the overall market is far from saturated. Well over half of MSPs (59%) have expanded their services portfolios in the past 12 months, with some type of security service being the most frequently added.

Backup and recovery (90%), endpoint security (82%), email security (80%) and network security (80%) are the top four managed services most commonly provided, with email security, endpoint protection and network security among the services in highest demand in 2021, according to survey respondents. However, since the start of the pandemic, backup and recovery (48%), business applications (39%) and email security (39%) are cited as seeing the most increase in demand.

In terms of new opportunities, 90% of the respondents cited remote work as their most lucrative opportunity, followed by security at 80%, the survey finds.

Services on the rise

More than half of MSPs (59%) said they expect services to account for 50% or more of their revenues this year, which compares to 48% who said they generated 50% or more of their revenue via services in 2020. In addition to providing services, most MSPs resell products, but the rate at which end customers are preferring to consume IT as service in the wake of the COVID-19 pandemic has increased.

The survey also notes that MSPs believe their reputation has either improved significantly (28%) or slightly (43%) in the last year as demand for external IT expertise rose. Much of that demand has been driven by both the increased complexity of IT environments and a general lack of available skills in key areas such as security, said Jason Howells, vice president of international sales for Barracuda MSP, a unit of Barracuda Networks.

In some cases, MSPs are building new practices to complement existing ones to address security, while others are opting to partner with MSPs that have complementary expertise, noted Howells.

Bright future

It’s not clear going forward what percentage of IT might be consumed as a managed service. Historically, the percentage of IT delivered as a service stood well below 20% for many years. However, as organizations rely more on IT to accelerate digital business transformation initiatives in the wake of the pandemic, the percentage of IT consumed as a service is likely to significantly expand. “MSPs now find themselves in a unique situation,” said Howells.

Of course, competition among MSPs is often fierce. Aggressive pricing can make it challenging for some MSPs to recoup their investment in developing, for example, security expertise. On the plus side, however, as the overall size of the managed services market continues to grow, it would appear there’s still plenty of opportunity for most MSPs as the overall global economy continues to recover.

The challenge, then, may be choosing which areas to specialize in. The Barracuda survey is one data point that can help narrow those choices.

Further reading: MSPs Can’t Be All Things to All People, So Specialize