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While the average small and midsize business customer today has anywhere from four to five solution providers servicing their needs, the CEO of N-Able said that the move toward managed services models will probably result in SMB customers only needing one or two solution providers.

Speaking at the company’s Regional Partner Summit in Chicago, N-Able CEO Gavin Garbutt said that today there about 60,000 solution providers servicing about 5.6 million businesses with about 92 million users.

But of the 60,000 solution providers, only about 2,500 have business models that could be described as being based on proactive or managed services, while the other 57,500 solution providers continue to pursue what he described as “chaotic, reactive” business models.

As a result of the limited number of solution providers that have made the transition to proactive or managed services, Garbutt estimates that managed services today only has a 1 percent penetration into that base of customers.

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But because the managed service model is inherently more efficient and lower cost, Garbutt is predicting that customers will soon move to reduce costs by shrinking the number of solution providers they need to manage in preference to solution providers that have the most complete managed service offerings.

In order to compete, that means that solution providers that expect to survive this wave of consolidation need to rapidly scale their services to have sufficient size to compete.

This will be especially true as manufacturers, telecommunications providers, direct marketers and distributors also roll out managed service offerings that will often compete with services from local solution providers.

“Solution providers really need to establish themselves in this space before the big boys enter this market more aggressively if they expect to win,” said Garbutt.