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New data from AMI-Partners confirms earlier studies that North American SMBs not only want managed services, but that they want them now.

The research company has been collecting data annually, but recently went to quarterly surveys and the results indicate that annual spending on remote managed IT services is expected to increase 3.3 times in the next five years, representing a compounded annual growth rate of 28 percent, according to a new report, The Emerging SMB Managed IT Services Market Opportunity in North America. Anil Miglani, SVP of IT Infrastructure and Managed Services at AMI, said a number of the results from this survey, as well as similar surveys of channel partners and new players entering the managed services market, were surprising.

"The biggest surprise is that we’ve been seeing increasing interest in managed services from SMBs for some years, but the level of increase is quite high in the last year," he said. He attributes the strong growth to economic conditions and the need for SMBs to reduce costs, and to better manage IT.

Another factor is the number of large companies entering the managed services market, including AT&T, Best Buy/Geek Squad, CDW and Dell. "The sheer number of large players entering this market was quite surprising. We believe the conditions are ripe for very rapid growth of managed services among SMBs."

AMI found that while some partners build their own service-delivery capabilities, some are acting as agents for cloud-based infrastructures from others, which has dramatically reduced their barriers to entry. This highlights one of the key changes driving the channel, reports the company. Channel partners need to shift their focus from technical staff to sales and marketing staff in order to get new customers and manage their customer relationships.

AMI does have details on the size of the market, as well as what services are selling, but that information is being reserved for clients, said Miglani. He did confirm that only a small portion of the total installed base of 60 million PCs and 8 million servers in North America is managed remotely currently.

Storage and security have been among the most popular services over the last three-four years but that’s starting to change, he said. "What we see happening now is that people are also willing to use managed services for other types of devices, notably PCs, servers and networking devices."  Networking is growing in importance, as is unified communications, added Miglani.

There is no shortage of potential suppliers, but he said what they are supplying is changing. "They’re broadening from niche players to be more horizontal suppliers, so SMBs don’t have to go to four-five different vendors."

The main drivers for SMB to move to managed services haven’t changed, he said. SMBs need to cut costs and they are struggling with managing IT, especially anything beyond basic maintenance.

However, there are several barriers to broader and faster adoption of managed services, said Miglani, ranging from the comfort factor most SMBs have with their existing VAR, concern about handing off an increasingly complex IT environment to somebody they don’t know, and a lack of understanding how the fixed-price managed services model will work.

These issues will lessen as the market expands, he said. "As the market grows, understanding with grow." He believes the entrance of more players, the spread in usage and the creation of more case studies will help change the SMB mindset and spur the growth of managed services. Furthermore, he believes there is no going back, that even once the economy is on the upturn, SMBs will continue to flock to managed services because of the value proposition.

Managed services is well established in the large enterprises, and is growing in the mid market, said Miglani. It’s a "pretty well established paradigm", one that is now seeing consolidation.
Over the short term, Miglani expects SMBs to start spending more money on hardware and software purchases that have been delayed for the last several years because of the economy. But managed services will continue to grow in SMBs as more companies offer more options.

Businesses need to keep their costs down and better manage their IT assets, and managed services offers a very compelling alternative, he said.