Cloud ProvidersCSPs and MSPs

Top 6 revenue opportunities for managed service providers in 2021

6 Mins read

As all of us today navigate the risk and challenges brought forward by the pandemic, businesses worldwide are feeling its brunt on revenue, capital, and cost. There is an increased focus on operational efficiency and effectiveness. Here, the adoption of managed services can help businesses fulfil their need to better organize, operate, and safeguard their business.

Benefits of managed services for the users

The rising demand for managed services can largely be attributed to the small and medium-sized businesses (SMBs) who need access to the latest technologies to innovate in their respective fields but lack the proper talent and IT budget.

Managed services enable them to play at the same level as middle and enterprise-scale organizations.

By outsourcing their operations and IT infrastructure to managed service providers, businesses can drastically improve their revenues.

Source: Frost & Sullivan

The lack of skilled IT staff is another major reason why organizations look towards the services of a managed service provider. The cost of hiring and training new employees can eat up a big portion of their budgets.

Source: Investopedia

Apart from cost-savings, there are other benefits of managed services for the users as well:

  • Access to cutting-edge and market-leading technologies and tools.
  • Access to advisory expertise to solve complex business problems.
  • Allows businesses to focus time and skills on innovating and not managing the IT.
  • Access to worldwide talent and expertise.
  • Enhanced financial planning through a predictable pricing model, reduced third-party fees, outcome-based pricing, and overall operational efficiency.

Managed services opportunity for the service providers

This increased dependence of businesses on the managed services presents a window of opportunity for the managed services providers (MSPs) i.e., you. By focusing on trending technologies and including them in your portfolio, you can increase your revenues drastically.

The demand for managed services has grown exponentially in the past years – with global managed services market projected to reach $356.24 by 2025, up from $185.98 in 2019.

The rest of the article discusses the top revenue opportunities for the managed services providers.

Top revenue opportunities for managed service providers

1. Digital business infrastructure solutions

Digitalization has now become more important for businesses than it ever was. Digital technologies are slowly bridging the gap between the physical and digital worlds. It is all about improving customer experience by creating value through digital touchpoints.

A digital touchpoint can be defined as the environment where the end-users directly interact with the services of a digital business. Examples may include virtual assistants, augmented/virtual reality technology, smartphone apps, wearables, ATMs, robotic arms, etc.

Gartner identifies four digital business infrastructure operations (DBIO) service lines – Core operations, security operations, network operations, and edge operations.

While MSPs managing their client’s Internal IT environment and managing their digital business might sound the same, it is not. The latter, i.e., the digital business management is based on outcomes and creates business value.

As such, organizations are looking to transform into digital businesses with urgency and hence, they are demanding support from the MSPs.

By 2023, 63% of global managed service providers (MSPs) will gain revenue through digital business infrastructure operations (DBIO). – Gartner.

2. Security offerings

The constantly evolving threat landscape and the rising number of security breaches are making IT security quite complex for organizations. Here, companies look towards managed services providers to guide and protect their companies’ data.

However, to increase revenues, MSPs would need to sell beyond traditional security services – including basic antivirus, email security, or firewall. Largely, because these services are easier to manage as compared to robust and holistic cybersecurity solutions.

Today’s cyberthreat landscape is far more complex and sophisticated.

Companies need robust defences and tools to reduce the risk of these calculated and targeted attacks. That could be managed detection and response (MDR) tools, endpoint detection response (EDR), incident response, endpoint management, vulnerability management and patching, etc.

By selling these advanced cybersecurity solutions, you can enhance your revenues.

Security is the most requested service that customers want from MSPs: Acronis-Omdia report 

3. Backup and disaster recovery

Business continuity is a top concern of IT strategists and decision-makers.

There cannot be a better time to preach about the importance of business continuity and disaster recovery (DR) solutions than now, considering the state of the businesses who lacked a proper recovery plan during COVID.

Backup and DR solutions are a must to ensure the continuity of a business in the face of a contingency.

Here, small, and medium sizes businesses would indulge in managed backup and DR solutions to protect their data. Managing backups internally is both complicated and time-consuming.

As such, the demand for backup services is set to grow and MSPs with their expertise and resources are better positioned to help.

MSPs need to include backup and disaster recovery solution in their portfolio to build a strong revenue stream.

4. Internet of Things (IoT) development services

The future belongs to smart technologies. They are everywhere – changing the facet of everyday life. From smart digital assistants and chatbots to fitness and sleep trackers, smart technologies are here to stay.

The growth of these smart technologies results in more connected devices across the world or the concept of the internet of things.

Research shows that there will be 35 billion smart devices online by the year 2021 and this number will rise to 75 billion in 2025. The Internet of things comprises applications, devices, connectivity, and security which all need management.

MSPs can help in almost every stage of IoT implementation. This includes planning, procuring hardware, software, architectures, and even managing the networks. Here, to manage a comprehensive IoT environment, MSPs themselves will need to redefine and re-strategize their processes and operations.

The IoT managed service market is expected to grow at 15.3% annual compound growth rate till 2022.

The demand for IoT devices and implementations is a great opportunity for you. Every data stored in the devices needs a proper setup by the MSPs. This also includes processing and analysis of these massive amounts of data.

5. Managed cloud services

Keeping up with the demands of a dynamically evolving business environment is challenging. With the need to be agile and responsive, organizations are relying on the expertise of managed cloud service providers. MSPs with advanced technological capabilities are better positioned to enhance organizations’ operational efficiencies and enable their internal teams to focus on innovation.

According to Gartner research, up to 60% of organizations will be willing to use an external service provider’s managed cloud service offering by 2022, which is double the percentage from 2018.

Companies look for managed cloud hosting services for better control on costs, agility to respond to changing business landscape, leveraging expertise and resources, scalability, and for driving productivity. Additionally, it also helps internal IT teams to focus on projects and tasks that are of more value and strategically align with the organization’s mission.

Suggested Reading: Best way to sell cloud services to new & existing customers in 2020

6. Artificial intelligence-as-a-service

Artificial Intelligence (AI) market is growing exponentially and is expected to reach around 126 billion U.S. dollars by the year 2025. Forward-thinking companies have already started exploring how AI can fit into their organizations.

Applications built on AI can provide a competitive edge to businesses in the coming years. Here, large enterprises can benefit from having a team of AI experts to formulate and implement an AI strategy. For a small and medium-sized business with limited access to technology and bootstrapped budgets, this might not come easy. Not to mention, the number of AI startups are increasing with every passing day. These startups and SMBs may need the help of an MSP which is uniquely positioned to provide them with the latest AI tools and applications.

AI can prove instrumental in meeting customer demands in a fast-paced and constantly evolving business environment.

The global Artificial Intelligence-as-a-Service market was valued at USD 2.68 billion in 2019, and it is expected to reach USD 28.58 billion by 2025, registering a CAGR of 48.9% from 2020 through 2025.

MSPs need to work out ways in which they can include AI in their service offerings. One of those can be – helping their clients with customer experience (CX) through AI-powered chatbots. Many vendors are already selling white-labelled chatbots which MSPs can simply resell.

Suggested Reading: Top 5 ideas for CSPs to improve customer experience

Challenges Ahead

Managed service providers play an important role in delivering IT services and technical expertise in a dynamic world. But nothing comes without challenges. To be customers’ one-stop service provider, MSPs must work on the latest technologies and tools to deliver smooth services.

You might face challenges in customer onboarding, recurring billing and subscription management, and scalability. Here, automation can be the key to unlock greater revenues and profits.

As the MSP business grows, you will need mature processes in place to meet the changing customer demands. Billing is the most important area which you need to automate to meet with subscription and recurring service models.

A cloud and business management and automation tool can make the job easier. A cloud broker like RackNap can help you with faster go-to-market strategies, streamlined billing, quick customer onboarding and support, etc. and can help you take your MSP business to newer heights.

Contact our experts today to know more on business automation and how we can help.

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About author
Sabarinathan, SVP of RackNap heads product and technical delivery functions. He has over 18 years of experience in the IT industry with specialization in cloud services delivery. He believes that to be successful, cloud service providers need – right business strategy, right automation platform along with skilled manpower.
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