What is a managed service provider? Strategic outsourcing for IT services

Strategic managed service providers

Managed service providers have evolved of late to offer services that support strategic and longer-term business planning, including digital transformation consulting, compliance audits, technology roadmaps, and needs assessments.

Another area of growth for MSPs has been in providing internet of things (IoT) services, with 50% of MSPs seeing IoT as a significant revenue opportunity, according to CompTIA.

Benefits of managed service providers

In addition to providing improved security, efficiency, and reduced costs, managed services providers offer the following benefits:

• Flexibility and scalability: Variable billing can provide additional revenue opportunities for the MSP, while offering a great deal of flexibility and scalability to a customer. For example, an enterprise that has large investments in hardware and software can’t just reverse that investment during downturns. Similarly, layoffs can be very costly and cause long-term damage once the business turns around if those employees have since found other jobs. Similarly, adding capacity during temporary business surges can be difficult.
• Access to top technical and industry expertise: MSPs can also invest in technologies and expertise in ways that individual companies, especially smaller ones, cannot, resulting in greater efficiency and performance.
• Ability to bridge talent gaps: MSPs can also help clients gain access to talent they might otherwise lack. Take, for example, legacy systems. As older employees retire, young people are increasingly reluctant to learn obsolete languages and technologies. An MSP can not only staff legacy skills but train for them, given their large client bases.
• Faster technology adoption: Enterprises can also turn to managed services providers for cutting-edge applications to accelerate adoption, even when they don’t have the staff to use or implement those technologies.

[ Related: Building elasticity in outsourced managed services ]

Current state of the MSP market

According to Mordor Research, the managed services market will grow to $380 billion by 2028, up from $260 billion in 2023, buoyed by increased adoption of the model among SMBs, as they look to outsource non-core IT systems and functions. “The Evolving Landscape of the MSP Business Report,” assembled by Vanson Bourne and commissioned by Barracuda Networks, reinforces this trend, citing increasing complexity of IT (49%) and internal IT resources deployed to other projects (48%) as key drivers for SMB adoption of MSPs today.

The top 10 services and solutions currently offered by MSPs include the following, according to Vanson Bourne’s research:

1. Security operations center (SOC): 35%
2. Cloud-based applications: 35%
3. Managed detection and response (MDR): 34%
4. Extended detection and response (XDR): 32%
5. Backup, business continuity, and disaster recovery: 32%
6. Network security: 31%
7. Cloud-based infrastructure: 31%
8. Business applications: 30%
9. Productivity applications: 29%
10. Network monitoring and management: 29%

Vanson Bourne’s research notes a drop in cloud-based infrastructure among MSP offerings, from 45% in 2022 to 31% in 2023. It ascribes this drop to fewer organizations requiring ongoing support for early pandemic spikes in remote and hybrid working. Still, navigating remote and hybrid working environments at client sites remains a top challenge for MSPs, cited by 46%, followed by increased competition in the MSP market (44%) and keeping up with tech trends (40%).

As for growth strategies, the “2023 Global MSP Benchmark Survey Report” from Kaseya found that offering new services is a top priority of 61% of MSPs, with 54% of MSP reporting that they have added up to three new services in the past two years, and another 30% having added four or tive new services over that same time period.

Additional trends include an expected growth of 28% until 2028 of the IoT market for MSPs, according to Mordor, as well as a 60% increase in adoption of AIops among MSPs, according to research from OpsRamp. AIMultiple analyst Cem Dilmegani notes that, while no numbers are currently available regarding adoption of generative AI, MSPs are expected to make considerable use of this technology in the year ahead.

Managed service provider jobs

Managed services providers hire IT professionals with a wide variety of experience levels and skill sets, though individual companies may focus on particular industries or technologies. For example, an MSP specializing in managed network services will skew toward professionals with traditional computer engineering, software engineering, and systems engineering backgrounds, in addition to software developers, and networking and security experts.

Due to the wide variety of services offered by MSPs, nearly any IT job can be found within the industry, including IT support specialists, service delivery managers, network operations technicians, systems administrators, security analysts, cloud architects, and more. MSPs also hire IT pros for roles tailored to specific vendor solutions, such as VMware and Oracle.

At an MSP, IT professionals can work with a wide variety of companies in various industries and gain more experience than they can with a single company. Working for an MSP also offers more geographic options, as many MSPs have long relied on remote staff.

Salaries at MSPs are roughly comparable to those at enterprises, according to MSP executives, who add that slight premiums can be found in the MSP job market due to competition for skills and business models that can accommodate them.

MSPs are also investing heavily in artificial intelligence and machine learning given the growth potential for their client bases.