Study: MSPs Bucking Poor Economy


Managed service providers expect their revenue to increase by 20 percent over the next 12 months, according to a new study by research firm AMI-Partners.

The study found that MSPs are being spared the impact of the downturn, and in fact may owe some success to the economy, as more businesses look to streamline IT costs through managed services.

"About one out of every three U.S. channel partners offers these types of services, and, ironically, this economy presents a strong opportunity for them," said Avinash Arun, senior analyst at AMI, in a statement. "Revenues from IT services and support, particularly in a slowing market, are important for partners, so many of them are struggling to shift their business models to focus more on value-added services."

AMI also found that profit margins on managed services are about 41 percent, compared to 36 percent for Internet-related services and 35 percent on software development. Margins on hardware are about half of the managed services profit line, according to the study.

Arun compared the managed services model to the razor blade industry because partners typically offer lower-margin hardware with the hopes of generating the bulk of profits through value-added services. Hardware sales account for about a third of total revenue for the solution providers polled, about the same as last year, which underscores the challenge partners face in making the transition, he said.

According to AMI's most recent SMB quarterly pulse survey, 67 percent of businesses expect decreased revenue in the coming months and 66 percent expect more restricted cash flow for the same period.

"This in isolation appears to be a grim forecast for IT channel partners. However, it could also mean increased services and consulting opportunities, as half of the businesses surveyed also indicated that they plan to look for ways to leverage technology to reduce costs and drive efficiency and productivity," according to the study.