MSP Alliance Study: 2014 North American MSPs Generated $154B In Revenue

Managed service providers raked in a cool $154 billion in revenue last year, according to an MSP Alliance survey released Wednesday. The survey of more than 10,000 North American MSPs was conducted during the fourth quarter of last year.

MSP Alliance CEO Charles Weaver said the study shows the managed services market is growing and forecasts that the $154 billion figure will be much higher this time next year. He said the reason is that more businesses are transitioning to the managed services model and there are many companies that have yet to adopt cloud technologies.

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"I think that we can safely project that next year we’ll probably be in the $250 billion range, if not by next year then pretty quickly," Weaver told CRN. "Cloud is certainly making up an important purchasing factor for customers. It is a type of technology that the MSPs are buying, but cloud is still a minority of that revenue. My estimation is that cloud is probably making up to $30 billion to $40 billion of that $154 billion, so it’s still a relative minority. Managed services, in my view, will continue to dominate the overall spending, but cloud factors in very highly. We asked our members how big of a factor does it play in your overall spending, and the response was overwhelming."

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Robby Hill, founder and CEO of Florence, S.C.-based MSP HillSouth, said there are many technologies MSPs can take advantage of that have yet to hit their peak.

"I absolutely agree with this study," said Hill. "We see our managed services business growing and growing. We find with cloud computing being so ubiquitous customers are finding the experience of a strong managed services provider to provide continuity. There are so many assets to MSPs from security to printing; there seems to be no shortage of opportunity to grow. I see tremendous growth in backup and disaster recovery, and those are areas where the end of the road is not there yet."

Weaver pointed to what he said was another interesting finding from the MSP Alliance study, one that centered on lead generation. He said a large majority of MSPs say referrals is a major source of their customer base.

"Overall, we asked the question of where are you generating your leads and list all those sources," said Weaver. "Eighty-nine percent of the respondents came back with referrals as a major source of their new customer acquisitions. I think we can safely say that the managed services profession has learned some very important realities in terms of lead generation, and we are looking more like other professions and following where they get new leads, rather than traditional VARs who rely on cold calling and other practices in traditional sales models. I think we are starting to see some divergence there."

Hill agreed that referrals are always going to be a big contributor to any sales department, but believes traditional sales practices such as cold calling should be more heavily utilized.

"Being in business for 15 years, referrals are the easiest way to gain new clients, and they’ll always be a big part of the sales process," said Hill. "But the trend of the IT industry as it trends to managed services, it’s getting easier to cold call and explain why to choose my brand as opposed to another brand. I think while referrals are really important, they’re not the top source of generating business, and they shouldn't be."