3 Reasons why the managed service provider market is flourishing

There’s no mistaking it. It’s a good time to be a managed service provider. Demand for managed services is increasing, and service providers that are prepared to meet these needs are capitalizing on it in a big way.

In my role with Intronis, I’ve gotten to see that success firsthand, watching our partners grow their businesses and find new ways to help protect SMBs and their data … and their businesses.

And the numbers back it up. According to recent research from The Everest Group, the MSP market maintained a growth rate of 11 to 16 percent in 2014, reaching an overall size of $85 billion to $90 billion worldwide.

Plus, in CompTIA’s 4^th Annual Trends in Managed Services report, 64 percent of end-user organizations said their companies are currently using an MSP for at least one operational function. That’s significant because it suggests that there’s still room for MSPs to continue to grow, both with new and existing customers.

Factors driving MSP growth

After working in the technology field for more than 30 years, I’ve learned how to identify industry trends and market influences, both good and bad. Based on my experience, I see three reasons for this kind of impressive growth in the MSP market:

1. Growing popularity of the cloud

Not too long ago, the cloud was still an unknown, and companies were reluctant to make the switch, skeptical about security and privacy in the cloud. But those days are long gone. Companies are comfortable with the concept of the cloud now, and they’re eager to start taking advantage of cloud applications and the benefits they offer, such as cost savings and mobility.

Most small businesses don’t have the technical expertise necessary to make the transition to the cloud themselves.  That creates an opportunity for MSPs.

According to CompTIA’s 4^th Annual Trends in Managed Services report, 45 percent of the organizations surveyed used outside help on their cloud computing initiatives. And with 50,000 small and medium-sized businesses signing up for Office 365 every month, I expect to see that number continue to go up.

2. Heightened security concerns

Cybersecurity is becoming a bigger concern for businesses every year. Major data breaches at companies like Target, Sony, and Anthem made headlines in 2014 and 2015, and 2016 is shaping up to be the year of ransomware.

In February, Hollywood Presbyterian Medical Center paid $17,000 to regain access to its files after they were encrypted in a ransomware attack, and KeRanger recently became the first strain of ransomware to strike Apple devices.

Businesses are concerned, and they need help navigating the increasingly complex security landscape. This creates an opportunity for MSPs to offer a variety of security services, such as email security, spam filtering, and firewalls. It also makes backup services more important because restoring to a recent backup is the only way to recover from a ransomware attack without paying the hackers.

Smart MSPs bundle all of these services into their basic packages to add value and create more recurring revenue. I’ve seen quite a few of our MSP partners do this very effectively.

3. Increasing complexity of IT environments

Technology changes quickly.  In this age of digital disruption, many companies are looking for new ways to use technology to improve their business. Managing a wider variety of technologies can be difficult, though, and a more mobile workforce using laptops, tablets, and smartphones brings new IT challenges, too.

Those challenges create opportunities for MSPs to innovate and provide new services to meet businesses evolving needs. According to a recent survey by Business Solutions Magazine, 75 percent of the IT service providers who responded said they plan to add new services to their portfolio in 2016. This is a move in the right direction, and I look forward to seeing the innovative new ways MSPs find to help their customers.

Renewed focus on MSPs

Here at Barracuda and Intronis, we see the enormous potential of the MSP market, and we want to help service providers meet this growing demand. That’s why we recently rebranded Intronis as Intronis MSP Solutions by Barracuda. This new corporate branding emphasizes our continued commitment to our MSP partners and the IT channel. It also reflects the growing synergy between the two organizations. We recently launched Barracuda Backup – Intronis MSP Edition, an appliance offering created specifically for our MSPs partners, and I’m excited about the additional MSP-optimized offerings we’ll be able to work on together down the road.

Rick Faulk is the VP & General Manager MSP Business, Barracuda.  Rick currently sits on the boards of Yodle, Influitive, Hostway, Bidding4Good & Ontegrity and is an advisor to other start-up businesses.You can read his blog here, and connect with him on LinkedIn here.