By Vadim Vladimirskiy, Nerdio
Throughout 2020, the channel ecosystem has witnessed an incredibly transformative year in the wake of COVID-19. In fact, MarketsandMarkets' Global Forecast estimates that the global managed services market is expected to grow from $223.0 billion in 2020 to $329.1 billion by 2025. Therefore, the effectiveness of Managed Service Providers (MSPs) has never been more critical. Movement to the cloud, security concerns, and strategic revenue models will all continue to shape the channel, and challenges that were already difficult to solve will become even thornier problems next year. Despite the challenges ahead, MSPs are uniquely positioned to win in 2021 as long as they adapt in these key ways. So, here are three predictions for the MSP landscape over the next 12 months.
A Steady Stream Of Investment In The Channel Ecosystem
Expect increased investments in the MSP ecosystem. An estimated 42 percent of the U.S. labor force was working from home full time in June of 2020 – a move that has fundamentally changed the state of where and how to work. Given the uptick in demand for accommodating distributed workforces, companies like Microsoft will continue to make significant investments in the MSP ecosystem. While this financial investment is a new move for the tech giant, it is aligned with the increasing adoption of cloud and virtualization specifically by MSPs. We expect these investments will fall into two main categories: Microsoft365 Lighthouse and Multi-Tenant Management for MSPs. Therefore, Microsoft will continue targeting the SMB market through support for MSPs and their go-to-market strategy. Overall, if you are an MSP and looking to grow, 2021 might be your year! A MariaDB survey found that 40% of companies report accelerating their move to the cloud as a result of the pandemic – signaling a ripe landscape for continued investment and revenue to come in the new year.
MSPs Must Reevaluate Their Security Approach
Security concerns will remain a top challenge for MSPs in 2021. Security provisioning will continue to be a pain point, as many MSPs will lean on Microsoft and the public cloud to help bridge the gap. With Microsoft tightening its requirements for partners' security measures, MSPs will need to adapt their practices to comply. As a result, the ecosystem can anticipate other vendors to follow Microsoft's lead on their own platforms. Heading into 2021, MSPs must be more mindful of how they're handling security and rethink their strategies. This may mean eliminating some of their internal shortcuts to efficiencies to ensure heightened safety measures are handled appropriately. Enterprise Strategy Group’s recent report found that about 40 percent of organizations now utilize Virtual Desktop Infrastructure or Desktop-as-a-Service solutions, with more than 60% of respondents citing security and IT efficiency as the top metrics justifying VDI and DaaS investments. Changing the authentication and security approach will cause some MSPs a few headaches, but it will pay off in the future. For example, MSPs will need to eliminate shared accounts and give each staff member an individual login with proper MFA and conditional access controls to help continue to manage customers' environments on Microsoft's powerful and complex cloud. This authentication makes it easier to log, audit, and ultimately detect phishing attacks on MSPs. 2021 will be the year of security and MSPs adapting to the new world.
Recurring Vs. Project Revenue Models: The Battle Ahead
Although 24 percent of MSPs report revenue between $1-2.4 million in annual revenue, more than half of MSPs note that over 50 percent of revenue came from recurring services. However, MSPs may need to move away from a recurring revenue model. Yes, you read that correctly. Last year, the best practice for a robust MSP business model was to build a recurring revenue stream. However, project and one-time revenue will help MSPs hedge business risk this year. Given the economic situation and many SMB customers going out of business, MSPs with long-term, front-loaded recurring revenue contracts are more vulnerable than ever. After investing heavily into the customer relationship initially, MSPs can get stuck holding a bill for customers who aren't able to pay. In 2021, MSPs can't be as picky with recurring revenue versus project revenue until the market is more stable. In sum, recurring revenue is significant yet vulnerable.
The year of the strategic MSP is upon us! There's a lot more to uncover when it comes to MSP strategy for the year ahead, and our team is looking forward to unpacking the future of MSPs as we continue our collective journey through these unprecedented, yet innovative times and at our virtual NerdioCon event in the new year. Whether you’re an MSP battling a revenue model strategy or seeking more secure options for your customers, the year ahead will unfold many challenges that will unlock the inner strategist that MSPs must become to remain valuable assets and trusted business partners.
About The Author
As a creative technologist with an aptitude for business, Vadim Vladimirskiy is the CEO and cofounder of Nerdio, and the dynamic force behind the creation and evolution of its products, Nerdio for Azure and Nerdio Manager for WVD. Vadim is a dynamic, sought-after speaker who enjoys educating and engaging attendees at the latest channel, technology, and Microsoft events like Microsoft Inspire. Vadim is also a lifelong entrepreneur. He started his first IT consultancy business in high school and has held a strong passion for technology and innovative progress every day since. When he's not actively pushing the IT envelope, Vadim loves running and spending time with his wife and four boisterous kids.