Predictions for the Managed Services Industry in 2010

It’s that time again to take stock in the year we leave behind and look forward to the year ahead of us. While 2009 will go down as a very tough year for a lot of MSPs, there are some important signs appearing even now about what 2010 will look like.

Credit to the channel
While banking and traditional lending sources froze assets in 2009, leaving many MSPs gasping for breath, a silver lining emerged this year that I believe will continue and grow into the new year.

Venture Capitalists and Private Equity firms have been emerging from all corners of the globe to invest in managed services. While this may not seem radical to some of you, the fact that investments into Vendor companies seem to be on the decline. This tells me that absent a robust banking/lending market, private equity is seeking a way into the hands of those most likely to provide a return on investment. MSPs, this is a very good sign!

M&A Activity To Increase
Some noteworthy deals happened in the managed services industry. While the MSP deals (like ClearPointe/TecWatch and others) were overshadowed by more noteworthy vendor deals (like McAfee/MX Logic, Dell/Perot Systems, and others), there are a lot of MSPs right now planning a sale in 2010. Granted, many of these “MSPs” are probably more like VARs or RSPs (Reactive Service Providers) and simply cannot handle another year like 2009.

Coupled with the potential investment from the PE and VC communities, 2010 will likely go down as a very big year for M&A in managed services.

MSP Leaders Pull Away from the Pack
It has been a long time in the making but finally we are seeing a group of very mature MSPs separating themselves from the rest of the RSP group. There are probably a few hundred in total but not much more than that and they are eager to prove that their services are different from what the other service providers are offering.

The difference between real MSPs and the RSPs is growing every day and will continue this trend well into 2010.

Master MSPs Continue to Evolve
Several years ago the “master MSP” term first came into popular usage. Today, the Master MSP has not only achieved mainstream acceptance in our industry but the role of this company has also evolved. Master MSPs are becoming master distributors or aggregators of all form of goods and services to the channel. Vendors are increasingly relying on Master MSPs to reduce their own sales and support costs to the channel as well as ensure the integrity of the brands being offered.

In 2010, look for more Master MSPs to come along as well as continue to solidify their role as leaders in the channel.

End-User Desperation
While there has been a mild lessening of the sense of panic felt early in 2009, the economy is not likely to recover to the extent many had hoped in 2010. That being said, continued pressure on businesses to control costs and extract more value from their IT assets will place even more importance on managed service providers and the role they have to play.

Conclusion
While the economic outlook for 2010 is still well in doubt, all indicators are that demand for managed services will continue to climb. This increase in demand will place even more pressure on MSPs to fulfill their obligations and prove themselves from the competition. Real MSPs will have to work harder to separate themselves from RSPs in an effort to prove value and daily demonstrate trust.

In the end, the outlook for real MSPs remains very strong for 2010.