Managed service providers have become an increasingly prevalent part of the business world. With more and more businesses ever dependent on technology, having trusted partners to manage cybersecurity, cloud solutions and other IT needs is of the utmost importance.
Of course, effective IT management requires significant effort, and managed service providers have played a crucial role in filling this ever-evolving market need. By providing a wide range of day-to-day IT services, managed service providers allow other businesses to focus on serving their customers without worrying about service interruptions, system downtime and other technical issues. It should come as no surprise, then, that the managed services market is expected to reach $393 billion by 2028.
As Rick Jordan, founder and CEO of ReachOut Technology explains, however, the industry has hardly reached a point of complacency. With extensive experience acquiring up-and-coming managed service providers, Jordan has a front-row seat to what is currently shaping the industry.
“The future of managed service providers is strong, but with increased competition and ever-changing approaches to how we use technology, the challenges will be there, too,” he says. “In my experience acquiring promising MSPs, there are a few key trends that indicate where the industry is headed in the next few years.”
Verticalization Around Specific Industries
While managed service providers have previously positioned themselves as “one size fits all” solutions that could work for any company in any niche, Jordan has seen an increasing number of IT providers shift their focus to specific industries.
“Becoming verticalized around a particular niche allows MSPs to deliver more sustainable value for their customers,” he explains. “Focus on a specific vertical allows MSPs to better identify client pain points and adapt their services as needed. We see MSPs leveraging extensive experience with a particular niche — or even a professional background in that area — to focus on verticals like healthcare, government agencies, manufacturing and so on. That level of focus allows them to deliver higher-quality service that better meets the IT needs of businesses in that particular industry.”
There are several ways a managed service provider can achieve successful verticalization. As Jordan explains, “Formerly generalist MSPs will often analyze their current client base to identify which industry or use needs are their biggest sellers, identify their own interests or passions and of course evaluate the market potential and unique needs for a specific vertical. These crucial assessments are key for a successful pivot.”
The most successful managed service providers then dedicate their resources to these verticals, hiring experts who can increase their knowledge of that domain, offering additional training to staff and enhancing core competencies to provide better solutions for their vertical.
Building Vendor Ecosystems
As part of addressing the specific needs of their chosen vertical, many managed service providers are seeking to provide a more holistic approach to IT — even as they themselves become more specialized.
“Part of the reason why I got into acquiring MSPs is because to truly deliver what their customers want, they need to build an ecosystem that addresses all of a client’s technology needs,” Jordan explains.
“This includes partnering with other vendors and tech providers, in addition to enhancing the MSP’s own ecosystem of tools and solutions. Customers don’t want to have to deal with a dozen different MSPs to manage their technology needs. In a perfect world, they want all their technology needs handled in one place.”
This is especially important as many managed service providers verticalize around a specific tech offering. While this enables them to deliver higher-quality service to their customers, it can create roadblocks when clients prefer an “all-in-one” solution.
Hence, Jordan anticipates more acquisitions in the future, as larger managed service providers acquire companies with a strong skill set for specific verticals. Even as larger vendors remain focused on serving a specific industry (such as healthcare), they will be more likely to want to utilize other managed service providers so they can offer a broader range of IT solutions.
Of course, ecosystem-building doesn’t have to happen exclusively through acquisitions. Strategic partnerships where various managed service providers offer their services together — or integrating another MSPs services into their own platform — could also serve as a win-win solution.
Regardless of the specifics, managed service providers will need to perform extensive due diligence to ensure that all parties involved are able to deliver a high standard of quality to their clients.
What Does the Future Hold?
Jordan readily admits that there is no “guaranteed” look into the future of MSPs. “Even when we can identify key trends and best practices, there is no telling how the industry will continue to evolve and change in the years to come,” he says.
“That’s a big part of why I got into the business of acquiring MSPs — because you never know when someone might come up with the next great innovation that completely shifts the industry norms and best practices. That being said, the trends we’re seeing right now are a good indication of where things are headed. It’s an exciting time in the world of MSPs, and ultimately, these movements are poised to benefit everyone who stands in need of them.”