Managed services in the digital wave
The wave of digital transformation has hit managed services as is the case with all other industries. As the digital revolution accelerates, customer demands and expectations have also changed. On the same subject : Why Dynamics Customers Choose Managed Services. This change has led companies to digitize their processes, products and services.
According to TSIA, trends show that Managed Service Providers (MSPs) are also digitizing all processes across the enterprise. The ongoing digital transformation has classified MSPs as MSP 1.0 and MSP 2.0, according to the report.
MSP 1.0 are those that provide highly customized solutions that inhibit downsizing, reducing growth and profitability.
MSP 2.0s have standard delivery operating models and use software-based digital delivery capabilities that allow them to increase market space and revenue.
To become an MSP 2.0 and continue to remain one, managed service providers would have to overcome three fundamental challenges. To see also : Verizon Business, Cisco bolster enterprise agility with managed service offerings.
Growth: As per TSIA, the new MSPs show an average growth rate of 20%. While the average growth rate is good, most managed services perform below 20%.
Revenue retention: Recurring revenue creates a reliable and predictive revenue model for the business. TSIA’s research indicates that the revenue retention rate of MSPs ranges from 70% to 100% with an average retention rate of 90%.
Profit: Operating income helps analyze a company’s profitability. It can be calculated by subtracting direct and indirect costs from the total revenue. Based on the TSIA report, the lowest operating income of MSPs was -17% and a maximum of 31%, with an average profitability of 10%.
Conquering digital transformation
MSPs are working to overcome these challenges by investing heavily in a digital delivery platform focused on scaling operations. To see also : Cloud computing and managed services: The thin line in between.
Managed services are continuously growing in proportion to the company’s overall revenues. As a result, industry leaders are focusing on the following areas to overcome challenges and increase growth.
By taking the above steps, MSPs can drive improvements in growth, retention and profitability. These will help lower performing MSPs reach tread state and improve their performance.
Source: Managed Services Trends in 2022
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