Managed services growth hints at utility computing potential

THINKstrategies –

As attention on utility computing has intensified, so too has the debate about the future of this movement, with some predicting its demise even before the market has had a chance to take shape.

It is my contention that the resurgence of managed services - not to mention application hosting - is an early indicator of the real potential of utility computing.

Managed services offer customers pre-packaged IT capabilities for a fixed monthly fee. These services address IT needs ranging from messaging and network connectivity to storage, backup and security. As I see it, managed services, along with application hosting, represent a logical first step for many enterprises to migrate to utility computing.

A newly released industry benchmark study that I had the privilege to conduct in conjunction with the MSPAlliance offers proof that customer adoption and satisfaction with managed services is rising.

The joint THINKstrategies/MSPAlliance survey of fifty managed services providers (MSPs) found that the vast majority (83.8%) saw their revenues grow significantly in the last twelve months (Figure 1). Only one MSP reported a decline in revenues in that period. Of those MSPs reporting revenue growth, average growth was 52.7% (Figure 2).

Another interesting finding was that the growth came from three main areas (Figure 3):

1. Customer bases grew 24.5%;

2. More than 90% of clients renewed their contracts;

3. Nearly two-thirds of clients bought additional services after their initial service contracts.

These trends bode well for not only the MSP market, but the utility computing industry as well.

As enterprises become more comfortable outsourcing, or more accurately 'out-tasking', individual IT functions to MSPs, it won't take a huge leap of faith for these same enterprises to consider outsourcing a broader set of their hardware, software and networking requirements to an integrated utility computing service provider.

When you combine the expanding market acceptance of MSPs found in the THINKstrategies/MSPAlliance benchmark study with the growing popularity of hosted applications from NetLedger,, Oracle, PeopleSoft, SAP and Siebel, the signs point toward a receptive market opportunity for utility computing.

It's just a matter of time before the pieces fall into place.

* * *

  Figure 1: Has your managed services revenues increased or decreased in the last 12 months

  Figure 2: What is the % of the increase or decrease in your managed services revenue in the last 12 months?

  Figure 3: What are your renewal rates? What % of your customers buys additional services after their initial service contract?

To obtain a copy of the complete MSPAlliance 2003 Managed Services Benchmarking Report, contact or 530.894.8633.
ITWorld DealPost: The best in tech deals and discounts.
Shop Tech Products at Amazon