Decision time for managed services  

DECISIONS on which cloud suppliers to work with, which services to use, the pace of expansion and the management of systems and users, particularly those on mobile links, are being debated; there is little history and experience on which to build, however. The Managed Services & Hosting Summit 2015, the UK’s leading managed services event for the channel, aims to answer these questions with delegates drawn from director/senior management level representatives of Managed Service Providers, Systems Integrators, Solution VARs and ISVs. http://www.mshsummit.com/register.php

Size of provider is an issue to be debated: the big consumer brands – Amazon Web Services, Google, Microsoft and so on, are in the public eye, but business users tend to want specialist suppliers and channels with vertical market knowledge, many of whom seem to be carving out a useful niche business.

As Christian Nagele, Autotask’s General Manager of RMEM, told IT Europa earlier this year: “We come across plenty of small-medium MSPs who deliver excellent service for their clients whilst driving very profitable revenues for themselves. Growth is often slow, organic and achieved through referrals. They are very profitable as the business is efficient and optimized (through effective processes and tooling as well as careful customer selection)”.

The market may be getting harder to call, however. Researcher Tariff Consultancy Ltd forecasts that while data centre space and power in Europe will increase by almost 20% from the end 2015 to the end of 2020 with the UK being the largest single market in Europe, pricing has reached its limit, with average rack space and square metre pricing forecast to decline by 10% over the 5 year period. This will put pressure on those counting on a rising demand and consequent returns. One further twist will be the rate of consolidation; already acquisitions are running at a peak; it is not just customers, but skills and expertise that are forcing the pace.

Overall, managed services revenues in Europe rose by 3.5% between 2013 and 2014, says the IT Europa report, though this masks rapid growth in the Nordics and shrinkage in Spain and Portugal. Total revenues for all companies in the report total $294.28 billion (Ä262.78 billion) and total staff number is 1.4 million, although again there are major differences. Most are employed in the UK, France, Germany and Italy.

Critically, Europe is not one market for managed services provision, as the IT Europa report finds; there are major variations in the scale of its use in each country and region; the report shows that the national telecoms providers still have a major advantage when it comes to provision. The fastest growing part of Europe for managed services is the east, but from a very small base; Poland, the Czech Republic and Bulgaria saw the biggest growth in turnover among managed services businesses last year. Some of these countries have very small scale managed services industries so far. Russia also has a tiny managed services provision. On the horizon for service providers is the expansion of Internet of Things (IoT) where its use in automotive, healthcare and other vertical sectors is expected to scale dramatically. This is an area, however, where in spite of many announcements and plans by large vendors, there appears to be little in the way of returns for IT channels other than larger integrators, so far.

Another issue for the whole industry is the emerging crisis in skills as the new technologies and sales methods rquire changed processes and customer engagement models. Some of the most sought-after information by resellers and service providers in managed services has been related to channel restructuring and the move to a revenue model which has major financial implications.

The big players among managed services in Europe reflect the global position, with IBM Global Services, Accenture and Capgemini in the top ten, but there are also national powerhouses such as T-Systems International GmbH, BT Global Services, Telecom Italia, Alcatel Lucent and Nokia Solutions and Networks. This shows that the comms incumbency is still a strong factor, and that managed services is still being built on the back of telco provision.

This is an industry in transition, where finding the winners means closely monitoring their management of change, commitment to evolving custom needs and in planning for the future.