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Industry Research : Survey: Partners Reaping Rewards Of Recurring Revenue
IT service providers that have recurring revenue as part of their business models are continuing to reap the rewards, as well as a continued jump in demand for managed services to serve growing remote workforces, according to the results of an annual IT benchmarking survey by software manufacturer Autotask.
Autotask, which makes IT management software, released the results of its annual "Metrics that Matter" survey this month. The study, conducted by Decision Tree Labs, canvased 1,100 IT service providers from across the globe, two-thirds of which are in North America.
The study found that recurring revenue contracts were being renewed overwhelmingly. It also determined which IT services are driving the most demand and how much providers are expecting to grow in 2016
Three-quarters of IT service providers surveyed reported that 80 percent or more of their contracts were being renewed, proving that the value of their services is in higher demand worldwide.
The three biggest reasons for the renewals? Demand for managed services (by 53 percent of respondents), better customer service (57 percent), and demand for cloud services (36 percent).
According to Jim Bittle, the president of Frederick Md.-based MSP CommPutercations, the high number of renewals is pointing to the maturation of clients in the MSP market.
"Once the clients realize that the MSP model really does save them money and they now have a trusted partner and adviser, they want to keep that relationship," he said.
Eighty percent of service providers said they plan to hire in 2016, according to the survey. A decisive majority - nearly 65 percent – are hiring service desk professionals and building out their managed services offerings with a deeper IT service talent pool.
That 65 percent is more than twice the percentage of providers that said they were hiring sales representatives. Meanwhile, 23 percent said they will hire for the operations segments of their businesses.
According to the survey, the largest percentage of MSPs, 36.7 percent, said they expect between 5 and 15 percent growth in 2016, with 31.2 percent foreseeing growth of somewhere between 16 and 50 percent, and only 10.3 percent of respondents predicting slight growth of less than 5 percent.
But according to Bittle, providers that believe they’re going to grow 5 to 15 percent are being "a bit conservative."
Bittle said when one takes into account all the potential growth from new customers and the addition of cloud services, "you could be easily looking at 25 to 35 percent."
As endpoints and service providers continue to grow, much of what they do continues to be done in the cloud.
According to the survey, 80 percent of respondents said they rely on cloud delivery to effectively manage their clients' endpoints.
Of those same respondents, 36 percent reported that that the demand for cloud services was the biggest reason clients renewed their contracts.
Over the next year, just over half of those surveyed - 55 percent - said they expect the number of endpoints they manage to increase steadily or significantly before the end of 2016, with over 90 percent of those who can gauge growth reporting that they’re already experiencing some sort of growth.
The growth of the number of endpoints, however, is making management and security more difficult for them and their clients to solve.
Bittle said service providers like his are concerned about the increase of potential security threats with an increased number of endpoints, adding that the attention some breaches have gotten have educated clients on security’s importance.
"We are seeing clients now letting us lock things down more now than in the past," he said. "I think most clients are very concerned about security now. It's a hot topic."
Bittle said his company recently started using a threat-monitoring solution that has "been a real eye opener for everyone." He said his company is trying to be "very proactive when it comes to security."
Posted by Laura Collins, Editorial Management
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Published: Monday, January 4, 2016