Customers moving beyond cost issues in considering managed services

data indicate that customer knowledge of is up significantly over last year, and that emphasis on cost saving is no longer their main concern. This should impact the way that MSPs sell their offerings.

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, senior director, industry analysis, CompTIA

CompTIA’s Fourth Annual Trends in Managed Services Study is out, and it has some interesting findings. The number of end users who are very familiar or even somewhat familiar with managed services compared to the last study jumped significantly. The data also indicate that customers are engaging managed services for reasons that go beyond simply seeking cost savings, which had been more important in the past.

The 2013 study, found that 57 per cent of respondents cited cost savings as a primary reason to adopt managed services. In contrast, this year only 30 per cent of respondents said cost savings were a primary driver.

“Customers are moving beyond cost, looking at managed services as more than just a way to save money,” said Carolyn April, senior director, industry analysis, CompTIA. “This year many are moving for more strategic reasons, like having IT people work on strategic projects to drive revenue for the company, and turning the IT functions that cost money over to an . I see this as a real positive.”

April said this was a particular trend among smaller organizations.

“Some of the smaller companies who used their most tech-savvy person on staff for IT have moved to using an MSP instead,” she said. “That way they are paying for something they hadn’t paid for before, but they also get that tech-savvy person back as a full time resource.”

Compared to previous years, cost saving expectations were also down. The majority (54%) of customers expected only modest cost savings due to managed services, while under a third were looking for significant reductions to the IT budget. Twelve per cent expected the move to managed services to be cost-neutral, but to generate non-financial benefits in other areas. These data were pretty consistent across company sizes, although interestingly, nearly a quarter of smaller firms (under 99 employees) expected the move to be cost-neutral.

April also indicated that customers are also using managed services to access emerging technologies like cloud computing and mobility solutions.

The study also found a much higher degree of familiarity with the term ‘managed services’ as well as greater adoption. 52 per cent of respondents said they were ‘very familiar’ with the concept of managed services, while another 40 per cent said they were somewhat familiar. With rounding, that’s a total of 93 per cent. In comparison, last year only 83 per cent fell into these two categories, of which only 36 per cent were very familiar – 16 per cent less than this year.

“That’s a dramatic jump,” April said. “Overall, compared to a year ago, there is greater awareness and a higher degree of familiarity, which leads to higher adoption rates.” The study found that 49 per cent of respondents outsource either the majority or a portion of their IT needs to a third party. However that also includes classic as well as managed services, and the study concludes that approximately 35 to 40 per cent of that total ecosystem represents the subset of MSP users.

April acknowledged that customers have taken a long time to become more comfortable with the managed services model, considering that it has been around for at least a decade.

“Managed services has been touted for a long time as the thing that will save the channel, but adoption had been a bit plodding, and I was beginning to wonder if we had seen a plateau,” April said. “This year, however, we saw a major uptick.”

The study found that almost 40 per cent of the companies surveyed think their current IT management methods are working just fine – which means that 60 per cent are looking for some type of improvement. That creates an opportunity for MSPs, April said.

“The takeaway here is 6 in 10 said it could be better,” she said. “That’s a big opportunity for MSPs to go in, and it’s a good talking point for the sales conversation.”

The other data from the study suggest that these sales conversations should no longer lead with cost savings and price issues, but should instead focus on improving operational efficiency and IT reliability, enhancing security and compliance, and taking a more proactive approach to IT maintenance and upgrades.

“Leading with cost shouldn’t be the lead sales pitch now,” April said. “Everyone can say they will save the customer money. However, unless you can show them exactly how, which has always been difficult with managed services, where ROI is hard to calculate, making this case can be difficult. Given that cost is less of an issue for customers, MSPs should be aligning to their pain point and leading with that.”

In addition, April pointed out that this move away from price is a good thing for MSPs.

“Selling on price just commoditizes themselves monetarily,” she said. “There’s zero reason to commoditize right now.”

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