Managed Services trends for 2023 will largely be impacted by the overall economic conditions in the U.S. and abroad. The three big economies – the U.S., EU, and China are all slowing down, according to Kristalina Georgieva, the head of the International Monetary Fund. This macro-economic trend will create disruptions for managed services providers.
The list of trends below highlight how Managed Services Providers can shift their models to accommodate customer needs.
1. Financially Unstable MSPs Will Fail in 2023
It goes without saying that if you don’t have the right cost and profit structure in place, that you won’t succeed. This is especially true during a trying economy. Managed IT Services Providers that aren’t charging their customers enough and keeping their costs low may run into ruin or have to take drastic measures to prevent them from going under. This is likely to have a negative impact on their customers, which may provide a boon to well established managed services providers.
Startup and existing managed services providers should evaluate their costs and prices and adjust accordingly where they can.
2. SMBs Will Outsource More in 2023
Small Businesses in the U.S. will need to weigh their costs and options in 2023. Many may turn to outsourcing IT services versus relying on in-house IT staff to achieve cost savings. This is likely to be a boon for Managed IT Services Providers. Not all SMBs will outsource their entire IT department to an MSP but will outsource some functions. Those functions will likely include Engineering-level talent across system administration, network management, cybersecurity, and cloud management.
MSPs should take inventory of their current customer needs and quickly re-position their services.
3. Talent Challenges to Persist in the Year Ahead
The talent gap is here to stay as a new normal. In December, 2022, the U.S. created 200,000 more jobs and had an unemployment rate of 3.7%. The unemployment rate is still fairly low despite a recession and will likely not improve the situation for tech talent.
According to the Bureau of Labor Statistics:
- The demand for Network and System Administrators is growing at 3%
- The demand for Network Architects is growing at 4%
- The demand for Computer and Information System Managers is growing at 16%
- The demand for Information Security Analysts is growing at 35%
Despite the tech industry’s recent and massive layoff, many who were laid off will find it difficult to re-tool their skillsets to meet the demands of IT operations. Not all tech skills are equal, of the same caliber, or even the same disciplines. The massive layoffs in the tech industry targeted every role. Those who had skills as a software developer would not likely retool their skillsets into IT and those in IT may find it difficult to become software developers.
Managed Services Providers can be at the receiving end of a boon if they hire and hold on to top IT talent.
4. Supply Chain Issues Will Maintain its Trend in 2023
China’s recent shutdowns and zero-COVID policy have continued to delay products reaching the U.S. Technology manufacturers have been hit hard, especially network infrastructure. Many manufacturers of network switches and firewalls have reported up to a year or more of wait times before products arrive. Products that were ordered last February are still showing an estimated time of arrival of greater than 6 weeks, which means that their estimated time of delivery is in fact, unknown.
To combat this, Managed IT Service Providers (MSPs) will have to get creative. They will have to evaluate their partner landscape to understand who can help them deliver project outcomes on time for their customers. Delayed projects will likely lead to missed deadlines and unhappy customers. MSPs who can get products will be differentiated and win deals. MSPs who do not adjust their partners to meet customer expectations will lose.
5. Spending Cuts Will Trend Upward
Many SMBs are re-evaluating their purchasing decisions in 2023 due to the market downturn. If a small business or enterprise can delay a purchasing decision, they will do that to avoid burning through cash. That means large infrastructure projects and strategic initiatives may be put on hold for initiatives that hold a higher degree of trust and business outcome.
Managed Services Providers should focus on aligning themselves with their customers most pressing challenges and issues, like meeting the cybersecurity requirements of their cyber insurance provider, complying with regulatory requirements, and holding on to staff or critical outsourced services.
6. Leasing May Provide a Competitive Advantage
Interest rates continue to rise, sparking small businesses to avoid taking out expensive loans that hit their credit. They may also be likely to rely on their cash for more strategic purposes, such as M&A activities and capital investments to keep their business running.
To help customers with their cash situation, Managed IT Services Providers can introduce leasing as a vehicle to consume technology hardware as a service. This may be especially useful for a business who can depreciate the assets of the lease in the first year, if they can use Section 179 of the tax code.
7. Cybersecurity Challenges for MSPs and SMBs
According to Cyberseek.org and NICE (National Institute for Cybersecurity Education), there are currently around 769,736 job openings for cybersecurity positions across the country. Naturally, the largest states have the most openings. Smaller states such as those in the Midwest, like Minnesota, Iowa, Wisconsin, North Dakota, and South Dakota have fewer openings but nonetheless the need is there. That is especially true for Minnesota where the major cybersecurity provider Arctic Wolf is headquartered.
The talent gap for cybersecurity professionals is a big challenge for Small Businesses who can’t afford to hire a Chief Information Security Officer, or Security Analyst.
This challenge will be a boon for Managed Services Providers who build a practice around offering services like managed vulnerability scanning and remediation, vCISO services, managed security services, and Endpoint Detection and Response. It will allow for businesses to consume those as an outsourced model at a fraction of the cost.
8. Increased Demand for SaaS and A’ La Carte Services
Small businesses and enterprises alike will shift more and more to focus on consuming technology as a service. The SaaS model has proved to be effective in reducing expensive IT admin costs and providing more value with roles for application owners. As legacy applications become obsolete, SMBs and enterprises will replace them with applications offered in a SaaS model.
IT and cybersecurity solutions will also continue their shift to SaaS and as-a-service models. Cisco products like Duo, Umbrella, and Meraki have been highly successful in these types of solutions. Other examples include Office 365, Arctic Wolf, Datto, SASE, CASB, and EDR solutions.
Managed Services Providers can continue to innovate by creating custom tailored services that fit these models. Examples include:
- Firewall as a Service
- Infrastructure as a Service (e.g. Managed Azure/AWS)
- Managed Security Services (e.g. EDR and SIEM monitoring and response)
- Backup as a Service
- Disaster Recovery as a Service
Managed IT Service Trends for 2023 and Beyond
The business model of MSPs is to create value through outsourcing while reducing cost of in-house staff. MSPs can create successful opportunities for themselves by shifting their services and solutiosn to meet modern trends. The trends of 2023 will prove to be useful for MSPs that can adjust their business to meet those trends and it will be fatal to those who cannot adjust.