Hottest 2016 Markets for the Ambitious MSP

Two top organizations that carefully track Managed Service Providers (MSP) and the channel recently released their research and views on the hot technologies for 2016. These predictions aren’t ironclad, but they do give some insight into what the market and IT consumers are thinking. You might even get a new business idea or two from these lists.

Smart MSPs don’t stand still. Often they launch new services that are adjacent to ones they already have, making an easy and natural extension for existing clients. Some take a bolder stance, and go into brand new businesses that are hot, but have little to do with the existing service portfolio.

CompTIA, a long standing organization that serves the channel, releases its IT Industry Outlook 2016, an annual report. This free, extensive report, examines the overall IT market, the state of the channel, and the hottest technologies.

Meanwhile the Channelnomics Top Technologies for Growth in 2016 report is available for free in its executive summary form.

There is plenty of good news for MSPs and other channel partners. First, the IT market is growing, which is good news for all. “For 2016, CompTIA projects a worldwide IT industry growth rate of 4.9% in current dollars, with upside potential of 7.1% and a downside floor of 2.7%,” CompTIA said.

Just as good, the channel still manages to drive a majority of the action. “The traditional rule of thumb is about two-­thirds of non-­consumer IT hardware and software is sold through indirect channels. This covers the different types of channel partner firms, such as VARs, solution providers, integrators, MSPs and related, as well as distributors, retailers and any other type of intermediary involved in providing the product or service to the customer. Applying the 66% figure to an estimate of U.S. hardware and software sales, yields a ballpark figure of $260 billion flowing through or influenced by the channel,” the study found.

Top IT Growth Occupations in 2015 (Percent Change)

  1. Cybersecurity Analysts
  2. Web Developers
  3. Software Developers, Applications
  4. Software Developers, Systems Software
  5. Systems Analysts
  6. IT Support Specialists
  7. IT Managers / Directors / CIOs

Source: CompTIA

There have been fears in the IT and channel press that the channel should be bracing for a fall. There have been changes, such as break/fix services outfits transitioning into the more solutions-focused MSP space. But there has been no contraction. “Government data suggest the number of firms that could be classified as channel partners has been relatively stable over the past few years,” CompTIA believes.

Security Still Red Hot

It is little surprise that security solutions are looking at another great year in 2016. Hacker and malware threats keep getting worse. This is a perfect area for solutions providers which not only provide the technology, but offer expertise, configuration, and, oftentimes, management as well. And this category is expanding. “This category is no longer narrowly defined in the traditional sense of firewalls or antivirus, but rather, a broad suite of tools and safeguards designed to combat the ever-­expanding universe of security threats. Similar to cloud, expectations are already high for security so it is notable that 43% of IT industry executives believe there is the potential for the security category to over perform,” CompTIA said.

Security can no longer be simply reactive. You have to take charge of your own defenses. “This year, ongoing security breaches across a wide range of industries and companies will add a proactive element to the security approach. Companies will increase activities such as penetration testing, external audits, and end user evaluations that lead to investments in new security training platform,” CompTIA said.

Information sharing is just a critical. “As metrics are developed around these areas, companies will also begin to publicly disclose the results of their tactics. As the security balance shifts further away from prevention and more towards detection, active measures will be needed to keep ahead of the curve.”

Expectations for 2016 Product Performance
Expectations for 2016 Product Performance

IoT: Small Simple Devices on Fire

The Internet of Things (IoT) has been a quiet revolution, and this movement has been in place for decades largely in the form of intelligent sensors that can communicate back to a host. That definition has been busted wide open, and now there is all measure of IoT devices – from home automation to fleet trackers and agricultural sensors – and everything in between.

The real issue is keeping these ‘things’ secure. As IP devices, they can be easily commandeered by hackers and turned into bots, often spreading spam or viruses.

Telecom has Modest yet Important Growth

It seems odd that a market growing at 3.4% is considered hot, but the telecommunication space isn’t just moving at a decent pace, it is the underpinning of many services, and the bulwark upon which the entire cloud is built.

“Looking ahead, the appetite for bandwidth shows no signs of slowing. Beyond the existing installed base of Internet-­enabled devices, if lofty IoT projections come even close to materializing, billions of new ‘always on, always connected’ objects will come online. With spectrum and network infrastructure already at capacity in some markets, this additional demand could stimulate telecom spending.” CompTIA argued.

The Cloud is on the Move

The cloud has massive momentum, and growth is clearly on the cloud side. CompTIA is very bullish. “As businesses continue to take a cloud-­first approach with new technology initiatives, expect this mindset to further push ‘cloud’ to the same place as ‘electricity’ or ‘Internet’—so prevalent that it simply becomes the system of record” the group said.

The cloud is also changing the business model for providers such as MSPs. Unlike hardware and on-premises software which both have built-in margins, the cloud has much less wiggle room for the channel. “In a cloud-­based ‘as-­a-­service’ world, the main source of channel profit – vendor margin – is changing. In many cases, vendor-­provided margin now plays second fiddle to what the partner earns on his or her own raft of services. And with more channel firms calling consulting services their primary business model, this trend will only continue,” CompTIA said.

This change means that vendor/channel relationships are increasing fragile.

The vendors that will win are the ones with the best technology, vision, and partner programs.

“Forty-­eight percent of US-­based channel firms recently described the state of their vendor relationships as either ‘exploratory’ or ‘shifting,’ which means they are taking a look at new vendors to work with or they have made a definitive switch already. Cloud has a lot to do with this, as new, more nimble vendors have emerged and are beginning to build out indirect channels. How the channel makes money from cloud solutions – recurring revenue, referral fees, consulting – has them rethinking the value of some of the more conventional ways that vendors structure their programs and financial rewards,” CompTIA said.

The Channelnomics’ View

Channelnomics has been following the channel deeply for years, through research, news and analysis. Its latest study is its 2016 Channel Forecast.

Like CompTIA, Channelnomics is bullish on the cloud. Its starting point is a reference to research from Clutch, whose survey found that 90% are planning to increase cloud spending.

The good news is that 53% of those surveyed are contracting with an expert, such as a consulting firm, to support the cloud strategy and implementation.

“The ability for a company to use a consulting firm’s experience and expertise with cloud implementation can benefit the company significantly in the long run,” said Duane Tharp, VP of technical sales and services at Cloud Elements, which offers custom data and application integration services, quoted Channelnomics. “An in-house IT team may not have the same level of experience in cloud implementation. The company may become chained to the existing process instead of creating something new. Overall, hiring an outside consulting firm provides a fresh look, new ideas, and opportunities for growth, knowledge and expertise.”

The yet unreleased 2016 Channel Forecast Report has some of its own numbers to add. “Research from the 2112 Group confirms that channel partners are growing their cloud businesses, with the average solution provider earning up to 16 percent of its gross revenue from the sale of cloud products and services. According to 2112’s forthcoming 2016 Channel Forecast Report, solution providers see tremendous growth potential in cloud products and services, with 55 percent investing in cloud partnerships to facilitate growth in 2016,” Channelnomics said.

Other hot technologies include:

  • Backup and business continuity
  • Unified communications
  • Voice services
  • Wireless networking
  • Virtualization
  • Storage

Conclusions from these studies are in complete alignment with Kaseya’s latest annual Global MSP survey.  Find out what characteristics ‘Bionic’ MSPs ―those that report average annual MMR growth over 20%  — by downloading Building a Bionic MSP Practice.

Posted by Doug Barney
Doug Barney was the founding editor of Redmond Magazine, Redmond Channel Partner, Redmond Developer News and Virtualization Review. Doug also served as Executive Editor of Network World, Editor in Chief of AmigaWorld, and Editor in Chief of Network Computing.
Laptop with Game Over on the screen

Lessons Learned from Windows XP End of Life

Windows 7, as well as Windows Server 2008/R2, reach the end of life on January 14, 2020. Less than sixRead More

artwork of computers transfering files

How to Prepare for Windows 7 and Windows Server 2008 End of Life

Time is running out for support for Windows 7 and Windows Server 2008/R2. End of life for these operating systemsRead More

Woman wearing 90s clothing with VHS in hand

Congratulations to the Winners of Stranger Things in IT Contest!

Congratulations to all the winners of Stranger Things in IT contest! In your fights against Demogorgons and other IT monsters,Read More

Hourglass on top of laptop keyboard

What Does End of Life for Windows 7 and Windows Server 2008 Mean for Me?

Tick tock, tick tock, tick tock. The clock is ticking. Windows 7 and Windows Server 2008/R2 are reaching their endRead More

Connect IT Asia-Pacific - Don't Miss the Premier IT Management Event of the Year - Join Us in Sydney 1-3 October 2019 - Register Now