SolarWinds has just released a new report on the health of managed services across North America and Europe. The findings show managed services continue to drive profitability for IT service providers and reveal opportunities for future growth.

SolarWinds partnered with The 2112 Group to create the report, entitled, “2018 Trends in Managed Services.” The findings are based on data from its benchmarking tool, MSP Pulse, which provides deep insight into how IT providers compare against their peers on revenue, profit, service selection, sales capacity, customer engagement, and growth potential.

“Competition is fierce among managed services providers. To develop—or keep—an edge, it helps to compare yourself against the competition,” stated John Pagliuca, senior vice president, SolarWinds MSP. “In our 2018 Trends in Managed Services report, our research shows how the managed services model is performing in the market and how IT providers compare with the industry at large—helping them to start thinking about what strategic changes they should consider making when it comes to their managed services portfolio. The research offers valuable, deep insights not only into the performance of today’s managed services providers, but also into their habits, practices, and aspirations.”

The report claims that the managed services model is strong and offers healthy margins.

It says that the average channel partner from North America gets 28% of gross revenue through managed services and 24% in Europe. For businesses that identify primarily as MSPs (rather than being IT consultants or value-added resellers), the average percentage of gross revenue derived from managed services was 43% in North America and 38% in Europe.

The results also show there is an opportunity for growth if customer retention skills are exercised.

IT businesses onboard new customers each month but lose almost as many:

In North America, four new customers are gained and three are lost monthly.
In Europe, five new customers are gained while four are lost monthly.

Another key finding showed that companies with specialized sales staff tend to perform better:

Smaller IT service providers (with less than $500,000 USD in revenue) tend to not employ dedicated salespeople. (North America and Europe)
Providers with 3x the average number of salespeople—two in North America and four in Europe on average—tend to see 25% growth per year. (North America and Europe)

Many of the respondents have stayed close to their IT and network management roots. The top services offered include:

Endpoint management (82%), network management (79%), and server management (76%) in North America
Endpoint management (76%), network management (72%), and complete managed services (70%) in Europe

Among basic security services and products, respondents offer:

Network security (79% in North America, 81% in Europe)
Endpoint security (79% in North America, 78% in Europe)
Application security (30% in North America, 19% in Europe)
Security assessments (23% in North America, 11% in Europe)
Security information and event management (23% in North America, 16% in Europe)
Security operations center services (12% in North America, 5% in Europe)

Many providers are already moving in the direction of higher-value services, particularly around managed security (57% in North America, 46% in Europe). However, even though there is a growing market demand for detection- and remediation-focused security and cyberthreats continue to rise, few are yet to specialize in offering advanced security, like security information and event management (SIEM), security assessments, or security operations center (SOC) services. To make the move into advanced security, there is an option for IT service providers to offer specialized services by partnering with a trusted security provider. In 2018, SolarWinds MSP launched its Threat Monitoring Service Program, which allows IT providers to partner with a security firm that can help deliver 24/7 SOC services without having to invest heavily in their own SOC and specialized security professionals.