Managed Services Reimagined: Empowering Growth in a Technology-Driven World
IDC Spotlight paper highlighting the growth opportunities for managed service providers Atsisiųsti dokumentą SPOTLIGHT
Sponsored by: SAP
Managed Services Reimagined: Empowering
Growth in a Technology-Driven World
January 2025
Written by: Sheena Wee, Senior Research Manager, IDC Asia/Pacific Channels and Partner Ecosystems Research
Synopsis
The rapid evolution of technology, coupled with challenges like
talent shortages and increasing regulatory and technological
complexities, has rendered traditional IT outsourcing models
insufficient for modern businesses as they lack agility and
innovation to support dynamic business needs. This extends to
business process outsourcing (BPO) as well, where organizations
need providers who can adapt to evolving demands and offer
innovative solutions. Organizations now seek strategic and resilient
support that can handle not just day-to-day operations but also
proactively address emerging challenges and drive digital
transformation. This evolving need presents MSPs with a unique
opportunity to capitalize on this growing demand.
The global managed services market revenue reached US$575
billion at the end of 2023 and is expected to reach US$711 billion
by the end of 2028 with a five-year compound annual growth rate
(CAGR) of +4.3% (See Figure 1).
According to IDC’s 2024 Global Partner Survey, partners around
the world highlighted that on average, around 30–40% of their
total revenue comes from delivering services (including IT
consulting, system integration, managed services and support
services).
By expanding their roles throughout the customer journey, MSPs
can unlock new, predictable revenue streams and enhance
customer value while driving profitability. However, MSPs face
challenges in adapting their technical skills and business processes
to support these changes while managing costs and meeting client
demands.
Managed Service Providers (MSPs) must go beyond traditional service offerings to stay
relevant and competitive. By forging strategic partnerships and continuously innovating,
MSPs stay ahead of industry trends, deliver end-to-end solutions, and position
themselves as intelligent, sustainable enterprises with long-term growth and profitability.
KEY STATS
According to IDC research:
» The global managed services market is projected to
reach US$711 billion by 2028.
» On average, 30–40% of global partners’ total
revenue is derived from delivering services.
» MSPs highlight that customer-centric metrics and
profitability are the key indicators for evaluating
their overall performance and business health.
CHALLENGE
As MSPs transition into outcome-based and service-
centric models, they face challenges around cost
management, skill development, and balancing
customer needs with vendors’ frameworks. MSPs
must also evolve their technical skills and business
processes to support these shifts effectively.
WHAT’S IMPORTANT
Economic transformation and revenue growth:
Managed services have evolved from traditional
software sales to subscription-based services,
providing MSPs with predictable, sustainable revenue
streams and margin improvements. This economic
model enhances long-term profitability and
empowers MSPs to deliver value through outcome-
based solutions and “anything as a service.”
End-to-end customer value journey: MSPs are playing
a more prominent role throughout the customer
journey and can differentiate themselves by playing a
more active role. The deeper engagement fosters
customer loyalty and strengthens relationships,
creating stickiness for MSPs.
AT A GLANCE
Sponsored by: SAP
Managed Services Reimagined: Empowering
Growth in a Technology-Driven World
January 2025
Written by: Sheena Wee, Senior Research Manager, IDC Asia/Pacific Channels and Partner Ecosystems Research
Synopsis
The rapid evolution of technology, coupled with challenges like
talent shortages and increasing regulatory and technological
complexities, has rendered traditional IT outsourcing models
insufficient for modern businesses as they lack agility and
innovation to support dynamic business needs. This extends to
business process outsourcing (BPO) as well, where organizations
need providers who can adapt to evolving demands and offer
innovative solutions. Organizations now seek strategic and resilient
support that can handle not just day-to-day operations but also
proactively address emerging challenges and drive digital
transformation. This evolving need presents MSPs with a unique
opportunity to capitalize on this growing demand.
The global managed services market revenue reached US$575
billion at the end of 2023 and is expected to reach US$711 billion
by the end of 2028 with a five-year compound annual growth rate
(CAGR) of +4.3% (See Figure 1).
According to IDC’s 2024 Global Partner Survey, partners around
the world highlighted that on average, around 30–40% of their
total revenue comes from delivering services (including IT
consulting, system integration, managed services and support
services).
By expanding their roles throughout the customer journey, MSPs
can unlock new, predictable revenue streams and enhance
customer value while driving profitability. However, MSPs face
challenges in adapting their technical skills and business processes
to support these changes while managing costs and meeting client
demands.
Managed Service Providers (MSPs) must go beyond traditional service offerings to stay
relevant and competitive. By forging strategic partnerships and continuously innovating,
MSPs stay ahead of industry trends, deliver end-to-end solutions, and position
themselves as intelligent, sustainable enterprises with long-term growth and profitability.
KEY STATS
According to IDC research:
» The global managed services market is projected to
reach US$711 billion by 2028.
» On average, 30–40% of global partners’ total
revenue is derived from delivering services.
» MSPs highlight that customer-centric metrics and
profitability are the key indicators for evaluating
their overall performance and business health.
CHALLENGE
As MSPs transition into outcome-based and service-
centric models, they face challenges around cost
management, skill development, and balancing
customer needs with vendors’ frameworks. MSPs
must also evolve their technical skills and business
processes to support these shifts effectively.
WHAT’S IMPORTANT
Economic transformation and revenue growth:
Managed services have evolved from traditional
software sales to subscription-based services,
providing MSPs with predictable, sustainable revenue
streams and margin improvements. This economic
model enhances long-term profitability and
empowers MSPs to deliver value through outcome-
based solutions and “anything as a service.”
End-to-end customer value journey: MSPs are playing
a more prominent role throughout the customer
journey and can differentiate themselves by playing a
more active role. The deeper engagement fosters
customer loyalty and strengthens relationships,
creating stickiness for MSPs.
AT A GLANCE
Page 2AP7878X
SPOTLIGHT Managed Services Reimagined: Empowering Growth in a Technology-Driven World
Figure 1: Global Managed Services Market Opportunity Forecast, by region
Source: IDC Semiannual Services Tracker, October 2024
The global managed services market is forecasted to reach US$711 billion by 2028. This growth is fueled by
several converging factors — from the specialized expertise that many organizations lack internally, to
recognizing the importance of robust service-level agreement (SLAs) and accountability in their IT operations,
and the desire to mitigate transformation risks associated with major IT initiatives.
While North America dominates the global managed services market, accounting for 46% of the global share,
its growth is expected to be the slowest among the major regions, as the region was an early adopter of the
MSP model. There is substantial penetration of managed services, with many businesses already leveraging
these services. Conversely, Latin America is poised for the most rapid expansion with a +6.7% growth rate,
driven by increasing digitalization and the growing importance of managing IT operations in a proactive
manner. Asia/Pacific and EMEA follow with +5.3% and +4.8% respectively, reflecting the regions’ ongoing
transformation initiatives.
The Changing Landscape in Services
Today’s environment is characterized by unprecedented technological complexity. IT is now a strategic
imperative for organizations to compete and thrive in the digital economy. From cloud migration and
cybersecurity threats to the rise of artificial intelligence (AI) and Internet of Things (IoT), organizations are
increasingly turning to managed services and BPO services to navigate the complexity.
» From reactive fixes to strategic partnerships: MSPs are evolving beyond their traditional IT management/support
and break/fix roles to become trusted advisors and strategic partners. Organizations are no longer satisfied with
MSPs that will do only what they are instructed to do. They want MSPs to bring value by advising them on how to
drive positive outcomes and reduce costs, while guiding them through their digital transformation journey. MSPs
are embracing end-to-end BPO services, as well as business process management and transformation services, to
help organizations optimize business processes to maximize efficiency and operational agility.
» Shift from product-led to service-led sales: The focus is moving away from transactional product sales to a more
holistic, service-centric approach — potentially encompassing consulting, implementation, and ongoing proactive
46%
6%
18%
30%
North America Latin America Asia/Pacific EMEA
Global
managed
services spend:
US$711 billion
by 2028
Five-year CAGR by region
■ North America + 3.4%
■ Latin America + 6.7%
■ Asia/Pacific + 5.3%
■ EMEA + 4.8%
SPOTLIGHT Managed Services Reimagined: Empowering Growth in a Technology-Driven World
Figure 1: Global Managed Services Market Opportunity Forecast, by region
Source: IDC Semiannual Services Tracker, October 2024
The global managed services market is forecasted to reach US$711 billion by 2028. This growth is fueled by
several converging factors — from the specialized expertise that many organizations lack internally, to
recognizing the importance of robust service-level agreement (SLAs) and accountability in their IT operations,
and the desire to mitigate transformation risks associated with major IT initiatives.
While North America dominates the global managed services market, accounting for 46% of the global share,
its growth is expected to be the slowest among the major regions, as the region was an early adopter of the
MSP model. There is substantial penetration of managed services, with many businesses already leveraging
these services. Conversely, Latin America is poised for the most rapid expansion with a +6.7% growth rate,
driven by increasing digitalization and the growing importance of managing IT operations in a proactive
manner. Asia/Pacific and EMEA follow with +5.3% and +4.8% respectively, reflecting the regions’ ongoing
transformation initiatives.
The Changing Landscape in Services
Today’s environment is characterized by unprecedented technological complexity. IT is now a strategic
imperative for organizations to compete and thrive in the digital economy. From cloud migration and
cybersecurity threats to the rise of artificial intelligence (AI) and Internet of Things (IoT), organizations are
increasingly turning to managed services and BPO services to navigate the complexity.
» From reactive fixes to strategic partnerships: MSPs are evolving beyond their traditional IT management/support
and break/fix roles to become trusted advisors and strategic partners. Organizations are no longer satisfied with
MSPs that will do only what they are instructed to do. They want MSPs to bring value by advising them on how to
drive positive outcomes and reduce costs, while guiding them through their digital transformation journey. MSPs
are embracing end-to-end BPO services, as well as business process management and transformation services, to
help organizations optimize business processes to maximize efficiency and operational agility.
» Shift from product-led to service-led sales: The focus is moving away from transactional product sales to a more
holistic, service-centric approach — potentially encompassing consulting, implementation, and ongoing proactive
46%
6%
18%
30%
North America Latin America Asia/Pacific EMEA
Global
managed
services spend:
US$711 billion
by 2028
Five-year CAGR by region
■ North America + 3.4%
■ Latin America + 6.7%
■ Asia/Pacific + 5.3%
■ EMEA + 4.8%
Page 3AP7878X
SPOTLIGHT Managed Services Reimagined: Empowering Growth in a Technology-Driven World
management. MSPs are cultivating client loyalty and generating stickiness by providing service-centric approaches
that proactively address evolving needs, optimize IT performance, and deliver continuous value.
» Outcome-based services: Organizations are engaging MSPs to address complex IT needs and are increasingly
seeking outcome-based services where MSPs are accountable for delivering measurable results and business
value, while assuming some ownership of risks. MSPs are expected to align the provision of services with the way
their clients operate. MSPs must have processes and deal structures in place to support these outcome-based
services. According to the IDC Enterprise Intelligence Services Survey, 2024, 33% of business leaders say that IT
outcome-based pricing schemes will be utilized to deliver service engagements, while 31% say business outcome-
based pricing schemes will be adopted.
» Embracing agility and proactivity: As engagement cycles with organizations become prolonged, and managed
services contracts typically are being structured with a 3+1 option (three-year base with yearly renewal), MSPs are
expected to adopt a long-term perspective aligned with organizations’ business objectives and needs. Coupled
with the rapid pace of technology advancements, MSPs must proactively invest in capabilities that foster agility
and resilience that enable them to deliver the best possible outcomes for their clients.
The Economic Model for Managed Services
The managed services model presents compelling economic advantages for MSPs as they start to play a larger role in
enhancing the entire customer journey. In this expanded role, MSPs become trusted advisors to organizations, guiding
clients through every stage: from initial assessment and tech advisory to implementation, ongoing management, and
optimization. The deeper engagement creates opportunities for upselling and cross-selling additional services, further
enhancing revenue potential and fostering long-term relationships (Figure 2).
Figure 2: Roles of an MSP in an Organization’s IT Transformation Journey
Source: IDC Global Channels & Alliances Research, 2024
Customer
assessment
& tech
advisory
IT
infrastructure
architecture
& design
Building
solutions
Initial
adoption
Go-live,
ongoing
usage
Manage
Upsell,
cross-sell
Continuous engagement
SPOTLIGHT Managed Services Reimagined: Empowering Growth in a Technology-Driven World
management. MSPs are cultivating client loyalty and generating stickiness by providing service-centric approaches
that proactively address evolving needs, optimize IT performance, and deliver continuous value.
» Outcome-based services: Organizations are engaging MSPs to address complex IT needs and are increasingly
seeking outcome-based services where MSPs are accountable for delivering measurable results and business
value, while assuming some ownership of risks. MSPs are expected to align the provision of services with the way
their clients operate. MSPs must have processes and deal structures in place to support these outcome-based
services. According to the IDC Enterprise Intelligence Services Survey, 2024, 33% of business leaders say that IT
outcome-based pricing schemes will be utilized to deliver service engagements, while 31% say business outcome-
based pricing schemes will be adopted.
» Embracing agility and proactivity: As engagement cycles with organizations become prolonged, and managed
services contracts typically are being structured with a 3+1 option (three-year base with yearly renewal), MSPs are
expected to adopt a long-term perspective aligned with organizations’ business objectives and needs. Coupled
with the rapid pace of technology advancements, MSPs must proactively invest in capabilities that foster agility
and resilience that enable them to deliver the best possible outcomes for their clients.
The Economic Model for Managed Services
The managed services model presents compelling economic advantages for MSPs as they start to play a larger role in
enhancing the entire customer journey. In this expanded role, MSPs become trusted advisors to organizations, guiding
clients through every stage: from initial assessment and tech advisory to implementation, ongoing management, and
optimization. The deeper engagement creates opportunities for upselling and cross-selling additional services, further
enhancing revenue potential and fostering long-term relationships (Figure 2).
Figure 2: Roles of an MSP in an Organization’s IT Transformation Journey
Source: IDC Global Channels & Alliances Research, 2024
Customer
assessment
& tech
advisory
IT
infrastructure
architecture
& design
Building
solutions
Initial
adoption
Go-live,
ongoing
usage
Manage
Upsell,
cross-sell
Continuous engagement
Page 4AP7878X
SPOTLIGHT Managed Services Reimagined: Empowering Growth in a Technology-Driven World
The managed services model also fosters greater partner autonomy, paving the way for strategic partnerships. As MSPs
cultivate customer reliance and stickiness through continuous engagement and delivery of outcome-based solutions,
while adopting a long-term perspective aligned with their clients’ organizational business objectives and needs, they gain
greater control over service delivery and pricing. By working with vendors that encourage autonomy and full
management of licenses and services, MSPs can forge strategic partnerships that empower them to differentiate
themselves in the market and build stronger, more profitable client relationships. These partnerships can further
enhance MSPs’ value propositions and competitive edge.
The shift from one-time payment models to subscription-based and outcome-based models drives more predictable
and sustainable revenue streams. This transition allows MSPs to generate recurring revenue, while enhancing financial
stability and facilitating long-term planning.
By building scalable and repeatable managed services offerings (especially if industry-focused or solution-focused),
MSPs can cater to a wider customer market and drive sustainable growth. Such an approach allows the MSPs to leverage
their expertise and resources efficiently and deliver consistent value to clients while maximizing their profitability.
Challenges Faced by MSPs in the Evolving Landscape
» Demonstrating value and differentiation: Competition in the managed services market is intensifying, which
requires MSPs to differentiate themselves through specialized expertise, innovative service offerings, and
exceptional customer experiences. Failure to demonstrate value can lead to price wars and loss of clientele.
» Keeping pace with technology advancements: MSPs face mounting pressure to adapt to the rapidly changing
technological landscape and must continually invest in new skills and capabilities to support their clients in
navigating IT complexities.
» Partners are in transformation mode too: The transition into the evolved managed services model necessitates
changes in technical skills, business processes, and operational approaches. MSPs must adapt their billing
processes, service delivery models, and internal operations to align with this new paradigm — all while delivering
the best outcome for their clients.
» Scaling operations and service delivery: As MSPs grow, they must scale up operations and service delivery
capabilities to accommodate increased demand. Scaling challenges can lead to disruptions, decreased customer
satisfaction, and hindered growth.
» Meeting evolving client expectations: There is a demand in the market for customized solutions and industry
expertise, which may not be as scalable and repeatable for MSPs. Clients also expect adherence to stringent SLAs,
accountability for delivering measurable results and high-value service delivery. MSPs are expected to invest in
developing specialized skills, industry-specific knowledge, and robust service delivery frameworks to meet these
expectations.
SPOTLIGHT Managed Services Reimagined: Empowering Growth in a Technology-Driven World
The managed services model also fosters greater partner autonomy, paving the way for strategic partnerships. As MSPs
cultivate customer reliance and stickiness through continuous engagement and delivery of outcome-based solutions,
while adopting a long-term perspective aligned with their clients’ organizational business objectives and needs, they gain
greater control over service delivery and pricing. By working with vendors that encourage autonomy and full
management of licenses and services, MSPs can forge strategic partnerships that empower them to differentiate
themselves in the market and build stronger, more profitable client relationships. These partnerships can further
enhance MSPs’ value propositions and competitive edge.
The shift from one-time payment models to subscription-based and outcome-based models drives more predictable
and sustainable revenue streams. This transition allows MSPs to generate recurring revenue, while enhancing financial
stability and facilitating long-term planning.
By building scalable and repeatable managed services offerings (especially if industry-focused or solution-focused),
MSPs can cater to a wider customer market and drive sustainable growth. Such an approach allows the MSPs to leverage
their expertise and resources efficiently and deliver consistent value to clients while maximizing their profitability.
Challenges Faced by MSPs in the Evolving Landscape
» Demonstrating value and differentiation: Competition in the managed services market is intensifying, which
requires MSPs to differentiate themselves through specialized expertise, innovative service offerings, and
exceptional customer experiences. Failure to demonstrate value can lead to price wars and loss of clientele.
» Keeping pace with technology advancements: MSPs face mounting pressure to adapt to the rapidly changing
technological landscape and must continually invest in new skills and capabilities to support their clients in
navigating IT complexities.
» Partners are in transformation mode too: The transition into the evolved managed services model necessitates
changes in technical skills, business processes, and operational approaches. MSPs must adapt their billing
processes, service delivery models, and internal operations to align with this new paradigm — all while delivering
the best outcome for their clients.
» Scaling operations and service delivery: As MSPs grow, they must scale up operations and service delivery
capabilities to accommodate increased demand. Scaling challenges can lead to disruptions, decreased customer
satisfaction, and hindered growth.
» Meeting evolving client expectations: There is a demand in the market for customized solutions and industry
expertise, which may not be as scalable and repeatable for MSPs. Clients also expect adherence to stringent SLAs,
accountability for delivering measurable results and high-value service delivery. MSPs are expected to invest in
developing specialized skills, industry-specific knowledge, and robust service delivery frameworks to meet these
expectations.
Page 5AP7878X
SPOTLIGHT Managed Services Reimagined: Empowering Growth in a Technology-Driven World
» Managing increasing costs and achieving profitability: Balancing competitive pricing with the delivery of high-
value services is a challenge for MSPs. They face rising operational costs including software licenses, infrastructure
investments, investments in capabilities, and development/retention of talent resources. To succeed, MSPs must
optimize their cost structures, streamline operations, and leverage automation to enhance efficiency and
profitability.
» Addressing talent shortages: The prevailing shortage of skilled professionals in the IT industry globally hinders
MSPs from scaling up their operations, and also adds to their increasing costs as competitive compensation
packages and investing in employee development become crucial to attracting and retaining top talent to deliver
high-quality services.
» Balancing vendor frameworks and client preferences: MSPs often need to utilize specific vendors’ frameworks
while maintaining flexibility to support client preferences across various platforms. This can be challenging,
especially when integrating solutions from multiple vendors.
Advice for MSPs
According to the IDC’s 2024 Global Partner Survey, MSPs indicate customer-centric metrics and profitability to be the
most important factors used to assess their overall performance and business health. MSPs based in the Americas
prioritize profitability above all, while those based in EMEA prioritize customer satisfaction and customer renewal and
retention. In Asia/Pacific, MSPs view profitability and customer renewal and retention as key success indicators.
To thrive in the competitive managed services landscape, MSPs must prioritize several key areas:
» Demonstrate the value of the MSP model by clearly articulating the benefits of services and showcasing their
ability to deliver results. MSPs may track key business indicators such as customer lifetime value, service delivery
efficiency, and use this data to demonstrate the returns on investments of partnering with an MSP.
» Drive transformation and innovation through continuous adaptation and innovation and staying abreast of
technology developments. Successful MSPs can position themselves as leaders in the space while conveying their
deep expertise in offering end-to-end services; with capabilities in platform solutions combined with mainstream
automation and AI to optimize service delivery, enhance efficiency, and drive innovation for clients.
» Prioritize customer experience and satisfaction by building strong relationships, providing proactive support, and
exceeding client expectations. This will continue to drive long-term business opportunities with the client.
» Offer flexible deal structures to cater to specific client needs by providing a range of pricing models and contract
terms, which demonstrates commitment to meeting individual client needs.
» Foster ecosystem collaboration and partnerships to leverage the resources and capabilities of the wider
ecosystem. This will enable the MSP to expand its service offerings and enhance its market reach to meet clients’
needs and simplify processes for them (i.e., MSP will manage all relationships and see through the execution for
the client).
» Participating in partner programs that align with growth priorities, offering benefits such as enhanced
profitability, increased visibility, MSP-specific support and capability building, lead generation and co-branding
opportunities.
SPOTLIGHT Managed Services Reimagined: Empowering Growth in a Technology-Driven World
» Managing increasing costs and achieving profitability: Balancing competitive pricing with the delivery of high-
value services is a challenge for MSPs. They face rising operational costs including software licenses, infrastructure
investments, investments in capabilities, and development/retention of talent resources. To succeed, MSPs must
optimize their cost structures, streamline operations, and leverage automation to enhance efficiency and
profitability.
» Addressing talent shortages: The prevailing shortage of skilled professionals in the IT industry globally hinders
MSPs from scaling up their operations, and also adds to their increasing costs as competitive compensation
packages and investing in employee development become crucial to attracting and retaining top talent to deliver
high-quality services.
» Balancing vendor frameworks and client preferences: MSPs often need to utilize specific vendors’ frameworks
while maintaining flexibility to support client preferences across various platforms. This can be challenging,
especially when integrating solutions from multiple vendors.
Advice for MSPs
According to the IDC’s 2024 Global Partner Survey, MSPs indicate customer-centric metrics and profitability to be the
most important factors used to assess their overall performance and business health. MSPs based in the Americas
prioritize profitability above all, while those based in EMEA prioritize customer satisfaction and customer renewal and
retention. In Asia/Pacific, MSPs view profitability and customer renewal and retention as key success indicators.
To thrive in the competitive managed services landscape, MSPs must prioritize several key areas:
» Demonstrate the value of the MSP model by clearly articulating the benefits of services and showcasing their
ability to deliver results. MSPs may track key business indicators such as customer lifetime value, service delivery
efficiency, and use this data to demonstrate the returns on investments of partnering with an MSP.
» Drive transformation and innovation through continuous adaptation and innovation and staying abreast of
technology developments. Successful MSPs can position themselves as leaders in the space while conveying their
deep expertise in offering end-to-end services; with capabilities in platform solutions combined with mainstream
automation and AI to optimize service delivery, enhance efficiency, and drive innovation for clients.
» Prioritize customer experience and satisfaction by building strong relationships, providing proactive support, and
exceeding client expectations. This will continue to drive long-term business opportunities with the client.
» Offer flexible deal structures to cater to specific client needs by providing a range of pricing models and contract
terms, which demonstrates commitment to meeting individual client needs.
» Foster ecosystem collaboration and partnerships to leverage the resources and capabilities of the wider
ecosystem. This will enable the MSP to expand its service offerings and enhance its market reach to meet clients’
needs and simplify processes for them (i.e., MSP will manage all relationships and see through the execution for
the client).
» Participating in partner programs that align with growth priorities, offering benefits such as enhanced
profitability, increased visibility, MSP-specific support and capability building, lead generation and co-branding
opportunities.