Managed Services Growth, PSA @ IT Nation Connect, PSA Competitors

[00:00:02] It's Tuesday, November 12th, 2024 and I'm Dave Solt. Four things to know today. IT and managed services markets facing growth normalization as global demand for cloud and data security soar. IT Nation Connect, ConnectWise expands ASIO with PSA integration, security enhancements and unified data protection. Competitive moves in PSA, Nine Minds launches an open source PSA as SuperOps introduces an AI companion.

[00:00:31] And PAX 8 adds EZDMark 8x8 and Connectie AI. This is the business of tech.

[00:00:41] I'm sorting through a lot of marketing, so let's focus today on managed services and IT services specifically as there's a lot of information to look at just here.

[00:00:51] The managed services market is projected to grow significantly, reaching an estimated $393.02 billion by 2025, according to Straits Research.

[00:01:04] Factors driving this growth include increasing need for specialized managed services providers to handle complex IT infrastructures and reduce staffing costs.

[00:01:14] The rising trend of bring your own devices or BYOD boosts productivity and creates market opportunities as businesses seek managed services to ensure data security across personal devices.

[00:01:26] North America currently leads the market, counting for the largest share with a compound annual growth rate of 12.2%.

[00:01:34] Europe and Asia Pacific were also witnessing substantial growth fueled by the adoption of cloud services and the digital transformation of businesses.

[00:01:43] And a new report from ResearchAndMarkets.com highlights the rapid growth of managed data center services projected to rise from $446.3 billion in 2023 to $1 trillion by 2030, achieving a compound annual growth rate of 12.2%.

[00:02:01] The increasing demand for cloud computing, data security, and complex IT infrastructure driving this growth.

[00:02:08] Notably, the managed co-location segment is expected to reach $364.2 billion by 2030 with a CAGR of 12.2%.

[00:02:19] Service leadership has released its Q3 2024 index, revealing a slowdown in managed services revenue growth, returning to pre-COVID level.

[00:02:29] Despite profitability remaining strong from managed services providers.

[00:02:34] The average adjusted EBITDA for MSPs is at 13.2%, while private equity-backed MSPs reported 17.3%.

[00:02:43] In contrast, value-added resellers experienced significant growth, with total revenue increasing by 12.6%.

[00:02:51] Notably, Europe saw a robust 6.9% growth in managed services revenue, while North America and Australia faced decline.

[00:02:59] A drop in project services revenue impacted profitability across the board, with Europe experiencing the largest decline at negative 10.6%.

[00:03:09] Then Enable, Inc. reported its third quarter 2024 earnings, achieving revenue of $116.4 million, which surpasses analysts' estimates of $114.87 million, marking a 8.3% increase year-over-year.

[00:03:26] Subscription revenue also saw a notable rise, reaching $150 million, a 9.3% increase compared to the previous year.

[00:03:34] The Enable's adjusted EBITDA rose by 22.7% to $44.8 million, with an adjusted EBITDA margin of 38.5%.

[00:03:44] Despite facing challenges like fluctuating foreign exchange rates, Enable remains optimistic, updating its full-year revenue outlook to $462 million and an adjusted EBITDA margin outlook of 37%.

[00:03:58] And in the third quarter of 2024, Google's cloud business outpaced its competitors, growing 35% year-over-year to $11.35 billion, while Amazon Web Services grew 19% to $27.45 billion, and Microsoft Azure saw a 33% increase.

[00:04:17] Analysts at Argus Research highlighted this growth as a sign of Google's increasing traction in artificial intelligence, noting that the cloud's operating margin reached 17% for Google.

[00:04:28] In contrast, AWS maintained a robust operating margin of 38%.

[00:04:33] And despite the competitive landscape, demand for AI services continues to exceed supply, with Microsoft and Amazon both indicating a need for enhanced capacity.

[00:04:42] The global cloud market reached a staggering $84 billion.

[00:04:47] AWS, Microsoft and Google Cloud, which are collectively holding 68% of the market share.

[00:04:54] According to Synergy Research Group, this represents a significant growth of roughly $16 billion, or 23% year-over-year.

[00:05:02] The market has seen an impressive surge, growing by nearly $16 billion over the last four quarters, compared to $10 billion in the previous period.

[00:05:11] Why do we care?

[00:05:13] I wanted to re-baseline the IT and managed services industry, considering the potential shifts ahead.

[00:05:19] The appeal of managed services is very clear.

[00:05:21] For organizations to outsource specialized functions, especially cybersecurity and IT operations, to experts without maintaining extensive in-house teams.

[00:05:31] Service leadership's data indicates a return to pre-pandemic revenue growth rates in managed services,

[00:05:38] and the divergence between MSP and VAR performance indicates a shift in client spending.

[00:05:43] As VARs capitalize on selling and integrating new technology, MSPs may need to reassess how they balance managed services with potential project-based work or product resale,

[00:05:54] especially as revenue growth normalizes.

[00:05:57] The pandemic's sugar high is over.

[00:06:02] With as many breaches and security concerns as I report in this show, it should be obvious that cybersecurity is not just about technology,

[00:06:10] but also the human expertise needed to interpret and respond to complex threats.

[00:06:16] Huntress is focused on elevating SMBs and MSPs around the world.

[00:06:21] Huntress has a suite of fully managed cybersecurity solutions powered by a 24x7 human-led SOC,

[00:06:28] dedicated to continuous monitoring, expert investigation, and rapid response.

[00:06:33] And the proof is the execution.

[00:06:36] Huntress is the number one rated EDR for SMBs on G2.

[00:06:42] Want to know more about the platform?

[00:06:44] Visit huntress.com slash MSP radio to learn more.

[00:06:50] I did just get back from IT Nation Connect, so let's hit the announcements.

[00:06:55] ConnectWise has announced the launch of its Professional Services Automation, or PSA, initiative,

[00:07:00] for the ASO platform, aimed at enhancing the success of MSPs.

[00:07:04] The integration streamlines processes with a unified user interface, accessing the existing PSA database,

[00:07:11] helping to eliminate double data entry and automate manual tasks,

[00:07:15] ultimately reducing costs and improving efficiency.

[00:07:18] Currently in preview across North America, EMEA, and APAC,

[00:07:21] the PSA and ASIO initiative allows partners to utilize live data,

[00:07:26] ensuring seamless integration during the preview experience.

[00:07:29] And ConnectWise introduced its next-gen security solution, ConnectWise Security 360,

[00:07:34] which provides a comprehensive view of security environments and integrates seamlessly with leading security tools.

[00:07:40] The new offering allows MSPs to assess risk exposure across their client base through an MSP security school.

[00:07:48] Additionally, enhancements to ConnectWise MDR for M365 expand its capabilities to protect threats in Office 365 environments.

[00:07:56] The company also unveiled the ConnectWise co-managed backup, Backup360,

[00:08:01] and its replicating data protection.

[00:08:04] Why do we care?

[00:08:06] Coming out of IT Nation, the message from ConnectWise is clear.

[00:08:09] A platform for MSPs coupled with an ecosystem around it.

[00:08:13] The question I'm pondering is this one.

[00:08:15] What's the vision?

[00:08:17] Directionally, where are they going?

[00:08:19] This trend to platform is not new.

[00:08:23] This is cyclical.

[00:08:24] We move between platform-based integrated products and integrated best-of-breed collections as a trend over time,

[00:08:31] and the pendulum is swinging again.

[00:08:34] Over the coming weeks, you'll hear interviews exploring that question.

[00:08:40] And competitive announcements?

[00:08:42] Here we come.

[00:08:43] Nine Minds, a Bellini Capital company, has launched Alga PSA,

[00:08:48] a free open-source professional services automation platform designed for managed services providers.

[00:08:54] CEO Robert Isaacs announced that the tool is currently available for download in its pre-production state

[00:09:00] and will offer a hosted version for approximately $50 per user per month by year end.

[00:09:06] Isaacs emphasizes the open-source model eliminates the need for long-term contracts,

[00:09:12] addressing a pain point for small MSPs.

[00:09:14] The platform aims to streamline basic ticketing functions while integrating AI capabilities,

[00:09:19] and is expected to compete against established players like ConnectWise and Kaseya.

[00:09:24] Isaacs envisions the tool not just as a software solution, but as a community-driven project,

[00:09:30] encouraging MSPs to contribute to its development on GitHub.

[00:09:33] And SuperOps has launched Monika, an AI-powered super companion tailored for managed services providers.

[00:09:41] Designed as a significant advancement in productivity and efficiency,

[00:09:45] Monika offers personalized insights and solutions based on each MSP's unique data.

[00:09:51] SuperOps's CEO emphasized that Monika functions as a strategic advisor,

[00:09:56] helping MSPs identify strengths and areas needing improvement while uncovering growth opportunities.

[00:10:00] Key features include identifying client inefficiencies, generating AI-driven prompts,

[00:10:06] and automatically creating workflows.

[00:10:09] MSPs can access Monika via their SuperOps interface,

[00:10:13] with the platform's commitment to integrating AI at its core from the outset.

[00:10:18] Why do we care?

[00:10:19] These competitive announcements from Nine Minds and SuperOps represent a deliberate challenge

[00:10:25] to establish a PSA and AI-powered automation solution from ConnectWise and Kaseya.

[00:10:30] Is there space for an open-source PSA?

[00:10:33] Or has AI-enabled the differentiator?

[00:10:37] A combination of low-cost, customized, and AI-enhanced solutions from players like Nine Minds and SuperOps

[00:10:42] could gradually erode the margin-share of traditional PSA providers.

[00:10:47] Emphasis on it.

[00:10:51] And announcements timed just to get into the mix.

[00:10:56] EZDMark has announced its integration with the Pax8 Marketplace.

[00:10:59] This initiative positions EZDMark as one of the first DMARC solution providers on Pax8,

[00:11:05] enhancing its efforts against the growing threats of phishing attacks.

[00:11:09] And 8x8 Incorporated has announced significant innovations to its cloud platform,

[00:11:14] enhancing customer engagement and AI capabilities.

[00:11:16] Key advancements include AI-powered transcriptions in the 8x8 contact center

[00:11:21] and improved call quality for Azure virtual desktop environments.

[00:11:25] According to a recent Metragy report, companies utilizing AI have seen revenue increase by 17.9%,

[00:11:32] customer ratings rise by 22.3%, and agent efficiency improve by 21.8%.

[00:11:39] Notable features include increased language support, video elevation for agents,

[00:11:43] and bulk messaging capabilities.

[00:11:46] And Connecti AI has raised $1.8 million in pre-seed funding rounds

[00:11:52] to tackle the complexity of enterprise data management.

[00:11:55] The startup, founded by experienced executives, aims to help organizations save up to 80% of the time

[00:12:01] spent on manual data preparation and analysis.

[00:12:04] Utilizing a context-aware platform, Connecti AI connects and unifies data

[00:12:09] and various sources, integrating seamlessly with tools like BigQuery and Snowflake.

[00:12:15] Why do we care?

[00:12:17] I'm intrigued by the idea of data management.

[00:12:20] Sure, this one is enterprise.

[00:12:21] But I highlighted it as I expect to see more.

[00:12:24] This.

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