VARs Transitioning to Managed ServicesNow that we've unveiled our second-annual MSPmentor 100 report, I keep hearing the same question from multiple market watchers: How many VARs will become successful managed service providers? Here's an educated guess -- at least for North America. I will offer some thoughts on additional regions later this week.

First, I'd like to address a myth: Not all VARs need to become MSPs. Some of Cisco's most successful solutions providers, for instance, continue to generate hefty profits simply through consulting engagements and project work.

Full disclosure: I do have a bias on this topic, especially since we also operate a sister site called TheVARguy.com.

MSPs By the Numbers

Still, plenty of VARs see ample opportunity in the managed market. For North America, I estimate:
  • There are between 80,000 and 120,000 VARs/solutions providers
  • Roughly 10 percent of those companies -- 8,000 to 12,000 -- have moved into the managed services market
  • Roughly 10 percent of those aspiring and estabished MSPs -- or roughly 800 to 1,200 companies -- are wildly successful managed service providers.
In other words, I believe only about 1 percent of all North American VARs are truly thriving and generating explosive growth as MSPs. Anybody care to debate me on that figure?

The bigger concern for MSP software companies: Most VARs may never make a successful transition to managed services. That's one of the reasons why N-able introduced a low-end remote management tool for the channel masses.

Here Come More MSPs

Now let's jump back to MSP market size. Assuming the North America market has between 8,000 to 12,000 reasonably successful MSPs right now. Next, assume the managed services market grows 8 percent annually -- as predicted by Insight Research.

With those variables in mind, it's somewhat safe to expect at least 640 North American VARs (8,000 X .08) to become reasonably successful MSPS in 2009. But I suspect a few thousands VARs will try -- and fail -- to make the transition.

Why? The reasons for MSP success (or failure) certainly vary from company to company. But business outcomes typically have very little to do with choosing the right MSP software tool. For most MSPs, the secret to success involves business leadership.

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