Rapid adoption of internet of things solutions is driving growth in the global IT services market.
Information technology (IT) is in yet another state of transition, and that means good things for companies developing managed network services.
IT continues to develop and evolve rapidly, creating new ways to make day to day operations simpler and more efficient for businesses of all shapes and sizes as well as for the average consumer. The funny thing about information technology though, is that as it creates new and innovative solutions to make life simpler, the systems themselves become increasingly complex. As businesses and consumers come to rely more and more on IT services, issues and interruptions with these systems can be devastating to productivity. This is where the IT managed services industry comes in.
The increasing complexity of the devices and systems that businesses rely on is fueling rapid growth in the IT managed services sector as small to medium enterprises (SMEs) in particular are looking to third parties in lieu of costly and resource intensive in-house IT management. A recent report by Research and Markets projects the global managed service market to see a compounded annual growth rate of 11.23 percent from 2018 to 2022, largely driven by the rise of technology that both raises the complexity of interconnected IT systems and enables the viability of off-site management systems.
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What’s driving growth in managed network services?
The rising adoption of internet of things (IoT) solutions is a major growth factor in the IT managed services sector. The term IoT comprises a wide range of hardware devices networked together via embedded software and communication services and managed through cloud-based applications.
Companies and consumers are adopting IoT rapidly. Gertner projects that there will be more than 20 billion IoT connected devices in service by 2020. Of the 8.4 billion connected devices in service now, 63 percent are consumer devices while 37 percent are used for enterprise. The interconnectivity of IoT is an obvious gain for businesses, creating synergies and providing metrics on all types of day-to-day operations that can be used to create further efficiencies. According to a survey by Inmarsat, 82 percent of responding companies expect to implement some sort of IoT system in the next two years.
IoT systems are different enough from the IT systems that came before them that few companies have in-house specialists with the skills required to implement the necessary infrastructure as well as the software and security capabilities required to maintain the systems. Managed services companies, on the other hand, can specialize on the specific skills and capabilities needed for IoT networks, taking the deployment, monitoring and maintenance of the complex system off of the client’s plate entirely. The interconnected nature of IoT means that most of the work on these systems beyond the initial installation can be performed off-site, allowing managed service providers an efficient model of service with ample opportunity for scalability.
Obviously, the increasing demand for both business to consumer (B2C) and business to business (B2B) managed services presents a rare opportunity for IT companies to move into the space. The opportunity is particularly interesting for companies looking to deploy a franchise model. While it’s true that most of the day to day servicing in IoT systems can be done remotely, the initial installation and any hardware servicing or maintenance requires physical on site service. This means physical locations near business and residential centres, or mobile entities that can easily reach multiple locations, are a necessity. A franchisor company can provide the training and equipment to a franchisee who can then provide the on-site service for a particular geographic area.
The North American IT managed services space
North America makes up the largest share of the global IT managed services market. North America’s status as the world’s most advanced region for adoption of emerging technologies is due to developed tech sectors in the the US and Canada. According to Markets and Markets, the North American IT services market will be worth $261.5 billion by 2021. This is unsurprising given that North America is home to some of the industry’s key players.
Nerds On Site (CSE:NERD) is one the emerging players in the North American managed services market. With the notable exception of their major client Canadian Tire (TSX:CTC.A), Nerds on Site is focused primarily on servicing small to medium enterprises. Nerds On Site operates in 10 cities across Canada and the company is working on aggressively expanding into the United States by establishing 150 franchises across 10 US cities. The company offers a wide range of IT services to both business and residential clients including network installation and support, PC setup, tailored software services, and more. This expansion comes at an opportune time as wide spread rapid adoption of IoT systems is fueling major demand for services like Nerds on Site from customers in both their established Canadian markets and the company’s new US markets.
The IT managed services industry is comprised of players of all sizes. These include massive tech industry household names like IBM (NYSE:IBM), less generally recognizable but significant giants like Cognizant (NASDAQ:CTSH), mid-size companies like RMON Networks and smaller regional players like Transparent Solutions operating out of Vancouver, British Columbia.
There’s no other sector that moves forward quite so rapidly and steadily as information technology. As advancements like what we’re seeing with IoT today take hold, there is always a push from consumers and businesses of all types to keep up, and that means that there will never be a shortage of opportunity for IT managed services to make the transitions go smoothly.