Rise of Cloud Computing Spells Opportunity, But Education is Needed

Service providers looking to sell value-added managed IT services to small- and medium-sized businesses (SMBs) have an opportunity to grow this business line by better educating SMBs on the benefits of outsourcing IT network and equipment management and service, according to a study released by CIT Group.

Many SMBs lack of understanding of the benefits of third-party managed services is the biggest barrier to value-added resellers (VARs), according to "Technology Channel Outlook: Are SMBs Ready to Embrace Managed Services," which was prepared by CIT's Vendor Finance Group in association with Forbes Insights.

The report's key findings include:

  • There's an opportunity to educate SMBs: Nearly two-thirds (62%) of respondents agreed (54%) or strongly agreed (8%) that their customers do not understand the benefits of managed services. Nearly half (49%) of those surveyed believed this lack of understanding is the leading barrier they face in trying to sell the benefits of managed services to SMBs. This was followed by overall cost (37%) and the desire of SMBs to maintain their own infrastructure (37%).
  • Need to focus on the benefits of managed services: Understanding that many smaller companies see technology as a necessary expense, as opposed to a strategic investment, respondents cited reduced costs (43%) as the most compelling benefit of managed services for SMBs, followed by the ability to free up resources to focus on other aspects of the business (37%) and reduced IT headcount (33%).
  • Popularity of Cloud Computing Increases Opportunity: Cloud computing solutions are smoothing the way for VARs to sell managed services to SMBs. In fact, nearly two-thirds (63%) of respondents agreed that the popularity of cloud has made it easier for them to sell managed services to SMBs as customers become more familiar with the concept of software as a service.
  • Planning for the future: When asked to discuss which technologies would have the greatest impact among SMBs over the next two years, more than half (51%) of respondents said cloud computing would have the greatest impact, followed by tablets (21%) and smart phones (15%). Fifty-two percent (52%) of respondents also believed that tablets will take the place of laptops for most executives, while nearly a quarter (24%) believed that all applications and data storage will migrate to the cloud.
  • Managed services can be a key revenue generator for VARs: More than a quarter (27%) of respondents indicated that managed services will likely account for more than half of their 2011 revenues. Looking ahead to 2012, nearly two-thirds (64%) said they expect their revenue from managed services to increase, with a sizable number (16%) saying it will increase by 20% or more.


"The findings of this study are consistent with our experience in financing managed service contracts," said Ron Arrington, CIT global president of vendor finance.

"We have found that the most successful managed services programs are those in which the VAR clearly articulates the offering and quantifies the impact for the SMB. Likewise, when an SMB is committed to implementing a managed services solution, it soon realizes that it can play an important role in the growth plans and expense management of the company."

Written by Michael Standley at 00:00
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