Business IT Support: The Market Opportunity for Managed IT Services

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1 Business IT Support: The Market Opportunity for Managed IT Services Kurt Scherf April Pivot Media, LLC 1 telecompetitor.com/plus

2 Table of Contents 1. Executive Summary Background SMB IT Challenges The Telecom Service Provider Case for IT Support IT Support Services Being Offered Market Opportunity 6 2. Technical Support Services Background 7 3. The Challenges of the SMB Technology Environment 9 4. The Telecom Service Provider Case for IT Support Services Offered Help Desk Services Data Center/Cloud Computing/Hosted Services Market Opportunity 21 List of Figures Figure 1 Penetration of Home and Personal Technology: U.S. 7 Figure 2 Consumer Tech Support Services 9 Figure 3 Technology Use in SMBs 10 Figure 4 Who is Responsible for Tech Support? 12 Figure 5 Time Spent Per Week Addressing Technology Problems 13 Figure 6 Biggest Technology Issues 14 Figure 7 Help Desk Services 18 Figure 8 U.S. Help Desk Services and Pricing 19 Figure 9 Cloud Computing/Hosted Services 21 Figure 10 Managed Services and Data Center Revenue Growth Pivot Media, LLC 2 telecompetitor.com/plus

3 1. Executive Summary Telecom service providers, both large and small, have recently taken on aggressive expansion into offering business-oriented tech support offerings to small and medium business customers (SMBs). This market report discusses the growing demand from SMBs for managed services, how service providers are categorizing these offers, and explores the overall market opportunity Background The business opportunity for managed IT services stems from the growing need of technical support by small business customers, as the widespread proliferation of more complex IT issues spreads to businesses of all sizes. Businesses are exploiting the advantages that IT can bring them for better relationships with customers and more efficient internal operations. But as these complexities increase, small business owners and managers increasingly find themselves distracted with IT problems that are better suited to be solved by IT professionals. This has given rise to the concept of managed IT services, where telecom service providers can add value to their current business product portfolio by helping SMB customers better manage their IT infrastructure. In so doing, SMB customers can focus on building and maintaining customer relationships, and not waste time and resources on managing IT issues. Providing managed tech support services for SMBs is a growing and appealing business opportunity for all service providers to explore SMB IT Challenges The technology challenges facing today s 5+ million SMBs are only growing in complexity. The need to maintain and manage typical IT infrastructure including computers and servers has expanded to include issues like video conferencing, cloud computing, virtual servers, and the prevalence of employees bringing their 2013 Pivot Media, LLC 3 telecompetitor.com/plus

4 own mobile devices into the workplace, also referred to as BYOD. At times, it can become overwhelming;telecom carriers are well positioned to provide relief and support. SMBs are continually investing in their IT infrastructure, with spending on the rise. Spending for IT services has increased from 19% in 2010 to 25%, according to the most recent data from SpiceWorks. Areas of growth include hosted backup/recovery and hosted data storage. IDC estimates that IT spending in U.S. SMBs exceeds $130 billion annually. 1 In a recent survey, the National Small Business Association (NSBA) provides some insight into how SMBs are managing their IT support services today. A little over one third, or 36%, pay an outside company for it. While an equal number task internal staff with the responsibility. One fourth of SMB owners indicate they do the IT support themselves. Office Depot recently conducted a survey which found that about half of respondents (48%) takealmost 2-3 days to have their computers repaired, with a majority (67%) citing that computer issues have hindered them from doing their job The Telecom Service Provider Case for IT Support Many telecom carriers, large and small, have recognized this growing opportunity for IT support services. It s widely considered as a revenue replacement strategy to help address declining revenue from more traditional voice services. Larger carriers have been quite active in this regard, primarily through acquisitions. Smaller carriers have also been acquiring companies and talent to be in a position to maximize this opportunity.. 1 IT Spending Outlook: American Small and Midsized Business, Dan Berthiaume. MSPmentor, April 19, Office Depot Small Business Index Reveals Small Businesses Struggle with Technology Issues, Office Depot press release, June 16, Pivot Media, LLC 4 telecompetitor.com/plus

5 Telecom carriers are in a unique position to provide IT support services to their business customers. Established business and billing relationships provide a level of trust that can be leveraged for this opportunity. According to a Parks Associates survey of 500 U.S. businesses, 45% prefer to use a broadband service provider to deliver technical support services IT Support Services Being Offered The portfolio of services offered for IT support can be broadly categorized into tech support/help desk opportunities and data center/cloud opportunities. Tech support/help desk offers aim to replicate the internal help desk function present in many larger companies, where an employee encounters a technical problem and can receive on demand support from an IT professional. Issues can include computer and software problems, or other IT equipment issues. According to the newest edition of the Office Depot Small Business Index, technology issues among small businesses are common, with 75% of respondents citing that they have had a computer repaired at some point in time. A majority of these repairs were due to virus/malware issues (43%) or hardware issues (40%). 4 Our research highlights different approaches by service providers for these services, listed in section 5.1. The second category gaining momentum in this area is data center and cloud services. For many small businesses, buying and owning equipment or individual software components is too cost prohibitive or too complex to manage. With the advent of the cloud, telecom service providers are in a good position to offer these services in a virtual environment. There are immediate opportunities with cloud services for products like data backup and recovery and disaster recovery/business continuity, among others. In 3 Small/Medium Business: Tech Support Opportunities, 2012, Parks Associates. 4 Office Depot Small Business Index Reveals Small Businesses Struggle with Technology Issues, Office Depot press release, June 16, Pivot Media, LLC 5 telecompetitor.com/plus

6 a 2011 survey, online backup provider Carbonite found that many small businesses (48%) with two to20 employees had experienced data loss, up from 42% when Carbonite surveyed small businesses in December Cloud opportunities to explore also include Hosted Virtual Desktops, Hosted Virtual Servers, Hosted Exchange , Hosted VoIP, and Colocation services Market Opportunity There is no shortage of evidence suggesting a rich market opportunity for offering business IT support services by telecom service providers. Parks Associates estimates that the SMB tech support market opportunity is expected to grow at a 14% compound annual growth rate (CAGR) between 2012 and 2016, reaching nearly $25 billion by Many early indications from carriers who have already entered this market point to a significant revenue opportunity. Both CenturyLink and TDS report impressive revenue growth for their relatively nascent IT support business portfolio. 5 SMB Tech Support Market will Achieve Double-digit Growth through 2016, Parks Associates press release, February 7, Pivot Media, LLC 6 telecompetitor.com/plus

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