Research shows SMEs significantly boost the managed services market

New research by Frost & Sullivan shows the local small to medium enterprise (SME) sector presents  ucrative business opportunities for managed services providers.

The research firm says as South African businesses aim to reduce costs and improve efficiencies under the present economic conditions, many will look to managed services to achieve these goals. A growing worldwide trend is emerging where enterprises increasingly outsource non-critical IT processes to focus on core business initiatives.

Frost & Sullivan attributes one of the main drivers of this trend as the emergence of cloud computing. The report states: “SMEs are positioned to benefit immensely from cloud-based offerings as these services essentially circumvent the need for businesses to invest in costly capital infrastructure.”

As SMEs cannot generally afford to invest in their own infrastructure, they present a key market for cloud-based offerings.

According to Dave Tang, director of strategy and communications at , cloud adoption among SMEs in 2011 was at 72%, and is expected to grow to 98% by 2015. “At the same time, over the next two years, SMEs will spend about $50 billion on cloud services,” he says.

Furthermore, new research from suggests that four out of every 10 small businesses expect to be paying for at least one cloud service by 2014, while the number of cloud services paid for will double in this time.

’s “SMB Cloud Adoption Study 2011” investigates how cloud computing will impact SMEs, and was carried out across 16 countries, including South Africa.

In South Africa, the clear trend is that larger SMEs are quicker to adopt cloud services. Of the local companies surveyed, fully 88% of those with more than 50 employees expect to be paying for nearly five cloud services within three years.

In a recent article: ‘Manage Your Managed Service Provider’ by Michael Davis, CEO of Savid Technologies should focus on their strengths and delegate other tasks to those that can handle them better. “IT is no different, which is why managed service providers have grown to be an almost $55 billion business in the last four years, according to research firm Visiongain.”

Although SMEs stand to primarily benefit from cloud-based service providers, Davis points out that selecting the wrong provider can have a negative impact on company growth. 

A new report from the Harvard Business School: “Prosperity at Risk”, identifies several elements regarding how managed services providers (MSPs) can help SMEs maintain competitive edge.


The report maintains that while large enterprises can easily develop their own sophisticated communications infrastructure, SMEs often do not have the money, time or in-house expertise needed to build a first-class communications infrastructure. Managed communications services can allow SMEs to take advantage of leadingedge communications technologies and still have money left over to have something to communicate about.


Genuine skilled labour is tough to find, the report says. Usually, a company must go through an intensive recruitment process that involves weeding out numerous unqualified candidates to locate one properly experienced and trained person. MSPs can help SMEs save time and money in the recruitment process by offering the services of top-notch personnel as part of a managed services programme. Sharing the services of highly qualified professionals on an as-needed basis puts the best people within reach of SMEs, and without busting their HR or payroll budgets.


The report states that there are numerous bureaucratic regulations around hiring and firing workers that makes the process onerous and exposes the employer to potential risk of lawsuit, especially in the case where a decision is made to terminate an employee’s position. SMEs are especially vulnerable in the case of a poor hiring decision, as they do not have substantial legal resources and may be forced to keep a subpar employee on board rather than face costly legal action. MSPs remove the difficulties SMEs face in hiring and firing workers, while providing them needed services and manpower on a contract basis.


SMEs are less likely than their larger rivals to have access to the latest strategies, operating practices, management structures and analytical techniques, the report says. MSPs can deliver much of this knowledge and insight on as as-needed basis, at a fraction of the cost of obtaining new full-time personnel (see above) or pursuing education for existing employees.