Companies that provide managed technology services to customers are expecting high revenue growth over the next two years, according to research from CompTIA, a nonprofit association for the technology industry. But their optimism is countered by continuing concerns about their role in a market increasingly dominated by cloud computing offerings and by a persistent problem with employee retention.

CompTIA surveyed 400 U.S. managed services providers (MSPs) for its Fifth Annual Trends in Managed Services report, and found that half of all MSPs surveyed expect high revenue growth over the next two years, with services accounting for 75% or more of total revenue.

“The level of confidence among MSPs in how they are running their businesses is quite high,” said Carolyn April, senior director, industry analysis, at CompTIA. “Two-thirds of the companies we surveyed consider themselves to be skilled experts at managed services.”

Optimism about future business is tempered by worries about margin erosion, however. Just over half of the companies cite margin erosion as a factor that keeps them awake at night.

“Naturally occurring market commoditization accounts for a portion of slimming margins,” April said. “But some of the blame also falls on MSPs themselves, many of whom continue to compete with one another solely on pricing.”

Topping the list of factors that concern MSPs is cloud computing, cited by 62% of companies. Just 54% of MSPs offer cloud-based services as a strategic part of their business. Another 44% only support cloud services when requested by a customer.

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