The Managed Service Provider Market Takes Off in Europe

As the Managed Service Provider (MSP) market shows signs of maturity in the United States, a recent Everest Group report says the next wave of growth will be driven by the European market. Although market adoption in Europe to date has largely been driven by US-headquartered organizations with a presence in Europe, the European MSP market has reached a tipping point where many locally headquartered buyers have started to embrace MSP solutions. Most European countries, other than the United Kingdom, are in the early stages of maturity and represent huge untapped potential.

Several factors are driving MSP growth in Europe:

• A growing contingent workforce and increasing demand for contingent labor
• Complicated compliance and regulatory environments
• Increased MSP adoption among regionally-headquartered organizations
• Broader adoption of MSP in Continental Europe

Taken together, these factors have helped to propel the growth of the EMEA MSP market by 20%-plus in recent years, with expectations for the growth rate to remain the same (or even accelerate slightly) through 2017.

However, while the market shows potential, it is also quite challenging given its cultural and linguistic diversity, differing levels of MSP maturity, and strict and varying labor regulations. The key market challenges are outlined below.

• Geographic complexity: As noted above, varying cultural and linguistic preferences challenge MSP service providers to develop coherent offerings across geographies.
• Regulatory burden: Across Europe, some regulations support MSP adoption, while others limit it.
• Existing relationships: Long-held and/or strong relationships with staffing providers sometimes restrict the development of MSP relationships.
• Service delivery challenges: A geographic market’s size, complexity, maturity, and existing MSP presence all present unique challenges to service providers trying to build capability in Europe.

Europe is an important and fast-growing MSP market, with pain points that MSP is well-suited to address. However, it remains a challenging market to serve. MSP buyers and service providers will have to work together to identify service delivery options that will meet all parties’ needs.

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Note: For a more detailed analysis of this topic, see Everest Group’s report MSP in Europe: A Homogenous Solution for a Heterogeneous Market