Why Managed IT Services is the UK’s new growth sector
The Prime Minister’s recent speech about artificial intelligence (AI) was a welcome acknowledgement of the importance of technology to the future of Britain’s economy.
It was good to see British politics at the very highest level engage with a growing technology sector — and promising reforms to make the UK more attractive for AI firms.
Yet, I could not help wondering, how can AI transform our economy when we have lower rates of digitisation and automation than most of our competitors in the developed world?
We cannot simply plug still-analogue industries and institutions into AI and expect magic to happen. Someone must first do the hard work of digital transformation — and do it fast.
Here too, we run into a complication. Around half (44%) of British businesses already suffer from a digital skills gap. And 95% of employers find it hard to recruit for technology roles.
To overcome this barrier, the UK must turn to managed IT services. The sector has the talent and technology to digitally transform the public and private sectors, at speed.
Table of Contents
- UK demand for managed services is growing
- Cyber security: a catalyst for expansion
- Beyond the UK: export potential
- The state of the sector: calm after an M&A storm
- Charting the path to future growth
UK demand for managed services is growing
The IT managed services sector in the UK is already worth US$17bn. And it’s growing by 13% a year. This trend is likely to continue for the foreseeable future.
At a time when British companies need to cut costs, and the country as a whole needs to increase its per capita productivity, digital transformation is a priority across many sectors.
Because it’s so difficult to hire technology talent, the best option for companies looking for a way to digitise critical workflows, is to work with an external partner.
With the right managed IT services partner, public- and private-sector organisations can cut IT costs by up to 25% and cut operational costs by up to 65%.
Even if we set aside, for a moment, ambitions for the future, these facts reveal the importance of managed IT industry to the UK.
With its concentration of talent, instant access to cloud-based, market-leading technologies, and rapid-response operating model, the sector can deliver the digital boost the country, and many organisations, are looking for.
Bring the future back into focus, and the case for managed IT services is still more compelling. Whether harnessing the power of AI, supporting the smart grid we need to hit net zero, or enabling Britain’s world-leading fintech sector, managed IT services can deliver the digital infrastructure required to make Britain a leader in the industries of the future.
Cyber security: a catalyst for expansion
Another reason why the UK managed IT services sector is growing, and is important to the country, is the increased urgency of cyber security.
In 2024, global losses to cybercrime were worth more than US$10 billion. That’s double the value of losses in 2023.
Dr Richard Horne, CEO of the National Cyber Security Centre (NCSC) has warned of the gap between today’s cyber threats and the security meant to protect us from those threats.
Whether we consider public services offered online, infrastructure digitised using Internet-of-Things (IoT) technology, or any of the many other areas of life, our potential vulnerability to cyber-crime has never been greater. Organisations urgently need new ways to protect themselves and their users.
Unsurprisingly, as the threat has increased, so have the regulatory requirements to protect infrastructure, customers and public-service users against this threat.
In the UK, the 2018 Network & Information Systems Regulations placed a range of obligations on public and private organisations with regards as to how they secure their operations and their users’ data. The Cyber Security and Resilience Bill, which will come before parliament in 2025, widens the scope of these obligations and makes them tougher.
To meet these regulatory obligations, organisations have been upgrading their operations, using existing technical standards such as the UK’s Cyber Essentials scheme or ISO 27001.
This approach can be highly effective. For instance, recent research discovered that businesses that implemented Cyber Essentials were 92% less likely to claim against their cyber insurance.
But as with digital transformation, this approach requires instant access to technology expertise and to advanced business technologies that are both highly configurable and demonstrably secure and compliant. In today’s market, that’s difficult to do in-house.
This is another reason why the IT managed services sector is primed for growth and why investors are so interested in it. It’s also another reason why the sector is key to many of the UK’s economic, social and other policy goals.
Beyond the UK: export potential
Another reason government — and investors — should be bullish on the UK managed IT services sector, is its role in growing the market for UK exports.
In the first instance, managed IT services can enable other sectors to grow, and continue, their exports. It does this by ensuring that those sectors can comply with customers’ cyber security and compliance requirements.
To take one example, the EU — the market for 42% of Britain’s exports — recently passed its Second Network and Information Security Directive (NIS2). This mandates the most rigorous cyber security standards for a wide range of public and private entities in the EU.
Any UK company selling to these entities must show that its products or services meet these standards. If it can’t, it can’t sell into the EU; at least not to regulated entities, which in practice would mean most public and many larger private entities.
The IT managed services sector also has plenty of export potential. As a digital-services provider, the industry faces few tariff or non-tariff barriers, including with the EU. The UK speaks the world’s lingua franca. And, as the City of London knows well, thanks to Greenwich Mean Time, the same shift of UK service workers can support clients from Asia, through Europe to the US, in a single day.
For any industry, or government, wishing to promote export-led growth, engaging with and listening to the British managed IT services sector should be a priority.
The state of the sector: calm after an M&A storm
As well as great opportunity, the IT managed services sector also faces some headwinds. A recent surge in mergers and acquisitions, often led by American firms seeking to enter the thriving UK market, has caused some upheaval in the market.
Foreign investment and increased competition are both good. But where existing relationships and operating models have been disrupted, this can lead to lower quality of service, at least for a while. This in turn gives potential customers cause for wariness. That’s not in anyone’s interest.
“Clients value consistency and personal attention,” explained Hugh Caldwell, Managing Director of managed IT services specialist Texaport. “They appreciate speaking with highly qualified UK based IT consultants who understand their systems intimately and can provide tailored support."
“That’s why continuity and consistency are core to our model. By avoiding the pitfalls of rapid acquisitions, we're able to preserve the integrity of our service delivery and build lasting relationships. These days, MSPs hold a great deal of responsibility to secure their clients from threat actors; that is why we champion industry regulation; the MSP sector is too important to the business community to be unregulated.”
To ensure that the British managed IT services sector continues to be known for the quality of its product and thrives as an engine of British-led domestic and export growth, the industry needs to organise. It needs to lobby government for the support it needs to succeed, and to help its clients succeed. And it needs to deliver the stability required to maintain high service levels.
"These days, MSPs hold a great deal of responsibility to secure their clients from threat actors; that is why we champion industry regulation; the MSP sector is too important to the business community to be unregulated."
Hugh Caldwell, Director, Texaport
Charting the path to future growth
The UK managed IT services sector is a British success story. Today, it’s well placed to help both the private and public sectors boost productivity and to deliver an export-led services success story. To capitalise on all this potential, we — and our partners in government — need to get serious about promoting the sector, now.
Not only will this deliver short-term gains for our clients and for the British economy, it will also deliver a key long-term benefit. The UK, as we have already seen, is held back because, among other reasons, it lacks digital skills.
The managed IT services sector trains thousands of engineers, consultants and other digital and cyber specialists every year. Over the course of their careers, many of these experts move into other areas of the economy, taking their ingenuity and know-how with them.
So, it turns out that working with IT managed services doesn’t just remove immediate barriers to growth, it makes an important contribution to removing long-term barriers too. The time for the UK to take the managed IT services sector seriously is now. And if we do, the future is bright.
