What are the biggest challenges facing MSPs?

challenges in msp

Managed Service Providers face multiple threats and challenges on all sides as the IT market evolves. As competitors in a market that was valued at $215.14 billion in 2020, they must battle increasing commoditization, competition, and a changing landscape that sees firms continue to move away from BPO, to remain relevant and successful.

Benefiting from increasing home working and IT upgrades during COVID, the MSP market is on the rise. According to an NTT/IDG report, some 55% of companies are engaging with MSPs to deliver productivity, security, and other benefits including the growth in remote working.

That does leave 45% of companies on the table and Grand View Research estimates a compound annual growth rate (CAGR) of 12.7% from 2021 to 2028, suggesting plenty of opportunity for MSPs. As more services become easy to bundle and integrate across managed networks, backup and security, communication, mobility, and productivity, creating the right service for a client should become easier.

MSP Market Maneuvers in the Dark

The greatest threat to MSPs comes from application and service providers using the accessibility of the cloud itself. This enables end-users and businesses to deal directly with large or small services, building their own select toolset of applications tailored to their business.

Startups see other startups and high-growth firms achieve great success using the trinity of Slack, Teams, and suitable productivity applications (Google or MS Office). They never consider using (or even heard of) MSPs to deliver a tailored solution. Smaller firms also tend to consider security as built-in to the cloud, no matter how misguided that could be.

Across the MSP market, players of all sizes are in direct competition from top to bottom, frequently trying to cannibalize each other’s business and offerings. New players are challenging incumbents with more flexible service offerings while M&A activity creates massive MSP companies with major bargaining power.

Internally, an MSP’s business is easily repeatable, which sees successful and motivated salespeople willing to create their own business, taking customers with them. While larger firms and enterprises rely on MSPs, partners, or internal teams to guide their IT decisions, the volume of data and traffic sees them looking for well-known names in the MSP market or they retain their legacy applications until they have no choice but to migrate or upgrade.

Executive decision making and message building

As smaller firms grow, and larger ones change the roles fulfilled by CIOs, CTOs, CISOs, and other categories, MSPs need to address the right audience with suitable offerings. Marketing strategies need to be flexible to address the widest audience, while sales pitches need to be hyper-focused on the client’s needs, even if they seem broadly similar to deals that have been successful before.

MSPs on the rise need to find an area of focus that creates a scalable and profitable operation. Some MSPs are focused on specific verticals such as industrial, hospitality, aviation, or medical to deliver a consistent message of excellence in one field. Or they provide horizontal offerings (like enterprise resource planning [ERP]), often partnering with vendors to deliver a strong product lineup that can easily be integrated across any type of business.

Around all this activity, MSPs need to use vendors’ clout and their own marketing to deliver a high-value message to differentiate. This can include broadening the offering from traditional areas by including artificial intelligence, ADC/  load balancing, Web Application Firewall, or chatbots as ways to add value and demonstrate they are a forward-looking business.

Pretty much every MSP can offer a range of Google or Microsoft licensing packages, but high-growth firms will be looking for advantages that support their increasingly distributed workforce and fast-growing volumes of data. As security moves very fast up the feature list, and more web applications or global servers play a key role, being able to deliver what businesses need will win more long-term deals. 

About Jay Savoor