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Canalys Forum NAM 2024 Expert Hub: MSP Reality Check
The panel discussed the challenges and opportunities in growing managed services models, from tool sprawl to macroeconomic difficulties.
Market fluidity: progress driven by innovation and halted by external disruptors
At the 2024 Canalys Forum North America event, we hosted a panel of experts (listed below) for our MSP Reality Check Expert Hub. During the discussion, each panelist shared their perspective on the state of the MSP market and the triumphs and tribulations they have experienced, providing the audience with a reality check.
MSP Reality Check panel
- Arsalan Eizadirad - Senior Manager of Global MSP Strategy, Lenovo
- Christopher Caprio - CEO, Focus Technology
- Darrin Nelson - Director New Partner Procurement and Activation - America, IBM
- Oguo Atuanya – CVP of Vendor Experience, Pax8
- Dror Liwer - Co-founder, Coro Cybersecurity
- Mark Wyllie - Chairman, SmarterEdge Technologies
The managed services market is in a healthy state, reaching US$475 billion (13% growth year on year) globally last year, with 46% of that revenue generated in North America from nearly 79,000 partners or 24% of partners worldwide. What is driving this growth? It depends on who you ask, but there are some commonalities across different channel partners. Unfortunately, it is not all roses; the entire IT industry, including the channel, is being affected by various external factors. These factors can significantly affect a partner’s growth depending on their financial and operational stability.
Market movers
During the discussion, we asked the panel what was driving the market. Cybersecurity is still the foremost priority for most customers, mainly due to compliance and specialization needs. Cyber insurance and regulation are perhaps of more importance today for SMB customers in cyber buying decisions but for those in the enterprise, the possibility of a major breach affecting brand image negatively is also still a major factor.
As cyberattacks surge, cybersecurity remains a top priority for enterprises. This is one of the most significant reasons for the projected 10% growth in cybersecurity in North America in 2024, as businesses seek to protect their most valuable assets. Cloud adoption has also grown strongly as businesses seek scalability and flexibility and MSPs are capitalizing on multi-cloud and hybrid-cloud strategies. AI is revolutionizing the MSP landscape through predictive analytics, IT automation and virtual agents.
Macroeconomic mayhem
A 2024 Canalys poll showed that 43% of MSPs listed macroeconomic events as their most significant business challenges. This also included talent shortages, regulatory compliance, inflation and other effects from global events, but the impact of these incidents can vary greatly from partner to partner.
- Inflation and rising interest rates: inflation drives operational costs higher for MSPs while slowing client spending.
- Government regulations: stricter data privacy laws add compliance burdens for MSPs. Some larger firms can absorb these costs, but smaller MSPs face challenges meeting complex regulatory requirements.
- US elections: the 2024 US elections can create uncertainty, with potential policy shifts impacting taxes, labor laws and tech investments. Many businesses tend to delay significant IT investments during election years.
- IT skills shortages: the lack of skilled IT professionals remains a bottleneck, especially in high-demand areas like cybersecurity.
Conclusion: a market in motion
The MSP market is growing strongly and there are many opportunities today, but there are significant challenges as well. Technological advancements are pushing the market forward, enabling MSPs to unlock new revenue streams and better serve clients, but they bring headaches for partners who must decide where they should be investing their precious assets. External forces are also creating significant hurdles to sustainable growth.
To thrive in this volatile environment, MSPs and their vendor partners must focus on specialization, automation, operational efficiency and strategic partnerships. Those who can best adapt to regulatory and macroeconomic disruptions will be well-positioned to capitalize on new market opportunities.
