82% of MSPs expect an increase in revenue in the next 3 years – Datto report

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The Managed Service Provider (MSP) industry is rapidly evolving, with new technologies, market trends, and customer demands shaping its direction. As we progress through 2023, it’s important to take stock of where the industry stands and what MSP services we can expect in the coming years. The Global State of the MSP Report by Datto offers a comprehensive overview of the current state of the industry, providing insights into key trends, challenges, and opportunities. In this blog post, we’ll delve into the report’s findings and explore what they mean for MSPs and their customers.

Competition remains the top challenge for MSPs

As per the report, competition remains the primary challenge for MSPs, followed closely by revenue growth, profitability, and customer acquisition. This is not surprising given the growing competition in the MSP space.

Despite the challenges, MSPs are optimistic about revenue growth, with 82% expecting growth to continue over the next three years and setting specific growth goals. 74% anticipate growth of more than 5%. However, finding the right tools, time, and strategy for sales and marketing remains a consistent challenge, which could contribute to the difficulty of remaining competitive and increasing revenue.

challenges faced by MSPs

Top products and services offered by MSPs

The top five services offered by MSPs are networking, business continuity, and disaster recovery (BCDR), technical support, and traditional MSP offerings. There is also a significant opportunity for new solution offerings, with 26% of MSPs planning to add collaboration software and 25% planning to offer storage design and implementation services in the next year.

Cloud-based services

According to the survey, 90% of MSPs now provide cloud-based infrastructure design and management, which suggests that small and medium-sized businesses (SMBs) are still heavily interested in transitioning to the cloud. The COVID-19 pandemic has accelerated this trend, as many had predicted.

MSPs recognize a wealth of opportunities in cloud integration, as an increasing number of clients turn to cloud services for better storage design, productivity, and team collaboration. Almost all MSPs surveyed (95%) see new market opportunities in this area, with half of them expecting more than 75% of their workloads to be in the public cloud within the next three years.

In North America, where only 7% of MSP workloads are currently in the cloud, 75% of respondents anticipate this number to rise to 25% within three years. However, some factors such as resistance to converting spend, stricter compliance requirements, and reluctance to undertake digital transformation are keeping North American workloads on-premises.

Managed security services

Around a third of respondents believe that security solutions continue to present new business opportunities. 97% of surveyed MSPs offer managed security services. While ransomware and email security remain top priorities for MSPs, new players, and tactics are emerging.

Many MSPs are now seeking tools that can monitor networks to mitigate risk and address issues before an attack occurs. Email security is currently the top managed security service offered, but advanced endpoint security and security framework, and compliance auditing are expected to be offered in the coming year.

managed security services to be added in the next year

Top cybersecurity concerns of MSPs

MSPs are facing challenges in hiring skilled security specialists and dealing with the complexity of current security products, despite the advancements in security technologies. The most common cybersecurity issues faced by MSPs are computer viruses, COVID-19 related scams, phishing messages, and endpoint threats.

Surprisingly, only two-thirds of MSPs claim to have antivirus protection tools in place, indicating a need for improvement in this area. The tools expected to see the most growth are those that address wiper malware, spyware, hackers, identity theft, and phishing.

top cybersecurity concerns

33% of MSPs plan to create internal security policies for clients

MSPs are increasingly relying on security frameworks to address compliance concerns. These frameworks have their strengths and weaknesses. MSPs often work with more than one framework to carry out security audits or establish security policies for their clients. Presently, four out of five MSPs offer security audits and training to their clients, and almost as many create internal security policies for them. Internal security policies are not as prevalent as the other services, but they are expected to experience the highest growth in 2023.

The top compliance frameworks used are CMMC (37%), CIS (27%), NIST CSF (24%), ISO 27001/2 (21%), and SOC II (15%).

In 2023, 18% plan to add security audits for clients. 19% plan to add security education training for clients and 33% plan to create internal security policies.

In conclusion, the MSP industry is experiencing significant growth and change as more businesses adopt cloud-based solutions and seek out managed services for their IT needs. Despite facing challenges such as increased competition and cybersecurity threats, MSPs remain optimistic about revenue growth and new market opportunities.

With a focus on expanding their service offerings and improving security expertise, MSPs are well-positioned to meet the evolving needs of their clients. As we move forward in 2023, it will be interesting to see how the industry continues to evolve and what new trends and technologies emerge.

Source: Datto

Read next: $2 trillion market opportunity awaits cybersecurity technology and service providers – McKinsey Report

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