Cybersecurity & AI lead MSP growth in recent report

N-able has released its second annual MSP Horizons Report, detailing trends expected to influence the managed service provider (MSP) sector, with a particular emphasis on cybersecurity and AI.

The report, compiled in collaboration with Canalys, indicates a significant growth projection for MSPs, driven by key factors such as cybersecurity services advancements.

"The IT managed services market is expected to be worth an estimated $610 billion by the end of 2025, with channel partners contributing approximately 98% of that revenue," stated Robin Ody, MSP Analysis Practice Lead at Canalys. He further commented on the evolving business model for managed service providers in response to changing customer demands and competitive pressures, highlighting specialisations in cybersecurity, cloud, AI, risk management, compliance monitoring, and vertical capability.

The report's findings suggest an overwhelmingly positive growth outlook for MSPs. A notable 59% of respondents expect a revenue increase of 20% or more in 2025, while nearly 40% foresee a similar rise in managed services profits. Growth is anticipated to stem from a stronger focus on endpoint, robust cybersecurity measures, compliance, co-managed expansion, and automation efforts, including AI integrations. However, challenges such as acquiring new customers and upskilling staff remain significant hurdles.

The report identified cybersecurity management as a primary force driving future services. A substantial 90% of respondents foresee cybersecurity managed services sales growth in 2025, building on the previous year's expectation of 80%. Notably, security-related services are predicted to dominate managed services revenue, with third-party managed detection and response (MDR) topping the list of new services MSPs plan to introduce. In-demand services include SaaS application backup (53%) and AI-powered backup and recovery (51%). Concerns about cyberthreat complexities, compliance, and data breach liabilities are crucial factors boosting the cybersecurity sector.

N-able President and CEO, John Pagliuca, emphasised the importance of cyber resilience in the report. "A central theme of this year's report is cyber resilience and a constant trend remains: cybersecurity is a key revenue driver," he said. "Conversations with MSPs worldwide make it clear that the line between IT operations and security operations has blurred. The leading MSPs differentiate themselves by addressing security across the entire attack lifecycle: from protection and detection to response and recovery. When it comes to cybersecurity, 'good enough' is no longer good enough."

AI adoption is gaining momentum, with more companies focusing on governance and risk management. The findings show that only 6% of respondents are not employing generative AI, while 40% have established data governance rules and human oversight guidelines. Predominant AI applications include workflow automation and the sales and ticketing process.

Merger and acquisition (M&A) activity is also predicted to rise, driven by strategic goals such as acquiring new skills or expanding into new regions. An impressive 90% of those surveyed have expressed interest in M&A, a significant increase from 44% the previous year.

Cloud modernisation continues to gain traction amongst MSPs, with a prevalent cloud-first strategy, although concerns about security, compliance, and cost control are noted by 40% and 38% of respondents, respectively.

John Joyce, Owner of CRS Technology Consultants, reflected on the value of the report. "There is all sorts of value in the MSP Horizons Report," he stated. "I feel that we have a pretty good sense of what's going on in the industry. But to see things distilled down to numbers and to see the feedback from the sample group reflecting what we're seeing is a powerful validation. The cybersecurity piece is only going to continue to grow because we don't have a choice. The report clearly highlights that many of us have been able to go on and build a piece of our business out of it, and I don't see that changing. I see it only increasing."

The MSP Horizons Report was based on a survey conducted from October to November 2024, collecting responses from 451 business-to-business channel partners across regions including EMEA, North America, APAC, and Latin America.