8 Top Managed Service Provider Trends for 2024
We went straight to the source, asking MSPs what they're watching for this year. We used this survey to create this list of the 8 Top Managed Services Trends of 2024.
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In conversations Channel Futures editors are having with the leaders of vendor partner organizations, they are engaging more than ever with the CEOs and senior-most leaders of their organizations.
The reason is simple: More than 70% of all tech is sold through or touched by a channel partner, according to industry experts. Certainly, the smaller the organization, the more involved the CEO, president, COO and CFO are in channels, but the leaders of many Fortune 500 across the channel are suddenly getting far more engaged with the channel than ever before. Perhaps they are taking a cue from HPE’s Antonio Neri, who works very closely with the company’s channel leadership and is very visible at channel events.
With channel the key to tech vendors’ go-to-market strategies, CEOs want more and better involvement in channel than ever before. This will put pressure on vendor channel leaders in 2024 to interact with the C-suite in ways that put the channel in perspective when it comes to ROI, growth and ability to scale.
Bottom line: Every vendor, whether large or small, sees the MSP and managed services as a path to increased value for their organizations — or an increased multiple for their stock price. Expect CEOs to be much more involved in MSP strategy and direction in 2024 than they've been in the past.
“The vendors I talk to are trying to get even better understanding of the channel and are going deeper on adding real value to MSP,” said Peter Kujawa of Service Leadership, a ConnectWise business division.
Let’s face it: Channel talent has always been in short supply with executives jumping ship with the frequency of MLB and NFL coaches. For so many reasons ranging from senior leadership changes to equity opportunities to performance, channel leaders just don’t stay put too long at one company.
A good example is Rodney Clark (pictured), who went from Microsoft to Johnson Controls to Cisco’s channel leadership role in a short period. We expect to see this trend continue in 2024. Yes, there will be exceptions, but channel-leader longevity shows no signs of, well, being any longer than it has been in recent years.
Industry experts have tried to quantify how many years on average channel leaders stay at one company, with conventional wisdom coming down on the side of three years or less. Does this cause disruption for vendors who must recruit new talent? Yes. It also causes partners to pause to see what changes the new executive and perhaps their incoming team will make.
We wanted to share one of Canalys’ predictions for 2024 that focuses on the U.S. channel. The market research and events organization is owned by Channel Futures' parent company, Informa.
Canalys said 2023 saw a set of challenging results across the technology sector, including a 7% first-half drop in growth for the biggest U.S. partners, and a 10% fall in the third quarter. These companies typically have a higher percentage of revenue coming from product sales than do MSPs or more services-oriented partners. Companies that have maintained their cash reserves amid rising interest rates are well protected, but those reliant on debt saw challenges throughout the year, Canalys stated.
The researcher expects efficiency to remain the name of the game in 2024, and not just for channel partners, but also for vendors. Vendors have been adjusting their go-to-market strategies to be more channel-focused, as the channel emerges as a way of creating a more efficient go-to-market strategy. This, combined with improving conditions and early indications of growth from the tech titans — the large vendor organizations — (up 3% in Q3 2023), will mean that by April, channel partners will collectively see growth again and will have further embedded themselves as the key drivers of growth for vendors.
Despite all the market data about growth, opportunities, direction, customer spending and behavior, there is one thing in the channel that matters above all else — relationships. Ignore this trend at your own risk.
Any veteran channel executive will tell you that vendors can do all the bragging they want about their latest innovations in cloud computing or AI or cybersecurity, but the final purchasing decision comes down to the quality of the relationship between partner and customer. In 2024, Channel Futures expects this trend to continue, with relationships becoming an even stronger factor in what partners recommend to their customers and what customers ultimately consume. Call this a trend or a foundation of the channel, but relationships are the difference maker, especially in times of technological disruption — such as what the industry is experiencing with artificial intelligence. Think about what is taking place inside every partner’s customer right now. Business leaders are experimenting with AI, employees are using ChatGPT, and some are testing Microsoft Copilot with senior leaders trying to figure out how AI is going to impact the business from a strategic perspective. This alone creates customer confusion.
When this happens, partners have to look their customer in the eye — whomever that is in the organization — and say, with confidence, “This is what we recommend you do now.” The bottom line is relationships matter most during disruptive times, as history has proven, so expect partners to tighten relationships with their customers while vendors and tech suppliers focus on improving relationships with their partners.
“Successful MSPs today understand that their real value to their customers is helping them use technology to achieve their business goals,” said Kujawa. “Today, their customers are trying to figure out how to use AI to achieve those goals and MSPs are in a great position to help their customers on that journey,” he said.
It’s not just about offering new services, but also about understanding clients’ needs and how partners can add value, said Jason Rincker (pictured), CRO at Stronghold Data, a New Charter Technologies company.
“We need to communicate effectively, show them how these changes benefit them, and provide continuous support. It’s all about building and maintaining those relationships. After all, our clients are at the heart of what we do,” Rincker said.
As 2023 was coming to a close, a few worrisome events emerged, including a wave of layoff announcements by large vendors and data showing customers getting nervous about IT spending in 2024.
According to market researcher Canalys, partners were expecting customer spending on IT to decline considerably in 2024. Based on a global survey of some 378 partners, Canalys found that nearly one-third of those answering the survey expected customers to cut spending by 10% year over year. Another 18% of partners were looking at customer declines of at least 1%, and up to 10%, with one-fifth of those in the survey saying customer spending will be flat. That type of data should make everyone pause.
“Clients are more price conscious for core services as commoditization continues,” said Mitch Morgan (pictured), CEO of channel partner New Charter Technologies.
While the global results do not show a promising sentiment on customer spending year over year, the silver lining was the North American market was perhaps the least bearish compared to partners in APAC, EMEA and LATAM. North American partners were far more apt to say customer IT spending will be flat vs. their international brethren.
We all know that channel partners are a bit pessimistic when it comes to forecasts of IT spending — many are the ultimate sandbaggers — so it was good news that nearly 30% said they expect spending to increase, if even by low single-digits. But it does paint a picture of a channel uncertain about the direction of customer spending with the results providing less optimism than many were hoping for this year. Perhaps that is why Stronghold Data CRO Jason Rincker said in 2024, “We are going to be hyper-focused on EBITA.”
When it comes to selling tech services, channel partners and their vendor suppliers have endured years of channel conflict, arguments over the quality of leads and how to put market development funds (MDF) to best use.
One of the biggest challenges vendors have faced is recognizing partners for their influence in closing deals that may involve contributions from different partner types. This year may well be remembered for putting some of those issues in the software market to bed as a result of the rise of such companies as Crossbeam, PartnerStack, PartnerTab, Reveal, Tackle.io and WorkSpan. These companies are assisting today’s leading vendors in co-selling with partners, covering a broad range of business models such as influence/marketing, transaction-assist, marketplace and customer-retention partners.
Canalys recently published its first global co-sell leadership matrix ranking these and other co-sell tech companies on a wide range of metrics and analyst assessment. Canalys crowned six champions in this space as well as emerging players, all of whom are raising money and seeking investors to grow their business in this rapidly growing category. Expect the co-sell topic to be a big one in the coming year. The co-sell software market could swell to $3.1 billion, with annual growth rates of 28% by in the next four years.
As Canalys stated, “With the fast-rising complexity of customer technology demands, vendor customers increasingly recognize the importance of co-selling and co-delivering solutions with others in the channel ecosystem – which is promising for those in the co-sell software industry.
No two MSPs or channel partners are alike, despite the efforts of many in the industry to group them all together. The industry’s smartest people know that you can call a company an MSP or IT services provider, but it's really what they do that matters most.
This was evident when we asked several prominent MSPs about their biggest challenge. The results ranged widely based on the comments that follow. For Sam Ruggeri, VP of business development and strategic partnerships at LincolnIT, one of the biggest challenges facing his organization is what he termed "tool crawl."
“There is always a new app that can help with this or that," he said, while stating that every MSP must examine how much they are spending on their tool stack to support and maintain the services delivered.
“In speaking to several peers, it is eye-opening when they explore this for themselves," said Ruggeri. "The costs add up.”
For Travis Woods, CEO of Fort Point IT Solutions, his take on the biggest challenge is far different than Ruggeri’s.
“I’m seeing the saturation point of the MSP market. Clients are entertaining five or more different MSPs trying to compare apples to apples. The strongest MSPs will continue purchasing smaller shops to grow seat count and revenue. Additionally, their size and efficiencies will provide pricing advantages that smaller MSPs can’t attain.”
The different views of Woods and Ruggeri are just one example of how differently MSPs view their biggest challenges based on their business models.
The high growth rate in managed services is attracting more and more competitors.
In 2022, the managed services market in the Americas alone had topped $200 billion, growing 11%. It had an equally good year in 2023, with projections that more than 100,000 channel partners were delivering managed services. These included a wide range of partner models and some general practitioners who delivered managed services within their business.
Researcher Canalys put the IT managed services market globally at $419 billion, up 12% over the previous year. Given the positive impact on a stock price or market valuation, including managed services in a business portfolio will continue to be very trendy in 2024. But it's causing some headaches for MSPs. Stronghold Data's Jason Rincker notes that commoditization of traditional services is one of the biggest trends impacting the channel.
“It’s like everyone wants a piece of the pie that was once ours alone. It’s not just us MSPs offering these services anymore. Other industries are eyeing the monthly recurring revenue (MRR) that we’ve traditionally collected,” Rincker told Channel Futures.
He said ISPs aren’t just providing internet anymore; they’re selling firewall services and security services, while print vendors are stepping out of their comfort zone and selling help-desk services. Even software vendors are jumping on the bandwagon and adding monitoring programs to their offerings.
“So the landscape is changing, and we need to adapt,” he said. “It’s a challenge, sure, but it’s also an opportunity for us to innovate and stay ahead of the game.”
Everyone now wants to be an MSP, and the market is being saturated with even large system integrators that are leaning in this direction, said Richard McKinnon (pictured), president of DVBE.
“Instead of one or two trusted MSPs, a client sometimes has seven to 10 companies vying for the services, which sometimes can be counterproductive to delivery and performance.”
The high growth rate in managed services is attracting more and more competitors.
In 2022, the managed services market in the Americas alone had topped $200 billion, growing 11%. It had an equally good year in 2023, with projections that more than 100,000 channel partners were delivering managed services. These included a wide range of partner models and some general practitioners who delivered managed services within their business.
Researcher Canalys put the IT managed services market globally at $419 billion, up 12% over the previous year. Given the positive impact on a stock price or market valuation, including managed services in a business portfolio will continue to be very trendy in 2024. But it's causing some headaches for MSPs. Stronghold Data's Jason Rincker notes that commoditization of traditional services is one of the biggest trends impacting the channel.
“It’s like everyone wants a piece of the pie that was once ours alone. It’s not just us MSPs offering these services anymore. Other industries are eyeing the monthly recurring revenue (MRR) that we’ve traditionally collected,” Rincker told Channel Futures.
He said ISPs aren’t just providing internet anymore; they’re selling firewall services and security services, while print vendors are stepping out of their comfort zone and selling help-desk services. Even software vendors are jumping on the bandwagon and adding monitoring programs to their offerings.
“So the landscape is changing, and we need to adapt,” he said. “It’s a challenge, sure, but it’s also an opportunity for us to innovate and stay ahead of the game.”
Everyone now wants to be an MSP, and the market is being saturated with even large system integrators that are leaning in this direction, said Richard McKinnon (pictured), president of DVBE.
“Instead of one or two trusted MSPs, a client sometimes has seven to 10 companies vying for the services, which sometimes can be counterproductive to delivery and performance.”
See our slideshow above for more information about the eight predicted managed services trends, or download our free resource on 2024 MSP predictions.
Here we explore a few of the following managed service provider trends:
The value of relationships in today’s data-focussed landscape.
Customer spending predictions for 2024.
Co-selling with vendor partners.
Heightened competition in an evolving landscape.
The future of VMWare.
Given the record flow of IT and connectivity products and services through channel partners of all kinds, today’s customers and strategic vendors are more dependent than ever on the channel. This puts the channel, especially managed service providers, in the spotlight for their strategies, growth rates and overall direction.
These managed services leaders find themselves in perhaps the most influential role in the industry. They work with customers on what solutions will help secure and scale their businesses, thereby picking the technology platforms that will get the most attention and growth.
Year-over-Year Growth of the Channel
One thing is clear: The channel is vibrant and growing globally. Canalys estimates there are more than 10 million channel, partner and alliance professionals that make up our industry, with 15,000 partner professionals using ecosystem in their title on LinkedIn. (Canalys is a Channel Futures sister company.)
If everyone is watching the channel closely, then the 35,000 vendor channel leaders who oversee their companies' indirect sales strategies and partner programs have become essential to their organizations' strategic direction and growth. The IT managed services industry, according to Canalys, grew 12%, to $419 billion, in 2022, with 335,000 global partners.
Challenges for the MSP Community in 2024
Channel partner opinions vary widely on where the market is heading, notably the biggest opportunities and challenges. Mitch Morgan, CEO of New Charter Technologies, is optimistic about the coming year, expecting security services to represent the highest growth rates for partners with cloud migrations, digital transformation, AI, workflow and DevOps taking center stage in 2024.
We resisted the temptation to make a single prediction on AI, as it's impacting just about every part of the technology business. As one partner said, “AI is a game changer. It’s like having a super-smart assistant that can do a lot of the heavy lifting. For MSPs, this means they can automate tasks and make better decisions; plus, with a shortage of cybersecurity experts, AI can step in to help spot and fix security issues.”
To download a condensed version of the 2024 MSP predictions, click here.
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