A new KPMG report highlights key insights into the evolution of the MSP landscape. There were key seven emerging trends and five universal challenges that are reshaping the industry.
Emerging priorities for modern MSPs
As the IT landscape continues to evolve rapidly, the report emphasizes that MSPs must become increasingly adept to keep pace with this unprecedented rate of change. KPMG has identified several key emerging trends, including:
- Emphasis on outcome-based models: Clients are no longer just seeking services; they are demanding measurable results and value. MSPs are transitioning from traditional cost-based agreements to outcome-based models where success is gauged using specific key performance indicators (KPIs).
- Transformation through digital innovation: MSPs are not just managing existing processes, but are helping businesses reimagine their operations through digital innovation by deploying cloud-native technologies, modernizing legacy systems, and fostering data-driven decision-making.
- Integration of AI and automation: Artificial Intelligence (AI) and automation technologies have become integral to managed services. From robotic process automation (RPA) for back-office tasks to low-code automation and AI-driven customer support agents, providers are leveraging technology to enhance efficiency, reduce costs, and deliver solutions at scale. Predictive analytics is also playing a pivotal role.
- Growth in nearshore services: Nearshoring is experiencing a renaissance as companies seek the perfect balance between cost efficiency and collaboration. Nearshore locations offer the advantage of language availability, cultural alignment, proximity, hence minimal time zone differences, and high-quality talent pools.
- Cybersecurity as a core offering: Cybersecurity has moved from being an add-on to a core managed service. Many MSPs now offer threat monitoring, incident response, and compliance management services as cyberattacks have become more sophisticated.
- Sustainability and ESG compliance: Environmental, Social, and Governance (ESG) compliance has become a key differentiator for MSPs. Organizations are looking for partners who align with their sustainability goals, whether through energy-efficient data centers or socially responsible labor practices.
- Importance of SaaS in service delivery: Software-as-a-Service (SaaS) has become a cornerstone of managed services. MSPs are leveraging SaaS platforms to streamline operations, reduce infrastructure costs, and offer scalable, subscription-based solutions.
Potential MSP pain points
The impact of each of these trends on an MSP’s business model will vary, but the KPMG report also highlights several challenges that are nearly universal across the industry, including:
- Talent acquisition and retention: The ‘Great Resignation’ of the early 2020s has left a lasting impact, with skilled labor shortages posing a significant challenge. Providers are grappling with the need to attract and retain top talent while competing with technology companies and startups.
- Balancing cost and quality: While cost efficiency remains a top priority, clients are unwilling to compromise on quality. Striking this balance is particularly challenging when MSPs have to invest in training and infrastructure.
- Regulatory and compliance complexities: Complying with regional regulations has become a labyrinthine process. MSPs need to stay ahead of global data protection laws, industry-specific regulations, and evolving cybersecurity mandates.
- Managing multivendor ecosystems: Large organizations often engage with multiple service providers, creating a fragmented ecosystem. MSPs must demonstrate collaboration skills and offer integrated solutions that align with those of other vendors.
- Adapting to hybrid work models: The hybrid work model, which combines remote and on-site work, has disrupted traditional service delivery frameworks. MSPs need to accommodate flexible arrangements while ensuring security, collaboration, and efficiency.
Adapting in a constant state of change
None of these challenges is individually insurmountable, but collectively, the amount of time, energy, and resources required for MSPs to succeed continues to steadily increase. There are AI advances that might help ease those burdens, but each MSP will need to find ways to continuously adapt. In effect, there is no such thing as a steady state when it comes to delivering managed services. As each individual customer adapts to changes in their business model, the collective weight of those decisions is eventually passed on to the MSP that supports them.
Ultimately, success depends not just on staying close to the customer, but on ensuring that the teams supporting them aren’t burned out by the pace of change
Photo: Ethan Daniels / Shutterstock
This post originally appeared on Smarter MSP.