What's in store for the managed services market in 2024? Canalys MSP, MSSP and channels specialist and principal analyst Robin Ody recently provided 10 predictions for 2024. Here's a look at those predictions.
1. Total managed services revenue in the channel will grow by at least 12% in 2024. Ody attributes this growth to increasing demand for services such as cybersecurity management, cloud infrastructure, application development, artificial intelligence (AI) solution consulting, and compliance requirements. Ody said that managed services growth is outpacing growth in many other areas of the channel, with a rising number of competitors entering the space to meet the growing need for specialized services.
2. Over 50% of all MSPs will be operating an ecosystem (co-managed and/or co-partnering) model in 2024.
3. At least 33% of MSPs will be using generative AI to build their own tools and automation processes by 2025.
4. MSP partner programs will become widespread across IT vendors in 2024.
5. Compliance consulting services will grow 60% for MSPs in 2024.
6. MDR services will be the number one growth engine for MSPs in 2024, growing at least 50%.
7. At least three vendors in the RMM and PSA space will be acquired by 2025.
8. M&A activity in the MSP channel will grow by 50% in 2024, returning to 60% of 2021 levels.
9. Cybersecurity managed services revenue will grow by 15% in 2024.
10. The three key challenges for MSPs in 2024 will be new customer acquisition, upskilling existing staff, and transitioning their business models.
Evolving MSP Model Enhances Customer Outcomes
Canalys provided more insights about some of those predications in an executive summary. The firm noted that although the MSP business model was established more than a decade ago, its evolution has been relatively slow until recently.
The growth has been attributed to a what Ody calls a “significant increase” in the variety of partners involved in managed services, enabling even smaller partners to deliver services to large customers across extensive geographical areas.
"Fifty percent of MSPs report they will be working in a managed services hybrid delivery model in 2024," he writes.
This model involves collaboration among partners, vendors, and customers' IT teams to deliver solutions, aiming to improve customer outcomes.
Cybersecurity and AI: Key Growth Areas for MSPs
The report also sheds light on the importance of cybersecurity managed services, with 34% of partners expecting more than 20% year-on-year growth in their cybersecurity revenue in 2024.
The complexity and necessity of cybersecurity solutions have significantly influenced the managed services landscape, according to Ody.
Ody also highlighted AI as a critical opportunity for MSPs in their internal operations, particularly in areas such as automation, project management, and improving software accuracy in data centers and cybersecurity.
M&A Activity and Vendor Consolidation
Canalys predicts a return a higher level of M&A activity within the channel in 2024, following a 60% decline in 2023 due to economic uncertainties.
The firm anticipates that conditions such as improving valuations and lower interest rates in some countries will encourage the rebound.
Beyond that, the firm points to what it sees as an inevitable consolidation in the remote monitoring and management (RMM) and professional services automation (PSA) business, naming several companies as high-demand targets for acquisition.
The firms identified include Addigy, Atera, HaloPSA, NinjaOne, and Syncro. (Syncro's CEO announced her departure from the firm this week on LinkedIn.) These companies are expected to be in high demand this year from other vendors and private equity firms, according to Ody.
MSP Partner Programs and Compliance Consulting
A majority (69%) of channel partners told Canalys in a recent survey that if their vendors offered a dedicated MSP program, that's something that would enhance their vendor relationships.
The company anticipates more vendors will develop dedicated MSP programs to strengthen partnerships as a result.
Challenges Ahead
Despite the optimistic growth forecast, Canalys points out several challenges MSPs could face in 2024, including customer acquisition, budget management, and staff upskilling.
