Business models are changing for MSSPs and MSPs due to AI – threat or opportunity?
Each industry is facing pressure with the advent of AI. Based on my experience working in the channel for 30+ years, some channel partners will survive, and some will eventually become irrelevant. That is just the reality of business, and I saw this happening when some MSPs did not want to face the reality that cloud infrastructure would take over their on-premises servers, and eventually, these organizations without skills or desire to move to the cloud would cease to exist. Canalys estimates the following of managed services revenue:
The channel will grow at least 12% in 2024, driven by customer demand for cybersecurity management, cloud infrastructure, application development, AI solution consulting and compliance requirements (among other things). Managed services are outgrowing many other areas of the channel, and there are more competitors in the space coming from a broader set of partners, all looking to capitalize on customers’ need to find specialists.
Canalys also agrees that while the term MSP has been around for over a decade, the evolution of the business model has been relatively slow. What is also interesting is that 50% of the MSPs will have a hybrid delivery model in 2024 by working in an ecosystem of other partners and vendors. This brings the partnering aspect that, for example, the International Association of Microsoft Channel Partners (IAMCP) has promoted since its inception by focusing on its core competencies and partnering on areas not part of the skillset. This benefits the customer and allows smaller organizations to bring services to large enterprises due to broader service offerings.
I was in a position to help an enterprise customer select an MSP the past year, and it was interesting to see and interview multiple different MSPs. Each organization seemed very similar, and eventually, the most important differentiation was who could offer the best cybersecurity service to my client. That is why MSP organizations that do not have the skills or capability in cybersecurity will have issues (become irrelevant) with time unless they invest in cybersecurity or get acquired by a larger player with a cybersecurity practice. Canalys predicts the following for MSPs in 2024:
Canalys states that "cybersecurity managed services will bring more value to partners and customers, with 34% of partners expecting over 20% year-on-year growth in their cybersecurity revenue in 2024, while almost two-thirds expect over 10% growth. Canlys states the following:
Cybersecurity has changed everything about the managed services space, from the services partners can offer to the complexity of the solutions delivered to customers. But relatively few partners can deliver full-stack services.
According to Channelfutures, there is an unprecedented cybersecurity skills shortage, with 4 million needed globally. If channel partners (MSPs, MSSPs) can recruit the right talent, this is good news. Furthermore, according to the report "The Mission Critical: Unlocking the UK AI Opportunity Through Cybersecurity," the global AI cybersecurity market will be worth $135 billion by 203. When putting that into perspective, according to a report from Mordor Intelligence, the MSSP market is currently (2024) estimated to be worth $35 billion and is expected to reach $62 billion by 2029.
My entire career has been to either work through channels or help channels. It is fascinating to see how channels are "forced" to evolve like they always have, even if we might have forgotten this is the case. Channels have been the bread and butter for my company, TELLUS International, to help channel partners with their business models, envisioning services/products, pricing the products, and building go-to-market plans with execution.
I would love to hear your thoughts on this topic. Are you aware of where you and your organization should go concerning AI, specifically if you are in the MSP business?
Yours,
Dr. Petri I. Salonen
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