Barracuda released its annual Evolving Landscape of the MSP Business Report in conjunction with Global MSP Day in May. After two tumultuous years of a global pandemic, the war in Ukraine, and political and economic instability in the U.S., the report provided a welcome dose of positive news regarding the business outlook and opportunities for MSPs, including several signs of growth. 

There are also some real challenges as clients adjust to new hybrid and remote work environments, rapidly growing cyber threats, inflation, and other potential business obstacles. Below, we will look at some key opportunities and challenges identified in the report, which provide a focus for the next 12 months.

Business Growth and Confidence on the Rise

Despite high inflation and global supply chain problems, pent-up demand from the pandemic is fueling growth across all sorts of industries and business sectors. In addition, security concerns, driven partly by greater adoption of cloud and remote work environments, should also benefit MSPs. Here are a few highlights:

MSPs are feeling good about revenue. According to the report, MSPs expect revenue to grow by nearly a third this year, with average revenue projected at $12.12 million compared to $8.93 million in 2021.

Additionally, MSPs expect to see more revenue coming from managed services, with income from services expanding by 10 percent compared to last year. Clients (particularly SMBs) need help as they face increasing demand, new network/employee configurations, and critical IT staffing shortages.

Additionally, 95 percent of respondents said they felt stronger overall compared to 2021.

Service offerings are also growing. With increased customer demand, MSPs are also expanding their service portfolios. According to the report, service offerings increased in 2021 by an average of four services. In 2022, the vast majority of respondents (94 percent) expect their portfolios to increase by an average of six services.

Many of those new services have emerged from clients’ growing adoption of cloud technology. For example, the cloud helped these companies rapidly adjust to remote work during the pandemic. According to the report, more than four in ten (45 percent) respondents report that their organization currently sells or supports cloud-based infrastructure (IaaS) as a managed service offering for their customers, with 42 percent saying the same for cloud-based applications (SaaS). 

Security remains a huge opportunity. According to the data, 80 percent of respondents believe their customers are concerned about cyber-attacks and are looking to them for help. In addition, 92 percent said that they needed to be more focused on security than ever before, particularly regarding network and endpoint security, along with network monitoring and management.

An increase in successful cyber-attacks drives this, but other factors are also in play. According to the report, the main reasons why respondents say their customers seek external assistance for cybersecurity include: skills being prohibitively difficult and expensive to retain and attract (29 percent) and cybersecurity solutions not being integrated in the way they need them to be (22 percent). 

MSPs are also looking for support, with 98 percent reporting that they had at least one area where they wish they had more help from vendors. Security incident response planning was among the most common (44 percent) along with hybrid working best practices (50 percent) and marketing support, including things like campaigns in a box (44 percent).

Managing Customers, Retaining Employees

Not every trend in the report was rosy, however; several challenges were also identified. Those include:

Regulatory burdens are increasing. While roughly a third (36 percent) of MSPs reported they were confident in being compliant with cybersecurity regulations, a large number (89 percent) felt they needed more support and educational resources. This is not surprising given the steep increase in demand for security services, coupled with more complex regulations (at the state, federal, and even global level) and an increase in cyber-attacks.

The Great Resignation has uncovered more staffing challenges. MSPs are not immune to the IT staffing shortages mentioned earlier, and coming out of what has been a challenging two years, employee burnout will need to be carefully managed if MSPs want to retain the staff they already have. Per the report, nearly one in five respondents believe the average employee is highly stressed, while 56 percent report moderate stress levels.

Moreover, the respondents with the highest revenues for 2021 also reported the highest employee stress levels. Therefore, MSPs aspiring to greater growth need to focus on employee well-being (including the effect of non-work-related stress and distractions) to remain productive and keep those experienced employees on board.

Customer expectations are increasing. While there are plenty of sources of stress to pick from these days, around 45 percent of MSPs reported rising stress levels because customers are more demanding. According to the report, managing customer expectations up front (and ensuring boundaries are acknowledged) will be vital to keep everyone happy.

Moving ahead, MSPs will need to look after their security posture and their client networks while keeping customers and employees comfortable and positioning themselves to take advantage of growth opportunities. Not an easy balancing act, even while business appears to be growing. Like their clients, MSPs may need to look to partners (like specialist vendors) to help lighten the load, increase their centralization and automation capabilities and expand their services. That will make it easier for MSPs to alleviate employee stress while increasing customer satisfaction – and profits.

Jason Howells is VP, MSP and International Sales at Barracuda.