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February 8, 2019

The Shifting Sands of the Managed Service Provider Landscape

"Mergers and acquisitions (M&A) have become a popular growth play for MSPs."

By CBR Staff Writer

John Pagliuca

As we reflect on the technological landscape of 2018, it’s fair to say the year was eventful. AI is beginning to truly shape the way businesses operate today. GDPR is no longer a deadline looming on the horizon, but a reality that’s here to stay, writes John Pagliuca EVP at Solarwinds MSP.

As a result, compliance is now an even bigger consideration. And security retains its top spot on the business agenda as the risks associated with cyberattacks increase and evolve.

So what does this mean for the MSP community.

Layered Security Is A Must

The threat landscape is changing rapidly. New attack vectors are continuously added to the threat system, which means businesses need to keep evolving. There is not just an appetite in the market for better security, but a clear demand for it.

The biggest risk to any business is a data breach. From an MSPs customer’s perspective, it is simply not acceptable today to suffer a hack. There is a growing intolerance for such incidents, because protection is possible. When it comes to the relationships between MSPs and their customers, the right level of security is crucial. It’s the factor that customers care most about, more than any other service. In fact, security often overtakes price as the deciding consideration when choosing an MSP.

Endpoint security is no longer enough. MSPs need to adopt a layered security approach that combines multiple mitigating security controls to protect resources and data. It’s vital for MSPs to monitor their customers’ IT estate for intrusion. Data breaches tend not to be “smash and grab” attacks, but sophisticated and considered assaults. The intruder will gain access and spend some time poking around in the system before stealing what data they can.

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This year, we’ll see more proactive services, such as monitoring logs to help find such attack, form an MSP’s offering. Training will also be high on the customer’s agenda, as it becomes ever more evident that technology cannot be enough to thwart the threat of attack. MSPs will begin to respond to that—and offer more assistance around dealing with the broader cybersecurity challenge, rather than single elements.

Scripting First, AI Later

AI is the buzzword of the moment, but 2019 will be all about automation and scripting. There’s been a lot of hype around the wide capabilities of AI (robotics, anyone?), but it is most successful when the focus is narrow.

We’ve seen this in the consumer world where virtual assistants, like Siri, offer a very specific skill. Similarly, MSPs and their customers will benefit most from a focus on the prescriptive automation of tasks rather than the nebulous benefits of AI. A combination of the current skills shortage and heightened demands from customers means pressure on MSPs to deliver, and scripted automation is by far the best way to alleviate this pressure.

More Consolidation—To An Extent

Mergers and acquisitions (M&A) have become a popular growth play for MSPs. Common reasons are to satisfy company expansion, increase service offerings, move into new geographies, garner new resources and skills, or simply make more money by increasing revenues.

In 2019, we’re set to see more M&A among MSPs. I don’t believe we’ll end up with a ‘Big Four or Five’ MSP list, as is being forecast by some. Private equity interest in the market makes acquisition inevitable (when it makes sense), but at a certain size, the business model starts to become less viable, as the fabric of an MSP becomes stretched.

One thing we may see this year is the acquisition of an MSP by an MSSP or vice versa. While the two types of companies fulfill separate roles, they overlap. There are opportunities to cross-sell services and fulfil the role of trusted advisor—and this could well be a move which enables this.

Overall, the world is becoming more onerous and complex for today’s businesses. MSPs are in a unique position to help their customers navigate the challenges and exploit the opportunities—and 2019 presents an opportunity to put that approach into place.

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