MSP Forecast: Double-Digit Growth Ahead

The latest Barracuda business report reveals that MSPs expect to maintain their average revenue growth trend of 33 percent in 2023.

Double-digit growth forecast

MSPs are optimistic about growth in 2023 (despite global economic instability), and many plans to expand their service offerings, particularly around cybersecurity. However, MSP employee stress levels also are increasing as these firms attempt to grow their businesses amid increasing competition. Those are the findings of Barracuda’s annual research report, “The Evolving Landscape of the MSP Business.”

The report is based on research by Vanson Bourne on behalf of Barracuda, including a survey of 500 MSP decision-makers.

More opportunities for MSPs in 2023

Moving into the back half of 2023, MSPs appear bullish on market opportunities. While 83 percent reported that tier growth was affected by global economic events, 91 percent said they were in a stronger position now than last year. Going forward, 92 percent said they believed there were many business opportunities this year, and many planned to increase the number of services they offer by an average of five per firm. In addition, while there are still concerns about economic instability, MSPs expect to maintain their average revenue growth trend of 33 percent in 2023.

That optimism is grounded in continuing demand for managed services from small and medium-sized businesses (SMBs). According to the survey, MSPs think that the top drivers for SMBs include:

  • Increased IT complexity
  • Internal IT resources are stretched too thin
  • Security concerns

Security is also top of mind for MSPs looking to expand their services. According to the report:

“Cybersecurity continues to be a key concern for SMBs, so 35 percent of MSPs are looking to incorporate a security operations center (SOC), 34 percent want to add managed detection and response, and 32 percent are interested in extended detection and response (XDR).”

Fewer MSPs offering cloud-based infrastructure services

Interestingly, there was one focus area where MSPs reported a reduction in services offered – cloud-based infrastructure services, which went from being offered by 45 percent of respondents in 2022 to just 31 percent in 2023.

According to the report: “This decrease is potentially driven by fewer organizations requiring ongoing support with cloud-based infrastructure services, following the short-term boom experienced during the 2020-2021 pandemic, with the rapid increase in home and hybrid working.”

MSPs are also increasing their sustainability efforts, with nearly all respondents indicating that their company had boosted sustainability credentials, and half were making sustainability a key part of their business strategy.

Training, staffing and available resources present challenges

While SMBs struggle with IT resource availability, MSPs also face challenges in providing relevant services to their customers. According to the survey, the top difficulties MSPs face include the demands of supporting client remote/hybrid working environments, increased competition in the MSP market, and keeping up with technology trends. All these challenges were ranked high by MSPs this year, in some cases by as much as ten percentage points compared to 2022.

In addition, MSPs also struggle with training, staffing, and resources around security. According to the report:

“Nearly half (45 percent) say that they wish their organization had access to more security incident response planning support, which demonstrates that even if the desire is present to expand their security offerings (as highlighted in the previous section), the skill sets and knowledge may simply not exist currently within the organization. A possible solution may be to partner with an existing managed security services provider, allowing MSPs to focus on providing services they are already strong in.”

MSPs also indicated they needed more marketing and sales support. Roughly half of the respondents stated that they would increase their use of social media and social selling, while just 38 percent indicated they would increase their advertising spend. With competition increasing, 46 percent said they wish they had more access to marketing support.

With expanded portfolios and increased competition, MSP employee stress is also increasing. Employees reporting high stress levels rose from 16 percent to 27 percent over the past year.

Balance is needed

According to the report: “MSPs may have a difficult balance between trying to expand their product line and keeping employee stress at reasonable levels. This continues to be a concern as MSPs plan to expand their service line-up further in 2023, with signs that stress is already increasing.”

MSPs are generally optimistic and confident, but most will need to do some internal work to ensure that employees are healthy and happy and have the training and resources they need to service clients. You can download the full report here.