Navigating the new normal and other trends we weren't expecting — Part 3

Around this time last year, a few executives predicted that 20% of MSPs will dominate 80% of managed services revenue by 2020. Well, it's 2020. How close are we to realizing this prediction? Is the pandemic influencing the pace of mergers and acquisitions (M&A) in the MSP industry?

MSP market consolidation

Before the COVID-19 pandemic, more than 50% of MSPs were interested in either acquiring or merging with another MSP. But the pandemic had other plans. The current economic uncertainty has greatly reduced the interest in consolidation. Now, only 37% of MSPs are considering M&A.

SMB businesses are demanding innovative technology which was first accessible only to larger enterprises. The remote work revolution has fueled the need to outsource some or all of their essential IT services to MSPs. Services such as software-as-a-service (SaaS), networking, cybersecurity, and business continuity have become more prominent. Managed service providers are therefore expected to support such services and help their SMB clients achieve their business goals.

Broadening the range of services that MSPs can offer is what makes the whole process of market consolidation appealing.

	Arvind Parthiban CEO & Co-founder, SuperOps.ai

Most SMB MSPs lack the expertise and operational maturity to meet the demands of customers. MSPs are assemblers. A sudden innovational shift can be difficult. For example, an MSP that provides remote monitoring and management (RMM) might find it operationally and financially difficult to add new services like disaster recovery to its service offerings. Additionally, the new normal is making it a struggle for managed service providers to adjust to the digital and shifting business patterns.

Consolidation is inevitable. It will only lead to a mature MSP industry.

	Arvind Parthiban  CEO & Co-founder, SuperOps.ai

M&A allows MSPs to expand their technical service offerings to new verticals, scale their marketing and sales, and attract larger clients. And a surge in M&A activity can be expected due to decreasing deal premiums and assets that companies were once reluctant to sell. Market consolidation offers managed service providers a chance to expand and survive these shifts.

Automation and AI

Outside the MSP community, for many businesses, AI is one of the biggest competitive advantages. Large enterprises have already begun to realize the benefits of AI, all thanks to their team of experts and deep pockets that guide their approach to AI. However, SMBs do not enjoy this luxury. Let's not forget the financial strain that the pandemic has put on them.

That’s where the friendly neighborhood MSP comes in. As an IT expert, MSPs are uniquely positioned to guide their clients to take advantage of the latest AI trends.

AI — the next big service offering

MSPs are perhaps, already offering packaged services but where does AI fit in within this context? In order to provide AI solutions, MSPs need to discover the value it can offer their clients. Take, for example, managed service providers who sell backup and disaster recovery as a service. Do you think it's all about taking backup? It isn't. It's about preventing costly downtime which makes backup and disaster recovery a great service to offer. MSPs need to think about AI in the same way.

How can AI benefit your customers?

AI-powered customer service

80% of customer service interactions can be handled by bots. And that 80% is not a measure of AI taking over our jobs. It’s an indicator of the amount of monotonous customer service tasks that can be intelligently automated. By providing your clients with AI-powered bots, you are helping them reduce response times and increase their customers’ experience.

Today there are plenty of vendors who provide white-labeled chatbots that you can easily resell. This way you can create a low-maintenance revenue stream using AI.

Powerful data protection

In my previous post, I had talked about how the shift to remote work has opened up Pandora’s box for cyberthreats. It has become a playground for cyberattacks and vulnerabilities. With the help of AI, it’s easier to identify malicious activity and take preventive measures.

Today most antivirus and anti-malware solutions rely on AI to eliminate threats and keep networks safe without human intervention. With such AI-powered solutions, MSPs can enhance security and provide that additional value to customers.

Enabling business intelligence

Data analytics is a crucial service for MSPs. If executed well, this service can turn managed service providers into wonder workers for their customers’ businesses. When large volumes of business data are combined with AI, MSPs can enable customers to make faster and smarter decisions.

MSPs can resell white-labeled data analytics solutions and position themselves as a provider of data analytics services. MSP customers can derive value by cashing in on the explosive growth of big data.

True AI isn’t yet a mature technology. But that hasn’t stopped companies from cashing in on its potential for growth. MSPs haven’t particularly shown interest in this technology. That said, it’s time to pick up the reins and lead the way for intelligent automation and AI-powered services. When everything else fails, AI will be the competitive advantage MSPs will have over their peers. By starting now, you can capitalize on opportunities as they become available or as customers ask for it.

Related reading: AI-powered MSP platform

Why just cope when you can thrive

If there is anything that this year has taught us, it’s this — change is the only constant. And those that don’t evolve can become irrelevant. It also taught us that change is not necessarily bad and that as crises occur, so do opportunities. With a little introspection, investment in the right technology, partnering with potential service providers, and shoring up weaknesses, managed service providers can thrive in the new normal. Be it the cloud, M&A, remote work, or AI, the pandemic has accelerated us forward into a future that was already on its way.

The only question left to ask is this — are you prepared?