2024 Insights: Key lessons for MSPs to thrive in 2025

The technology landscape is constantly evolving, bringing new opportunities and challenges for managed service providers (MSPs). As we enter 2025, it’s worth reflecting on the key trends and developments from 2024 that will shape our path forward.

At IT Nation Connect™, held November 6-8 this year, Joe Panettieri, Founder and Managing Director at Channel Angels, moderated a panel session, “Lessons from 2024: Shaping our path to 2025,” where conference attendees heard from four thought leaders with unique perspectives on the state of the MSP industry. Panelists (listed in alphabetical order by first name) included:

• Abraham Garver, MSP Team Leader and Managing Director at FOCUS Investment Banking, a provider of M&A advisory services
• Jay McBain, Chief Analyst at Canalys, a technology market analysis firm
• Mohnish Gandhi, Vice President at Thoma Bravo, a private equity firm in software and technology
• Peter Kujawa, Vice President and General Manager at Service Leadership, Inc.®, a ConnectWise company

Here are some of the key lessons learned and how MSPs can better prepare for the future. 

The market has stabilized after a period of volatility

The last few years have been a rollercoaster ride for MSPs. The COVID-19 pandemic fueled rapid growth in 2020-2021, with managed services revenue increasing 25% at its peak. However, 2022 saw significant deceleration across markets, bringing volatility.

As Peter Kujawa from Service Leadership shared, managed services revenue growth has now slowed substantially, returning to the historical norm ranges of 10-14% year over year. But, because wage inflation has declined, profitability and gross margins have actually improved compared to the height of the pandemic boom. We’re back to “blocking and tackling” as the market stabilizes.

This means that after a period of rapid change, we’ve entered a new normal. MSPs should focus on steady, sustainable growth strategies rather than counting on dramatic market fluctuations to drive revenue. Jay McBain from Canalys reinforced that even with a challenging global economy, tech remains a bright spot, growing at 6.2%, well above the overall economy. Compared to other industries, the MSP market is healthy.

M&A and private equity investment continues, albeit more selectively

As Mohnish Gandhi from Thoma Bravo observed, private equity investment has slowed across the board as firms take a more cautious stance in light of market uncertainties. Investors want to see predictable growth and performance before deploying capital.

According to Gandhi, there’s a clear reason as to why private equity firms wait for the market to settle before striking.

“You don’t want to catch a falling knife. You want to catch something that is stabilized and gaining momentum.”

Similarly, Abraham Garver from Focus Investment Bank is seeing more selective platform acquisitions, with minimum revenue requirements increasing from $3-5 million EBITDA to $15 million EBITDA. However, there is still strong interest, with over 100 private equity firms eagerly seeking platforms to acquire.

For MSPs, this means the market continues to consolidate around larger, proven players. Smaller MSPs may find it harder to attract acquisition interest or capital compared to two or three years ago. Focusing on efficient operations, predictable growth, and specialization in high-value verticals or services will be vital in standing out from the competition.

The ecosystem is converging, requiring MSPs to expand horizons

As Jay McBain observed, the partner ecosystem is increasingly interconnected, with partners offering multiple types of services. The lines are blurring between MSPs, VARs, ISVs, SIs, telcos, and other partner types.

This convergence presents opportunities for MSPs to expand their capabilities through both mergers and acquisitions (M&A) and partnerships. For example, integrating managed application services around cloud platforms such as Salesforce and Workday can significantly increase an MSP’s addressable market.

MSPs can’t afford to operate in a bubble—they need to understand the broader ecosystem and adjacencies to open new revenue streams. Cybersecurity, compliance, and managed data center services are other areas where MSPs can capitalize on growing market demand.

AI’s transformative impact will be long-term; near-term applications are limited

There was extensive discussion around artificial intelligence (AI), given high-profile releases such as ChatGPT. However, panelists cautioned that while AI will be transformative long-term, near-term practical applications are limited.

As Mohnish Gandhi explained, most current AI deployments focus on predictive analytics, not autonomous decision-making. Building the datasets required for true machine learning will take years, and regulations around issues such as AI accountability are still being developed.

For now, MSPs benefit most by incorporating AI capabilities from vendors such as ConnectWise into their operations. Improving ticket handling, billing, and other workflows delivers immediate efficiency gains. MSPs should monitor AI closely but not make overly bold investments just yet.

On-prem infrastructure isn’t going away anytime soon

As Jay McBain noted, around 85% of business data still resides on-prem, mostly on legacy hardware. While data migration to the cloud is accelerating, the expectation is this infrastructure will remain highly relevant for the next decade.

This is good news for MSPs managing on-prem infrastructure, networks, and data centers. With constraints around data gravity and systems interoperability, wholesale cloud migration is unrealistic for most customers. MSPs should continue investing in on-prem expertise while expanding cloud capabilities.

Compliance cannot be an afterthought

Whether driven by regulations such as GDPR or insurance risk mitigation requirements, customers expect rigorous compliance from their MSPs. As Peter Kujawa emphasized, non-compliance can result in heavy penalties and loss of business.

MSPs should proactively implement auditable standards, policies, and controls. Don’t wait for customers to dictate terms. Ensure teams are trained on the latest compliance requirements and that sales and marketing collateral accurately conveys your capabilities. Obtaining advanced certifications can further validate expertise.

Focus on organic customer acquisition

For MSPs looking to drive growth, Abraham Garver stressed focusing on organic new customer acquisition vs. M&A or cross-selling existing customers. Developing a solid customer acquisition engine—whether led organically or by dedicated sales staff—is highly valued by potential acquirers.

Building a strong inbound marketing program is critical, as is allocating resources to sales development. As Jay McBain noted, there are over 300,000 companies with at least some managed services revenue, so the market remains highly fragmented. Stealing share from competitors will fuel growth more sustainably than M&A in many cases.

To help fuel organic growth, you can also join industry programs or partner with outside vendors. Groups such as the ConnectWise Partner Program™ and IT Nation Evolve™ are great examples of community-based programs that can help accelerate your business success.

Conclusion

The lessons learned from 2024 will shape the future for MSPs in 2025 and beyond. While challenges and unknowns remain, technological change is creating new opportunities for smart, adaptable, and customer-centric MSPs to thrive. If your MSP aligns strategy with market forces, invests in the right capabilities, and stays focused on sustainable growth, the coming years look bright.