Dive Brief:
- Managed service providers face multiple challenges but finding new customers is the most pressing concern, according to Kaseya’s 2026 State of the MSP report, published Tuesday. The IT and security management software provider surveyed more than 1,000 MSPs globally.
- Nearly three-quarters of respondents said winning new customers is the biggest obstacle facing their business. Shrinking deal sizes and growing talent gaps are also MSP pain points, while cybersecurity and backup services remain core revenue drivers, the survey found.
- “Growth in today’s maturing market is less about scale alone and more about precision and operational discipline,” Dan Tomaszewski, EVP of channel at Kaseya, told Channel Dive. “The most successful providers will be those that simplify their technology stacks, automate intelligently and convert high demand into structured, profitable and scalable service models.”
Dive Insight:
MSPs are in a tough spot as customers scrutinize IT service contracts and once reliable revenue streams dry up. Sourcing new clients is particularly difficult in a crowded market, according to Kaseya.
“The data shows a clear tension: MSPs are focused on growth, but structural pressures in the market are making that growth more difficult to achieve,” the company said in the report.
Large annual contracts have become less common, slowing revenue growth for many MSPs. The share of customers spending $25,000 or more annually fell from 75% to 41% year over year as the number of contracts below the $25,000 threshold more than doubled.
The trend has cut into the bottom line, respondents said. Roughly 16% reported that their firm was either not profitable or just breaking even.
As traditional growth drivers recede, AI and automation services are becoming essential for MSPs looking to stand out in a competitive market. Almost half of the providers surveyed identified AI and automation as the top client needs this year, ahead of security and backup.
“This change creates both pressure and opportunity,” the authors said. “Those that can translate AI and automation into clear, outcome-focused services will be better positioned to differentiate in competitive bids and align with evolving client priorities.”
Despite falling to second and third in the picking order, cybersecurity and backup and recovery services remain reliable growth engines for MSPs.
Nearly two-thirds of respondents said endpoint and network management were top revenue sources. Nearly half ranked security services, such as antivirus/antimalware and email security, as their top revenue group, and 41% pointed to backup and recovery, including server backup, workstation backup, SaaS backup and disaster recovery.
The biggest MSP operational constraint was talent. The proportion of service providers that had difficulty finding and hiring skilled technicians jumped seven percentage points year over year to 16%, while challenges tied to training and upskilling staff more than doubled.
“As talent gaps replace tool limitations as the primary operational constraint, firms must rely on consolidated platforms and automated workflows to maintain core revenue engines,” Tomaszewski said. Cybersecurity, disaster recovery and business continuity services were three areas poised to benefit from AI and automation, he said.
