Managed service providers are facing a challenge from the clients who keep them in business. As IT services data becomes more accessible and automation takes over ticketing, the ties that bind an organization to its MSP are loosening.
Harold Mann, president of San Francisco-based MSP Mann Consulting, said his peers need to rethink their value proposition in an age of increased portability. As the burden of changing providers shrinks, MSPs are losing leverage.
Historically, customers would have to dedicate copious time and effort to retrieve years of tickets and workflows from their MSP if they wanted to make a change. For many customers, it was simply too onerous a process.
“The switching costs have been the dirty secret of our industry for a very very long time,” Mann told Channel Dive.
LLMs have changed the dynamic, unlocking data and making it more portable. Customers can tap into the same APIs and model context protocol servers partners use to swivel-chair vendor data streams.
“Now, you can just tell Claude, ‘Go into that ACME system over there and pull all my data out and reformat it for this system,’” Mann said.
While AI tools don’t relieve the full operational pain of switching, they can remove friction for MSPs that are knocking on the customer’s door, according to Jessica Davis, principal analyst at Omdia, a Channel Dive sister company.
“You still have to deal with access, integrations, licensing and actually handing over responsibility for the environment,” said Davis. “But if that knowledge transfer gets easier, customers may be able to more easily shop around. That could add to the price competition and margin pressure we’re already seeing, especially for MSPs that aren’t very differentiated.”
It would be a mistake for an incumbent MSP to try to make the data irretrievable, Mann said. Mann Consulting is pushing in the other direction, aiming to give customers better data visibility and access.
Customers have come to expect a degree of openness.
“In the health world, you have access to your medical records and lab results," Mann said. “In the old days it was all stuck in a manila folder at your doctor's office in a rolling file cabinet.”
For MSP Radio Owner Dave Sobel, the difference is not that customers can now extract the information, but that they can contextualize it.
"That was the incumbent's real asset, and it's the one thing AI is genuinely good at pulling out of an environment and writing down,” Sobel told Channel Dive in an email. “The moat wasn't the data. It was that only you had read it."
Vibe coded ticketing
Coding assistants are also loosening the MSP. Customers can use AI assistants to build IT services tools just as easily as their MSPs vibe cocde software to replace vendors.
“There's this perception that you're not locked in anymore on almost anything, because all of the software companies are scrambling to have these MCP server connections and API connections, and in doing so, they're basically putting bridges over every single moat that they've had,” Mann said.
Some of Mann’s customers have tried their hand at creating internal ticketing systems. Those tickets are showing up in the MSP queues with lengthy diagnoses from LLMs. Mann said that the AI explanations betray a hint of bias against the MSP and are often wrong.
“It’s the equivalent of going into your annual physical with a WebMD printout,” he said.
On paper, vibe coding by customers poses a threat, but Mann isn’t concerned for now. Internally developed ticketing software is loaded with risk. Companies also risk losing the person who vibe coded a tool, and overlooking the finer details of software development such as security and code maintenance.
“Just because you can write something that looks like the Temu version of ConnectWise doesn't mean you've replaced ConnectWise,” Mann said.
MSPs should nonetheless be ready to fend off vendors offering MSP-in-a-box agentic ticketing platforms.
“This is the calm before the storm still because our clients have not been aggressively sold more of a self-service kind of MSP experience, but it's coming,” Mann said.
Friction control
Mann sees some MSPs using a stick rather than a carrot in order to keep clients around, leaning hard on exit terms, hoping cancellation fees will make them think twice or at least help them recoup losses
"Reinstatement fees, re-onboarding at full rate if a client leaves and comes back, time-and-materials billing for transition work,” Sobel said. “That's cost recovery on a messy divorce.”
But Mann said he wonders if, instead of trying to make it harder for clients to shift, MSPs should up their game. Three-year contracts might shift to six months or even month-to-month as providers accept that their clients have options. MSPs that offer the better experience and more flexible licensing would then have an edge. Vendors that offer flexible licensing for the MSPs would be best positioned.
“If CrowdStrike is going to require me to be in for a year and my clients are insisting on month-to-month, then that moves all the risk onto me as the MSP,” Mann said.
Sobel wasn’t sure that vendors would be shortening contracts anytime soon.
The moral of the story is a simple one: As customers enjoy increased choice, MSPs are going to be genuinely differentiated by the experience they provide.
"If your retention depends on friction, you don't have a business; you have a hostage,” Sobel said.
