Managed services providers are trimming headcount as AI takes on routine IT support tasks, executives said at the Canalys Forum Americas this week in Scottsdale, Arizona. Amid growing strain on traditional per-user and per-device pricing models, MSPs are doing what they can to lower prices and stay competitive.
Boston-based MSP Focus Technology has not yet embraced outcome-based billing, but it is reducing prices at contract renewals on a like-for-like basis for existing customers, said CEO Chris Caprio. The company grew 30% this year, and cut 12% of its headcount, according to Caprio.
“I'm not saying every one of those [cuts] was AI-driven,” he said in a panel discussion. “Some of them were underperforming sales reps. But the point is, that's how we can afford to drive down prices. We have to continue to look internally, and that's what we're doing everywhere.”
MSP CSDNet, an MSP with a large New York State public sector practice, is embracing a similar pricing strategy.
“What we have done is use AI where we can to enhance our own team and the staff that we have, so that we can cut our main, back-end support team down to keep our costs lower,” CSDNet CTO Ryan Antonacci said. “We’re able to pass that value on for our future contract renewals to be at the same level or a little less from a negotiation point.”
Fear that AI is taking jobs has pervaded the channel. Antonacci said it’s not so simple for MSPs.
“I think everybody in this room has heard the fear that you could one day be replaced by AI,” he said. “But I think at this point in time, it's a better statement to say you could be replaced by somebody that knows how to use AI better, and that's the fear at the moment.”
Talent pools are already drying up, said Doug Murray, CEO at network management platform vendor Auvik, speaking at the same panel. The company’s MSP partners are a “retiring breed” with a shrinking influx of early career professionals who hold industry credentials, such as Cisco Certified Internetwork Expert.
“You're not getting a lot of kids coming out of Stanford, Berkeley, or Chicago that are saying, ‘I want to be a CCIE [Cisco certified internetwork expert].’ They're saying, ‘I'm going to AI,’ and I think that's going to accelerate extremely quickly,” Murray said.
AI is reallocating job responsibilities and headcount in the channel. Auvik is hiring young, AI-fluent talent alongside experienced security and networking veterans, according to Murray. Antonacci said CSDNet is using AI to free up its most experienced engineers so they can focus on higher-value projects while AI tools support less experienced staff.
HPE is developing and educating its internal workforce on AI rather than hiring externally, Ulrich Seibold, VP of WW ISV and service provider sales at HPE, said at the conference during the panel.
“Start now,” Seibold said.
