A sharp uptick for managed services growth is predicted driven by a number of key factors, including the maturity of cybersecurity services, according to N-able Inc’s second annual
MSP Horizons Report in partnership with Canalys.
The report, which summarises the top findings from research with MSPs across the globe, reveals that the increasingly successful ‘MSP 3.0’ model underscores the importance of focusing on long-term opportunities vs. short-term wins to drive scalability and profitability.
“The IT managed services market is expected to be worth an estimated $610 billion by the end of 2025, with channel partners contributing approximately 98% of that revenue,” said Robin Ody, MSP analysis practice lead, Canalys (now part of Omdia). “Managed service providers are operating at a time of significant change, both in the demand from customers and the competition from fellow channel partners.
“This is having a big impact on the managed services business model, affecting the services partners provide and the ways they package these capabilities. The forward-looking partner today is focusing on those specialisations that will provide the most value to the customer and help them remain competitive: cybersecurity, cloud, AI, risk management, compliance monitoring and vertical capability.”
Key findings include that 59% of MSP respondents expect to grow overall revenue by 20% or more in 2025. Also, almost 40% of respondents expect more than 20% managed services profit growth in 2025. Key growth factors include a bigger focus on endpoint, powerful cybersecurity and compliance tailwinds, co-managed expansion, and automation levers, including AI.
The top challenges to growth include new customer acquisition and upskilling staff.
Meanwhile, cybersecurity managed services sales growth is expected by 90% of respondents in 2025, up from 80% in the previous report.
Security-related services represent the top four most important contributors to managed services revenue over the next three years, with third-party MDR topping the list of new services MSPs are planning to add.
The most in demand future managed backup and disaster recovery services are SaaS application backup (53%) and AI-powered backup and recovery (51%).
Cyberthreat complexities, compliance requirements, and data breach liability concerns by partners and customers top the list for fuelling cybersecurity growth.
“A central theme of this year’s report is cyber resilience and a constant trend remains: cybersecurity is a key revenue driver,” said John Pagliuca, N-able president and CEO. “Conversations with MSPs worldwide make it clear that the line between IT operations and security operations has blurred. The leading MSPs differentiate themselves by addressing security across the entire attack lifecycle: from protection and detection to response and recovery. When it comes to cybersecurity, ‘good enough’ is no longer good enough.”
The report also found that AI adoption is maturing with more attention to governance and risk management. For instance, only 6% of respondents said they are not using any generative AI. Meanwhile, 40% have generated data governance rules and designed guidelines for human oversight. The biggest AI use cases are for building workflow automations and automating the sales and ticketing process.
Cloud modernisation is also in full swing, the report found. It said that on-premises will always have a place but modern MSPs are cloud-first for software and infrastructure according to the findings. However, concerns remain with security/compliance cited by 40% and cost control by 38%.