Why the MSP market now asks for a different point on the horizon
AuthorMSP Late NightPublished on:The MSP market is changing faster than most owners can keep up with, and that produces a peculiar kind of paralysis at the top. The vendor raises its thresholds, the end client asks for AI without knowing what it is, and buy-and-build consolidation carries on as though there were no brake. Three movements at once, and as a director you stand there choosing which to answer first. What stands out in conversations with owners of 20 to 150 FTE: nobody doubts their craft, everybody doubts their route.
The point on the horizon that will not stay put
The average MSP owner is caught between three movements at once. Vendors raise their thresholds and certification requirements every year, thinning out a channel that once had 8000 transacting Microsoft partners. End clients ask for AI and security as though it were a product catalogue, while they do not know themselves what they want. And the consolidation of buy-and-build parties carries on undiminished, this year as well, even though everyone thought last quarter that it would stabilise.
What this means for the smaller or mid-sized MSP is concrete: you can no longer comfortably keep selling large labels at the old level of competence. The vendor wants to see quality, not only volume. And you are left with a choice you would rather not make. Carry on under your own steam and hope it works. Specialise and deliberately let go of part of your revenue. Or be acquired by a larger group. The fourth option, hiring twenty people to deliver every vendor in depth, is no longer an option for most parties with the current war on talent.
What really works for the MSP market: choosing what you do not do
The reflex at many MSP owners is to formulate the point on the horizon as sharply as possible and then hold on to it grimly. That is exactly where it goes wrong. The partners we have seen growing fastest recently set a point knowing it will shift. Not because they have no vision, but because they understood that fear of imperfection is worse than a course correction in six months. Start building. Adjust along the way.
Practically that means a baseline measurement consisting of two questions. Where are you now, which competencies do you actually have in house, which vendor relationships really contribute to your margin. And where do you want to go, not as a marketing claim but as an answer to what clients should be saying about you in five years. Between those two points there is no straight line. There is a route you can walk, with the option of turning left or right as soon as the market forces it.
What the partners who do grow do differently
If you look across a portfolio of 5500 partners, two types stand out as doing well. The large MSP, which you would expect to carry twenty vendors because it can, turns out in practice to be sharply bounded. Three, four, five core technologies. That is where they build their competence, that is where they earn their statuses, that is where their margin sits. The smaller MSP by contrast often feels the urge to keep delivering everything because a client asks for it, and ends up with a vendor arsenal that collapses when one person goes on holiday.
“A good MSP knows what it wants and what it stands for.”
Stop the margin bleed and the time bleed
The mechanism behind it is simple. Every extra vendor costs certifications, costs training, costs someone who can claim rebates, costs someone who follows the product updates. With five vendors that is doable. With fifteen it becomes an operation your staff cannot meet and where your margin quietly disappears into overhead. The successful MSP does not grow by doing more, but by choosing more sharply what it does not do. And that is exactly where the opening for partner-to-partner collaboration sits: what you do not do, another MSP does, and together you win the RFP you would never have won alone. In theory that sounds like giving away competition. In practice it is the only way to serve an end client asking for seven disciplines while keeping your margin.
The AI trap nobody names
Then the other gap. Saying “we do AI” forty times on your website means nothing if you do not know which liability you are taking on with it. A chatbot answering questions at an end client about salary or acquisitions, while you are the party who implemented it: that is a liability question most MSPs do not have on their radar yet. The same goes for security. The partner who says “I will fix the hack when it happens, that is nice revenue” has simply never lived through a serious incident at a client from the inside. Anyone who has chooses at the front. Pen test mandatory. Managed SOC mandatory. If the end client does not meet that, they are not a client. That sounds arrogant, until you realise it is the only way to keep your own business standing.
Why liability conversations now belong at board level
The painful part is that at many MSPs this conversation is still held at account manager level. A commercial colleague says yes to a Copilot implementation because the client asks for it, and nobody checks whether the contract covers liability for the moment the AI invents something that causes damage. At an average mid-sized client that goes well for a long time. Until one day it does not, and then the damages claim does not land with Microsoft but with the party who implemented it. You, that is. The MSPs who lose sleep over this have by now rewritten their terms, reviewed their insurance and set up a go/no-go list at board level. That costs two half days and saves a court case.
“The biggest danger and the biggest opportunity is AI, but safely.”
Consolidation: join in, step back or buy yourself
The third movement, buy-and-build consolidation, is for many owners between 45 and 60 the most personal question. One private equity firm after another calls, valuations are not what they were two years ago, but deals are still being done. What we see working: not waiting until you get called, but mapping out yourself what makes your business unique within the region or the field. Three scenarios deserve serious arithmetic. Selling to a strategic buyer who needs your speciality. Joining a platform and growing on as a business unit. Or becoming the acquirer yourself of two or three smaller peers in an adjacent discipline. Which scenario fits best depends on age, succession and the question of whether in five years you still want to walk into the place with pleasure every Monday morning. The answer to that last question decides more than any spreadsheet model.
The MSPs growing now are not the parties with the broadest vendor portfolio. They are the parties who dare to say what they do not do, and who let their point on the horizon shift without losing their course. Anyone still hoping that billing by the hour will absorb the consequences of a hack is heading for an unpleasant conversation. Anyone choosing now what they really stand for is at the same time choosing which end clients they want to serve and which vendors fit with that. That is not a strategy exercise for two years from now. That is work for this quarter.