N-able’s second annual MSP Horizons Report, conducted in partnership with channel analyst firm Canalys, finds MSPs are optimistic for growth in 2025, with cybersecurity a leading opportunity that touches a variety of service offerings. Notably, 90% of survey respondents expect growth in cybersecurity managed services sales this year. This is up from 80% in the previous year’s report.
“Security hits all parts of the MSP growth algorithm,” says John Pagliuca, president and CEO of N-able, speaking with MSP Success about the survey results.
According to the report, security-related services represent the top four most important contributors to managed services revenue over the next three years. Third-party MDR (managed detection and response) tops 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%).
Opportunity also exists in service offerings that provide the most value to small and medium businesses. “The forward-looking partner today is focusing on those specializations that will provide the most value to the customer and help them remain competitive: cybersecurity, cloud, AI, risk management, compliance monitoring, and vertical capability,” says Robin Ody, MSP analysis practice lead at Canalys (now part of Omdia), in a press statement.
The Growth Outlook: MSPs Are Optimistic
In 2024, many MSPs saw sales slow. Canalys estimates managed services revenue globally grew just under 11% year-on-year in 2024. But data from the MSP Horizons Report projects 2025 to be a strong year for the IT channel. Indeed, 59% of MSP respondents expect to grow overall revenue by 20% or more in 2025. And almost 40% of respondents expect more than 20% managed services profit growth. Key growth factors, according to the report, include a bigger focus on endpoint, cybersecurity and compliance, co-managed IT, and AI/automation.
Pagliuca says these findings are not a surprise. “We know that this is a growth market,” he says. “The report reflects the sentiment of the MSPs that I speak to on a regular basis.”
The unknowns about the U.S. presidential election that contributed to stalled projects last year are now behind us, he says. “A lot of the work in the channel starts with not necessarily a recurring revenue, but more of a project. And I think for folks in the SMB community and midmarket, they need to have confidence before they’re going to kick off a sizable project. So I think the known change of the administration, as opposed to the unknown, gave folks a little bit more of a footing so that they could actually say, ‘OK, let’s kick off these projects.’”
Will Tariffs Dampen Optimism?
The survey was conducted from October 2024 to November 2024, so preceded the potential implementation of trade tariffs. MSP Success asked Pagliuca if that might impact MSPs’ optimism.
“I don’t think the impact in the MSP community would be more profound than the broader macro environment,” he says. However, MSPs that serve manufacturing businesses “may feel a little bit of a pressure from their customers.”
Overall though, he says, “The MSP community is very recession resilient, very diverse [in industries it serves]. I’m not expecting a major pullback.”
That’s because SMBs need MSPs more than ever, he says. “These are not services that are nice to haves. These are need-to-have, mission-critical services. So even if you’re an MSP servicing the manufacturing sector, those manufacturers still need the cybersecurity, the data protection, [and have] compliance needs.”
Cyber Resilience an Overarching Theme
Among the growth areas MSPs anticipate in the next three years are managed endpoint services, managed detection and response, and managed vulnerability scanning.
“There is a merging of IT operations and SecOps. So security operations and IT operations are really now one team. The need for these managed service providers and their customers is to get this complete, end-to-end view,” Pagliuca says. The overarching theme is now cyber resilience, he stresses.
“It’s difficult or near impossible to keep the threat actors out of an environment,” he says. “What you can do is detect and respond and remediate, and if you need to, recover. So it’s very much that NIST framework or that layered security approach that is the best practice.”
He adds, “Security is a great way for MSPs to expand their book of business with their existing customers, because they need help with compliance, they need all these different layers of security.” In addition, “MSPs can use security to differentiate themselves from the pack. Those that are leveraging a modern AI-based XDR platform leveraging the power of MDR, as an example, can differentiate and separate themselves because their customers need this.”
Automating security operations will be critical, he says. “A lot of these MDR shops are a black box service. They’re just telling the MSP how to respond [to a detected threat]. That’s good. That’s helpful. What’s more helpful is if you have automated software that responds on your behalf. We’re able to do that [with the Adlumin-acquired XDR/MDR].”
The report also noted that BDR is in the top five of all IT managed services offered by respondents. Its importance to partners’ managed services revenue is expected to remain just as strong three years from now. Further, not only is BDR generally a higher-margin offering, but it is also central to compliance.
Top Challenges to MSP Growth in 2025
Despite the opportunities, MSPs also cite several challenges to growth. The top ones are new customer acquisition, upskilling existing staff, securing their clients’ infrastructure, and client budgets.
“As long as I’ve been in the industry, acquiring new customers and attracting and retaining talent are always the top two out of the top five challenge for any MSP,” Pagliuca says. He adds that N-able’s platform helps address both the skills and acquisition challenge by providing tools that automate and eliminate many mundane tasks. “This frees up the MSPs and their leadership team to go focus on expanding their business, landing new customers, and bringing new offerings to the market. That’s been our focus.”
Operational complexity has also been an ongoing challenge for MSPs. As a result, there has been a move by N-able, Kaseya, ConnectWise, and others toward all-in-one platforms. However, the MSP Horizons Report notes that MSPs need to be aware of how their customers want to buy IT.
“Over the past five years, MSPs have been trying to achieve the simplified, single offering service stacks that were deemed to be best practice for building a profitable MSP,” the report states. “But with the advent of younger IT buyers, and cloud SaaS marketplaces, many want to pick and choose what they want from their MSP, tailoring it to fit their exact IT needs. This means it will be even more important for MSPs to understand the profit margins of every element of their stacks, as well as ensuring that they are adding tools that integrate well together.”
Pagliuca says N-able remains committed to an open ecosystem. “That being said, what we find is MSPs that are leveraging a technology across our stack are more efficient, are more effective. They have better visibility across their entire stack. But we understand that it’s a heterogeneous world. We also understand that they’re adopting some technology from some of their customers and it’s not a one-size-fits-all. So we’re not going to force them into a tech stack that might not fit their customer’s needs. But, we will always provide them with the best-in-class technology and show them the efficacy and the efficiency of leveraging a complete IT platform as opposed to buying the technology from seven or eight different providers.”
MSPs Need to Stay Focused on 3 Areas
The report concludes that MSPs can be confident in strong growth this year. However, there is a caveat. MSPs must not only invest in internal AI capabilities and build out their cybersecurity offerings, but they have to understand three things: “their customer, their profit model, and their risk exposure.”
