N-able: MSP growth coming from security and AI demand

The majority of managed service providers (MSPs) appear to be feeling positive about growth prospects for this year. Fuelled by security and artificial intelligence (AI), the feelings of many across the channel are upbeat, according to the latest MSP Horizons report from N-able.

The firm has worked with market watchers Canalys to get an idea of what’s happening with MSPs, with it clear that security products and services continuing to drive growth.

Headline findings in the Horizon’s report included the 59% of respondents that expected revenue growth to exceed 20% this year. Just shy of 40% also expected profits to improving at a similar rate in 2025.

Security was a driving force, with 90% of MSPs expecting it to grow this year, up from 80% in 2024, with services including managed detection and response highlighted as growth areas along with compliance and breach prevention.

AI was also an area with greater automation that was showing strong signs of customer interest that translated into MSP revenue opportunities.

MSPs indicated that their challenges included landing fresh customers and upskilling staff to provide the range of expertise required to deal with the latest threats and AI developments.

Robin Ody, MSP analysis practice lead at Canalys, said that there was a sizeable total addressable market available for MSPs to go after: “The IT managed services market is expected to be worth an estimated US$610bn by the end of 2025, with channel partners contributing approximately 98% of that revenue.

“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 specializations that will provide the most value to the customer and help them remain competitive: cyber security, cloud, AI, risk management, compliance monitoring and vertical capability,” he added.

The myriad of factors driving security growth – including evolving threats, increased pressure for customers to be compliant as well as seeking help managing complex defence systems – meant that it remained an area where the channel could tap into revenue growth.

“A central theme of this year’s report is cyber resilience and a constant trend remains, cyber security 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 cyber security, ‘good enough’ is no longer good enough.”

When it came to AI, the N-Able report revealed that only 6% of respondents were not using generative AI (GenAI) tools. The most popular use cases for the technology had emerged around building workflow automations and reducing the complexity around the sales and ticketing processes.

There were also signs that from a business perspective that M&A continued to be seen as a method of expanding, with 90% of those surveyed showing an interest in acquisitions as a way to gain fresh skills and exposure to more geographical areas.