Cyber insurers adding to MSP challenges

Managed service providers (MSPs) that cannot satisfy the requirements of cyber insurance companies face being frozen out of customer relationships.

That warning was shared by Robin Ody​, principal analyst at Canalys, now part of Omdia, who said there is a split emerging in the market between those able to demonstrate a tight grasp on regulations and data protection requirements, and those who are not up the task.

Over the past couple of years, MSPs have emerged as a primary target for criminals looking to gain access to sensitive customer data, and that rise in threats has been accompanied by a rising influence of the insurance industry.

“Partners have become the number one threat vector for customers, because a partner holds all the data,” he said. “And the more that they hold the managed services piece, the more that they hold the financial data and the more the MSPs have become the single threat vector for the channel. Now, the risk this poses to regulation in cyber insurance is incredibly high.

“What we are likely to see over the next few years is cyber insurers who will no longer be insuring customers because they have MSPs,” he added. “If you’re insuring a customer and they have a managed service provider, then you cannot quantify that risk, because that managed service provider isn’t insured by you and hasn’t been through your audit.”

He said that the consequences for the channel are unpredictable, and while it is not clear what the consequences will be for generalist MSPs, there is already a split emerging between the “haves and the have nots”.

“Those that can go through those audit processes, those that can be…certified or Dora certified, those that can show that they are up to speed on the UK cyber security and resiliency act, and so on, [would be in a stronger position],” he said.

Aside from the security challenges, Ody said there continues to be growth in the MSP market and that the rest of the year looks positive.

“The growth is incredibly good this year. I started out this year with a forecast for about 12.6% in managed services globally through the channel, and that’s dipped only slightly to about 12.3, but essentially it is exceeding almost every other area of the market,” he said.

“The reason is because every partner in the world is now looking at managed services as a way to improve their outcome for the customer, [which is] also improving their profitability.”

Ody added that one of the benefits of greater collaboration across the channel and the involvement of MSPs with marketplaces was the improvements it had made regarding speed of delivery and, as a result, growth.

“The more that [the different layers and partners across the ecosystem] collaborate, the faster it is to get deals done,” he said. “When you get stuck in procurement for months and you can’t get out, it’s because you don’t essentially have a route through to the finance team of the end customer. But if the end customer is already available through AWS or Microsoft version, then this road suddenly becomes much easier.

“It makes the deal flow much faster, and that’s why we’re seeing many more MSPs and new SaaS marketplaces this year – it’s just much simpler from a billing perspective as most of them don’t have the money they need to do to build those motions themselves,” he added.