What's Keeping MSPs Up at Night: Competition, Tough Clients and Vendor Costs

Pandemic-driven business conditions have been a boon for managed services providers (MSPs), generating more demand from more customers than ever. But all that growth comes with significant hurdles.

"As business models evolve, MSPs need to be able to react and remain a trusted partner during times of uncertainty," according to a report released this week by security specialist Kaspersky. "But this puts extra pressure on them to stay ahead of the game and on top of the very latest customer needs and solutions available."

Boom Times for MSPs (and MSSPs)
Businesses have dramatically increased their reliance on security and connectivity solutions over the past year-and-a-half, coinciding with the transition to remote work during by the pandemic. This increased reliance, Kaspersky argued in its "MSP Market Focus in 2021" report, has exposed gaps in many organizations' underlying infrastructures -- gaps that they need the help of MSPs to fill. In fact, over half (52 percent) of businesses polled by Kaspersky cited "requirements of special expertise" as their top reason for partnering with an MSP.

"Advanced cyberthreats and legal requirements, along with the speed at which businesses now need to deploy technology to support today's hybrid working norm, have all increased the need for more specialized IT security support," the report said.

Naturally, this has translated to a spike in MSP business. The vast majority of traditional MSPs (81 percent) reported having a bigger client base in 2021 compared to 2019, according to Kaspersky. For MSPs with a focus on security (managed security services providers, or MSSPs), that proportion was even higher at 91 percent.

"Our research found that confidence among businesses in adopting new technologies and solutions is growing," the report said. "Respondents also confirmed the vital role played by MSPs in supporting this transition and removing tech worries so they can focus on their core offerings."

Top MSP Worries
Demand for MSPs might be at fever pitch, but so is competition. When asked to name their top challenges for 2021, nearly a third (32 percent) of the MSPs Kaspersky polled cited "competition from other service providers." That's up from just 19 percent two years ago.

"This concern is well founded," the report said, "with new entrants in the form of telecoms providers, IT integrators and value-added resellers (VARs), basing their offerings around specialized security skills or automation in a bid to oust the more 'traditional' MSP players."

Rounding out the Top 5 issues concerning MSPs the most were:

  • "Demanding clients and users" (30 percent)
  • "Finding new customers" (30 percent)
  • "Maintaining profitability" (29 percent)
  • "Attracting and retaining staff" (28 percent)

The report also spotlighted some common client issues that are burdening MSPs, with complicated customer infrastructures being the biggest problem. About 40 percent of the MSPs polled cited "complexity of our clients' businesses creating additional time and expense" as a top pain point in client interactions.

Other common client-related challenges included:

  • "Unreasonable expectations about response times/SLAs" (35 percent)
  • "Disputes about time spent on support tasks & costs" (33 percent)
  • "Clients expecting us to deal with problems we are not contracted for" (31 percent)
  • "Clients not following helpdesk processes" (28 percent)

Vendor Challenges
Though not a particularly high-ranked problem, "dealing with vendors/distributors" was cited by significantly more MSPs as a challenge in 2021 (18 percent) compared to 2019 (10 percent).

As with many things, the issue comes down to cost. A fast-growing percentage of MSPs (45 percent) are looking for vendors with "competitive pricing." This is particularly true of traditional MSPs, whose profitability often relies on the margins they earn from vendor add-ons.

MSPs are also increasingly looking at vendors' "ability to offer additional services," especially security services, with 36 percent citing that as a top factor. That's not surprising, as Kaspersky found that roughly nine in 10 MSPs are planning to expand their IT security portfolios, particularly around threat intelligence and analysis.

"This call for more threat intelligence and analysis from vendors is in line with the expertise that customers have requested from their MSPs," the report said.

Kaspersky's full report is available as a PDF here.

About the Author

Gladys Rama (@GladysRama3) is the editorial director of Converge360.