2025 is set to be a massive year for MSPs, the latest MSP Horizons 2025 Report from N-able suggests. Fuelled by robust cybersecurity investments, AI-driven automation, and a surge in M&A activity, the industry is poised for significant growth, with new revenue opportunities abounding.
A Market on the Upswing
The report reveals that global managed IT services are currently valued at an impressive $525 billion, with managed services revenue growing by just 11% from 2023. Understandably, optimism is rife among the MSP community, with 59% of respondents expecting over 20% revenue growth in 2025 and 49% anticipating similar growth, specifically in managed services revenue.
Cybersecurity Drives Growth
Cybersecurity is a major driver for MSP growth. As cyber threats become more sophisticated and compliance requirements tighten, MSPs are investing heavily in security services. In fact, optimism has grown year on year, with expected growth rising from 80% in 2023 to 90% in 2024.
Larger MSPs, in particular, are capitalizing on this trend. 57% of high-revenue firms report a significant portion of their income from cybersecurity services, compared to 40% among smaller firms.
AI and Automation: Revolutionizing Service Delivery
MSPs are also embracing AI and automation to streamline operations and reduce overhead costs. For example, 51% of respondents reported adopting AI-powered backup solutions, reflecting a broader trend toward leveraging technology to minimize manual intervention and improve efficiency.
While there is some concern about the potential for AI to replace human roles, the prevailing strategy is to redeploy staff toward higher-value tasks. The report posits that MSPs are investing in upskilling and training to ensure their teams can manage complex technologies, thereby driving both operational efficiency and improved customer experience. Ultimately, the goal is to maintain a competitive edge by blending automation with specialized human expertise.
The M&A Surge: Consolidation as a Growth Strategy
Perhaps the most dramatic shift outlined in the report is a renewed focus on mergers and acquisitions. A staggering 90% of MSPs reported considering acquiring another MSP within the next three years, up from 44% last year. This trend reflects a strategic pivot toward consolidation as a means to quickly gain new capabilities, expand geographical reach, and better compete in an increasingly commoditized market.
Operational Challenges and the Road Ahead
Despite optimistic growth forecasts, MSPs face several operational challenges. New customer acquisition remains the top hurdle, compounded by a persistent skills gap in critical areas like cybersecurity and AI.
In response, many MSPs are exploring co-managed IT models, where they collaborate with clients to manage and secure IT environments. The report notes that 37% of MSPs plan to adopt a co-managed model in 2025, marking a 17-point increase from the previous year.
2025: A Transformative Year for MSPs
Ultimately, cybersecurity, AI, and M&A activity are defining the MSP industry. With strong revenue growth projections, heightened investment in security and automation, and a clear shift toward consolidation, MSPs are laying the foundation for a dynamic and prosperous future.
Josh is a Content writer at Bora. He graduated with a degree in Journalism in 2021 and has a background in cybersecurity PR. He's written on a wide range of topics, from AI to Zero Trust, and is particularly interested in the impacts of cybersecurity on the wider economy.
The opinions expressed in this post belongs to the individual contributors and do not necessarily reflect the views of Information Security Buzz.
