Let’s kick off the new year in a traditional manner: predicting the future. The next two years are going to be the most critical and fast paced change necessitating restructuring MSPs have ever seen. Let’s take a look. I have saved a variety of useful prompts and I’m using one here.
The Prompt
Based on the available market for Managed Service Providers (MSP) in the small business IT space, please make a prediction of what services small business will expect from their MSP 2 years from now. Take into consideration the historical role and service offerings provided by MSPs. Suggest how the service offering will need to change based upon your prediction. Please provide a detailed explanation of your prediction, including any assumptions, models or algorithms used, and any possible outcomes or scenarios. If relevant, please also provide any historical context, such as past trends or events that may impact the prediction. Please quantify your prediction as accurately as possible, such as with a percentage or range, and provide a level of confidence or uncertainty in the prediction. Finally, please make sure to include any potential limitations or risks associated with the prediction.
Summary: The direction is clear: in two years, small‑business buyers will expect their MSP to be a security‑first, AI‑literate, business‑outcomes partner, and MSPs that have not re‑weighted services and internal capabilities toward that model will find themselves in a shrinking, low‑margin corner of the market.
The Response
Small businesses will expect MSPs to act as integrated security, AI, and business-operations partners rather than “IT fixers” within two years, with most new or renewed contracts bundling advanced security, AI-enabled services, and strategic advisory by default. The core managed stack will still include devices, cloud, and support, but 40–60% of overall MSP revenue in the small-business segment is likely to involve services explicitly tied to security, compliance, automation/AI, and business outcomes, not just infrastructure care and feeding (80–90% confidence).
Below, “two years from now” is interpreted as the 2027 time frame, and the focus is on small businesses (sub-500 employees) using or considering MSPs.
Historical context and trajectory
- Historically, MSPs started as outsourced IT support: break/fix, networks, servers, backup, and basic monitoring, with security and strategy treated as add‑ons.
- Over the last decade, the market has shifted toward recurring managed services, cloud, and bundled security, with managed services growing faster than general IT services (roughly low‑teens CAGR globally).
- SMB security spending routed through MSPs is forecast to almost double from 2022 to 2027 (USD 25B → 48B, ~14% CAGR), showing that small businesses are already using MSPs as their primary security channel.
These trends set the stage for MSPs to become embedded business partners, especially on cyber risk, remote work, and AI adoption.
Core expectations from MSPs in ~2 years
1. Security and compliance as table stakes
By 2027, 80–90% of serious small‑business MSP buyers will treat advanced security as non‑optional in any proposal, and roughly half will explicitly prefer MSPs with strong, integrated security portfolios.
Small businesses will expect:
- Zero Trust–style architectures: strong identity, least privilege, conditional access, segmentation, and secure remote access “baked in,” not upsold as a niche project.
- Managed detection and response: 24×7 monitoring, AI‑assisted threat detection, automated containment, and incident response playbooks that the MSP can demonstrate and report on.
- Compliance help: basic frameworks (e.g., privacy, payments, sectoral regulations) and policy enforcement, especially in regulated verticals and in AI/data use.
Quantification and confidence
- Share of SMB security spend going through MSPs: projected to grow from USD 25B (2022) to USD 48B by 2027, implying the bulk of SMBs that care about security will route it via MSPs.
- Likely 60–70% of small‑business MSP contracts will include a named “security bundle” as a core line item (not optional), with 25–40% including some form of MDR or SOC‑like service (70–80% confidence, extrapolating from current security‑driven MSP adoption).jumpcloud+2
2. AI-enabled IT and AI governance
Two years out, small businesses will expect MSPs to manage AI tools in the same way they manage M365, endpoints, and cloud—especially around safety, integration, and productivity outcomes.
Expected from MSPs:
- AI stack selection and integration: helping choose, configure, and secure Copilot‑class tools, chatbots, and specialized AI apps, then wiring them into line‑of‑business workflows.
- Governance and risk: AI acceptable use, data‑loss and privacy controls, model access policies, and monitoring of AI usage for compliance and abuse detection.
- Automation and productivity projects: building and maintaining practical automations (e.g., ticket triage, documentation generation, forecasting, customer support bots) with measurable time‑savings.
Quantification and confidence
- Surveys and industry commentary already show the majority of small firms either using or planning to use AI tools, with some estimates around 90–98% using AI‑enabled applications by mid‑2020s.
- By 2027, 50–70% of MSP‑served small businesses are likely to expect their MSP to “manage AI” in some fashion (policy, enablement, or automation), and 25–40% will pay explicit monthly recurring fees tied to AI enablement/automation (60–75% confidence; AI adoption is high but willingness to pay for management varies by size and vertical).
3. Business‑outcome and strategy engagement
MSPs serving small businesses will be expected to justify fees with business‑level outcomes (uptime, revenue protection, risk reduction, customer experience) rather than technical metrics alone.
Small businesses will look for:
- Quarterly or semi‑annual strategy reviews focused on growth, operational efficiency, and risk, not just patch status.
- Clear ROI narratives: dashboards and reports that tie security incidents prevented, downtime avoided, or staff hours saved to specific MSP projects or automations.
- Vertical specialization: understanding of line‑of‑business systems, data flows, and regulations in their specific industry (healthcare, legal, non‑profit, etc.), especially where AI and security intersect.
Quantification and confidence
- Market analyses suggest that “mature, verified” MSPs are capturing a growing share of spend as buyers favor strategic partners over commodity providers.
- Reasonable forecast: 40–60% of small‑business MSP contracts will include some structured strategic advisory component (QBRs with business metrics, roadmap planning, risk reviews) with 70–85% confidence.
4. Cloud, remote work, and device everywhere
Remote and hybrid work, cloud dependency, and device sprawl will further cement expectations that MSPs handle “work from anywhere” as a solved problem.
Expected as baseline:
- Unified device and identity management: consistent policy, patching, and access control across laptops, mobiles, SaaS, and cloud workloads.
- Performance and reliability SLAs: not just uptime, but experience metrics (latency, app responsiveness) and proactive remediation using AI/automation.
- Secure remote/hybrid work: always‑on VPN/ZTNA, secure Wi‑Fi, home‑office standards, and monitoring for unusual remote behavior.
Quantification and confidence
- Over half of MSPs already see remote work solutions as primary growth drivers, and ~48% of buyers cite better device/remote management as key areas where MSPs excel.
- Expect >70% of MSP contracts in the small‑business space to explicitly cover hybrid/remote‑work enablement and management by 2027 (80–90% confidence, given remote/hybrid normalization).
5. Data protection, continuity, and resilience
Small businesses will expect resilience and continuity built in, with ransomware, outages, and vendor outages treated as “recoverable by design.”
Likely expectations:
- Multi‑layer backup and disaster recovery: immutable backups, rapid restore, and continuity plans that are tested and reported on.
- Resilience against cloud/SaaS disruption: backup and DR plans for SaaS data, multi‑region or multi‑cloud options for critical services, and playbooks for communications during downtime.
Quantification and confidence
- With security, continuity, and compliance leading SMB concerns, expect 60–80% of MSP contracts to include explicit backup/DR and resilience commitments (75–85% confidence).
How MSP service offerings must change
From “IT caretakers” to “AI‑driven security and operations partners”
Over the next two years, successful MSPs will need to significantly reweight their portfolios and delivery models.
Key shifts:
- Revenue mix: move from infrastructure‑heavy MRR to a more balanced mix where 40–60% of recurring revenue is tied to security, AI/automation, and higher‑value advisory services.
- Standard stacks: bake security, compliance, and AI capabilities into a single, opinionated platform (identity, EDR/XDR, backup/DR, MDM, M365 + Copilot‑class tools, SIEM/MDR) rather than à‑la‑carte menus.
- Processes: incorporate AI into internal operations (ticket triage, NOC/SOC analysis, documentation) to keep margins healthy as service expectations grow faster than headcount budgets.
New or strengthened service lines
Likely growth areas MSPs should explicitly productize:
- Managed AI services: AI readiness assessments, acceptable use and governance, Copilot/LLM deployment, automation development, and ongoing “AI tuning” retainers.
- Managed security and compliance: MDR/XDR, Zero Trust projects, phishing resilience, compliance reporting, and periodic risk and ROI reviews.
- Fractional “CIO/CISO + operations” roles: packaged as monthly or quarterly engagements for strategic road-mapping, vendor consolidation, and risk/efficiency initiatives.
Delivery model and tooling
To meet these expectations economically:
- Invest in AI‑assisted platforms: RMM, PSA, documentation, and security stacks that leverage AI to cut noise and automate repeatable work.
- Double down on standardization: strict standards for tools, configurations, and processes to enable true automation and scale.
- Training and roles: upskill techs on security and AI; create internal champions for governance, automation, and client‑facing education.
Assumptions, simple model, and scenarios
Key assumptions
- Macroeconomic conditions: no prolonged global recession; SMB IT spending continues to grow in high single digits, with managed services growing low‑teens annually (roughly aligning with recent forecasts).
- Threat landscape: continued increase in cyber threats, including AI‑enabled attacks, pushing more SMBs toward managed security and compliance.
- AI adoption: most small businesses adopt AI‑enabled tools as part of SaaS and productivity suites, but only a subset invest heavily in custom AI solutions.
Simple allocation model (2025 → 2027)
Using high‑level market data and current emphasis on security, remote work, and AI:
- Managed services revenue growth: assume ~12–13% annual growth in managed services globally, consistent with a 13% forecast for 2025 and similar rates through 2027.
- Service line mix for a “typical forward‑looking SMB MSP” in 2025 vs. 2027 (share of total MRR + flat‑fee revenue, illustrative, not exact):
| Service category | 2025 share (est.) | 2027 share (forecast) |
|---|---|---|
| Core infra & support | 45–55% | 30–40% |
| Security & compliance | 20–30% | 30–40% |
| Cloud/remote & devices | 10–15% | 10–15% |
| AI/automation services | 0–5% | 10–20% |
| Strategy/advisory (vCIO/…) | 5–10% | 10–15% |
Ranges reflect different maturity levels and vertical mixes across MSPs. Confidence in the directional shift (more security/AI/advisory, less “pure” infrastructure) is high (80–90%), while the exact percentages have moderate confidence (60–70%).
Possible scenarios
- Upside scenario: Rapid AI regulation and rising cyber insurance requirements force SMBs to adopt managed security and AI governance faster, pushing security+AI+advisory to 60–70% of MSP revenue within two years (probability 20–30%).
- Base scenario: Steady but not explosive change; security becomes fully standardized, AI services grow but remain uneven across verticals, yielding the mix in the table above (probability 50–60%).
- Downside scenario: Economic slowdown or major pricing pressure drives SMBs back to cost‑cutting, slowing adoption of premium AI/advisory services while still growing security slowly (probability 20–30%).
Limitations and risks
- Forecast uncertainty: Quantitative forecasts rely on industry reports with their own assumptions; actual adoption curves, especially for AI services, could be non‑linear and vary heavily by sector and geography.
- Sample/systemic bias: Much of the available data comes from vendors, analysts, and MSP‑centric surveys that may over‑represent more mature, growth‑oriented providers and under‑represent very small or informal IT shops.
- Regulatory and technology shocks: New AI, privacy, or cybersecurity regulations—or major incidents—could accelerate or distort the shift toward security and AI services in ways that are hard to model precisely today.
Within those constraints, the direction is clear: in two years, small‑business buyers will expect their MSP to be a security‑first, AI‑literate, business‑outcomes partner, and MSPs that have not re‑weighted services and internal capabilities toward that model will find themselves in a shrinking, low‑margin corner of the market.
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