MSPs are set for 'durable, long-term, double-digit growth': N-able CEO John Pagliuca
Following the release of its inaugural report for the managed services market, Pagliuca chats to CRN about what’s making MSPs tick
Managed services providers are buckled in for unstoppable growth and would rather continue to flourish than sell.
According to N-able's recent MSP Horizons report, MSPs are on a solid growth trajectory, with 97 per cent of those surveyed citing managed services revenue growth this year.
To find out more about what's impacting MSPs, CRN spoke with N-able president and CEO John Pagliuca.
"When we looked at the survey it was no surprise to see some were gaining traction. But it was surprising how much traction," Pagliuca told CRN.
"But if you take a step back, you'll see it makes a lot of sense."
He explains the MSP community sits at the intersection of three or four major global trends: moving to cloud, cybersecurity compliance and regulation, the hybrid model and the skills shortage.
"When you take the confluence of those four major macro trends, the MSP community sits square in the middle. What we're seeing is those trends impact not just the small medium enterprise (SME), but also the mid market and the MSP community.
"Because of those four trends MSPs are presented with an opportunity to help.
"MSPs are finding that larger and larger organisations need help and they're now turning to MSPs to do this co-managed part.
"Co-managed creates a huge opportunity for MSPs because mid market IT are having IT labour shortages and are looking for the cybersecurity specialists."
To sell or not to sell
As part of the survey of 354 business-to-business channel partners across EMEA, North America, APAC, and Latin America conducted from October to November 2023, MSPs were quizzed on whether or not they wanted to sell in 2024.
"The answer was a resounding no," he says.
"My interpretation of that is, in classic Wall Street or economics language you never want to sell low or buy high. You want to sell high."
MSPs are apparently pretty confident about the future owing to macro trends, and believe they can grow their business.
"They're quite optimistic about the short-term and long-term health of their business and where they're going. It also tells me that MSPs are beginning to have some fun out there growing their business and being that trusted advisor for their customers.
"That if nothing else is a strong indicator of the health of the channel, when the vast majority of these customers are saying they don't want to exit.
"I really do believe the industry is set for durable, long-term, double-digit growth. Because of the rate technology continues to keep changing, that's not the SMEs' bag and they always will need help."
Continue reading to find out what N-able's CEO thinks MSPs should be prioritising...
MSPs are set for 'durable, long-term, double-digit growth': N-able CEO John Pagliuca
Following the release of its inaugural report for the managed services market, Pagliuca chats to CRN about what’s making MSPs tick
Where should MSPs be prioritising?
On what managed services providers should start thinking about sooner rather than later, Pagliuca points to standardisation.
"Things go into somewhat of a certain order.
"For MSPs to get to a certain level of efficiency they first need to standardise their tech stack and their offerings to their customers.
"Once you standardise now you can automate the more efficient ways. Yes, you can automate without standardisation. But by definition, if your offer to your customers is not the same, if the tech stacks you're using are all over the place, the gains that you've made through things like automation and AI, you halve the effect of what you can automate.
"If they haven't already, it's standardising on how they go to market in their offering, it's standardising on the tech stack, and then begin to automate and build into that."
He adds MSPs need to also take a step back and look at their strategy around cybersecurity.
"An MSP who's not making cybersecurity or cybersecurity solutions or services a main part of their offering or the way that they're differentiating themselves, will not differentiate from the rest of the market."
How are MSPs using AI?
While it's still early days according to Pagliuca, he sees MSPs leveraging AI in three ways.
"Number one, for the larger MSPs that have developers and that are building their AI using an offering like Copilot, are both accelerating and providing a higher quality code base as they develop their own IP.
"The second thing is they're beginning to leverage AI in the MSP community. We've enabled ChatGPT inside of N-central which allows MSPs to help more efficiently and effectively write automation scripts and gain better access and insights into their customer base.
"And the third thing I'm seeing is MSPs using AI in sales and marketing."
Challenges for MSPs
The N-able boss says the managed services specialists are still facing age-old problems like new customer acquisition and talent.
"New customer acquisition is one of the things MSPs continue to struggle with because it's not necessarily a core competency.
"I think at the low end of the market, it's because MSPs lack the ‘F' word a little bit. And that word is ‘focused'. A lot of the small MSPs don't necessarily have someone who's dedicated to sales or marketing.
"On the higher end, I don't believe MSPs are having a hard time finding any customer. I think they're having a hard time finding the right kind of customer. Going back to automation and standardising, sometimes it's the right thing for an MSP to do to fire a customer if they're not able to align with their tech stack or what their service levels should be."
Pagliuca adds MSPs, like all channel players, are also struggling with retaining talent.
Moreover, he believes MSPs in a smaller labour market are seeing their teams being poached in big markets.
"Because of the remote work nature, I think MSPs are struggling a little bit to retain or to attract the talent.
"This is why they need to leverage automation so they can gain more and keep employees happy, but also gain a better ratio between the number of employees they have and the number of customers that they're serving."
Up next: Where is N-able focusing in 2024...
MSPs are set for 'durable, long-term, double-digit growth': N-able CEO John Pagliuca
Following the release of its inaugural report for the managed services market, Pagliuca chats to CRN about what’s making MSPs tick
N-able in 2024
Turning the conversation to N-able itself, Pagliuca says this year is all about the word ‘transform'.
"We're going to transform N-able and in the industry, I believe in a couple of different ways.
"Number one is our MDR offering. We're going to make MSPs the centre of their security stack and security services. By the end of this year an MSP will differentiate themselves as a two-person shop or 200-person shop and make sure they feel comfortable and confident in their security stack so they can make sure their customers are compliant and help them with the regulatory bits.
"Number two, you'll see us pushing more and more to the cloud. We will have the only offering on the planet that MSPs can monitor and manage Apple devices, Windows devices, Linux devices, but also M 365 cloud.
"So an MSP can better onboard and customers to 365 better, visibility with Azure. There'll be no other there'll be no other platform on the planet because the reality is it's a hybrid world.
"Yes there's more and more move to the cloud, but we will always still have devices in the physical world. A lot of our customers in the SMB market continue to have servers in some type of wiring closet. It will continue to be a hybrid world and we will be the only platform as we transform that allows the MSP to do that in a really automated and efficient way."
Key investment areas
One of N-able's top areas primed for capital this year is security.
"The reason is twofold. One, it's because the bad guys continue to focus on the soft underbelly of the industry and that's SMEs.
"The second is because more and more industries are becoming more and more regulated, being more prescriptive as to what it takes to serve customers in the industry.
"And so even if you're a small business, if you're servicing a customer that may be in a regulatory industry, the whole ecosystem needs to be compliant.
"The bad guys are getting more active and there's more and more of a need for compliance, which has changed computer security spending.
"SMEs are going to need to increase their IT spend and their know-how to the MSP to ensure they're compliant."