The year 2025 is shaping up to be a monumental year for Managed Service Providers (MSPs) as per the latest MSP Horizons 2025 Report from N-able. The industry is set for significant growth, driven by robust cybersecurity investments, AI-driven automation, and a surge in merger and acquisition (M&A) activity. This confluence of factors is creating new revenue opportunities and painting a bright future for MSPs around the globe.
The report points out that the global managed IT services market is currently valued at a substantial $525 billion, with managed services revenue experiencing an 11% growth from 2023. With such positive momentum, optimism is running high within the MSP community, with 59% of respondents expecting revenue growth exceeding 20% in 2025 and 49% foreseeing similar growth specifically in managed services revenue.
It comes as no surprise that cybersecurity is playing a pivotal role in driving the growth of MSPs. With cyber threats becoming increasingly sophisticated and compliance requirements tightening, MSPs are making significant investments in security services. The report indicates a year-on-year increase in optimism, with expected growth rising from 80% in 2023 to 90% in 2024. Larger MSPs are particularly capitalizing on this trend, with 57% of high-revenue firms deriving a considerable portion of their income from cybersecurity services compared to 40% among smaller firms.
Moreover, MSPs are also leveraging AI and automation to revolutionize service delivery, streamline operations, and cut down on overhead costs. For instance, 51% of respondents have adopted AI-powered backup solutions as part of a broader trend towards using technology to reduce manual intervention and enhance efficiency. While concerns exist about AI potentially replacing human roles, the prevailing strategy is to redeploy staff towards more high-value tasks. MSPs are focusing on upskilling and training their teams to handle complex technologies, thereby driving operational efficiency and delivering a superior customer experience.
A significant trend highlighted in the report is the surge in M&A activity among MSPs. A staggering 90% of MSPs are considering acquiring another MSP within the next three years, showcasing a strategic shift towards consolidation to gain new capabilities, expand geographical reach, and enhance competitiveness in a commoditized market.
Despite the positive growth forecasts, MSPs are not without operational challenges. Acquiring new customers remains a major hurdle, compounded by a persistent skills gap in critical areas such as cybersecurity and AI. To address these challenges, many MSPs are exploring co-managed IT models, where they collaborate with clients to manage and secure IT environments. The report reveals that 37% of MSPs plan to adopt a co-managed model in 2025, marking a 17-point increase from the previous year.
In conclusion, 2025 is shaping up to be a transformative year for MSPs, marked by increased cybersecurity investments, AI adoption, and a surge in M&A activity. With strong revenue growth projections, heightened investment in security and automation, and a clear trend towards consolidation, MSPs are on track for a dynamic and prosperous future.