MSPs focusing on improving profitability

Managed service providers (MSPs) have expressed optimism about the year ahead and their prospects for growth.

According to the latest Kaseya 2025 State of the MSP industry look ahead: trends, growth and strategies for success report, the focus this year is going to be on improving profitability.

When asked what the priority was for this year, more than 90% of MSPs pointed to profitability as the main goal. They also shared their top concerns, which included attracting new customers and increasing revenues.

The expectation is that many MSPs will look at their business models and their pricing to ensure they can deliver profitable growth as well as meeting customer demands.

Last year was challenging for many across the channel as customers tightened their purse strings and delayed projects. Despite that 64% of those MSPs quizzed by Kaseya reported revenue growth in 2024, many are expecting that momentum to continue over the next three years.

Some MSPs also revealed they are struggling to stand out from the crowd and it is often smaller-focused managed service players that gain business from larger competitors because of their association with a specific area of specialisation.

“Small and medium-sized businesses are becoming more and more tech savvy – and MSPs are reaping the rewards,” said Gary Pica, founder of TruMethods, a Kaseya Company. “They’re seeing revenue growth and want to continue that momentum long into the future. MSPs are an essential service and they’re making the right moves to build sustainable, high-margin businesses. By streamlining their operations and utilising automation, MSPs are preparing to capitalise on big opportunities in 2025.”

Last year was dominated by talk of AI, and MSPs have been investigating the technology to assess where it can bring some rewards. The Kaseya report indicated that a decent portion are already automating repetitive tasks. The flip side is that attacks exploiting AI have also risen, with a third reporting they were targeted by criminals last year.

Security is expected to be an area for investment by both MSPs and customers in 2025. The need for user education persists, with many SMEs continuing to fail to recognise the risks posed by criminals. Concerns about ‘client apathy’ rose year-on-year as managed service providers encountered a mixed response to data protection from users.

“It can be difficult to get small businesses to understand the importance of investing in security when they often don’t see themselves as a target,” said Pica. “While educating clients is important, it’s pivotal for MSPs to invest in platforms and tools that allow their customers to be better protected without breaking the bank.”

Kaseya’s report also identified the ingredients of success, identifying the attributes shared by those MSPs that were making $10m or more a year. A willingness to adopt emerging technologies and deliver exceptional customer service were a couple of the factors that the top earners had in common. Adoption of automation and AI to improve efficiency and support users was another theme shared by those leading the market

Many of the larger revenue generators had also migrated customer workloads to the cloud and had ensured they could protect data, with 97% being in a position to offer managed security services.